28 August 2026
CBDT substitutes the 'specified fund' definition in rule 157, the PAN exemption rule, to name Category I and Category II AIFs
Does a non-resident investor in an Indian AIF have to obtain a PAN?
Rule 157 of the Income-tax Rules, 2026 disapplies the PAN requirement in section 262 for a non-resident, other than a company or a foreign company, whose only Indian income is from investment in a specified fund, subject to conditions. CBDT's notification of 21 July 2026 substituted that rule's definition of specified fund, which now names Category I and Category II Alternative Investment Funds.
What changed
The Central Board of Direct Taxes notified the Income-tax (Second Amendment) Rules, 2026 on 21 July 2026, as G.S.R. 646(E) under Notification No. 94/2026. The instrument does one thing. In rule 157 of the Income-tax Rules, 2026, in sub-rule (5), it substitutes clause (c), which is the definition of "specified fund" used by that rule.
Rule 157 is titled "Persons exempt from obtaining Permanent Account Number under section 262". In CBDT's own catalogue entry, the amendment is described as aligning the definition of specified fund with rule 114AAB of the Income-tax Rules, 1962, the corresponding provision under the earlier Act.
What it says
The substituted clause reads that "specified fund" means:
| Limb | Text |
|---|---|
| (i) | any fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or Category II Alternative Investment Fund and is regulated under (A) the SEBI (Alternative Investment Funds) Regulations, 2012 made under the SEBI Act, 1992, or (B) the IFSCA (Fund Management) Regulations, 2022 made under the IFSCA Act, 2019, and which is located in any International Financial Services Centre |
| (ii) | any fund which has been referred to in Schedule VI [Note 1(g)] to the Act |
The rules were made under section 533 read with section 262 of the Income-tax Act, 2025 (30 of 2025), and are signed by Rohit Singh, Under Secretary.
Who it reaches
Rule 157(1) disapplies section 262, the Permanent Account Number provision, for a non-resident who is not a company or a foreign company and who has invested during a tax year in a specified fund. Three conditions must all hold. The non-resident must earn no income in India other than from that investment. The tax due must be deducted at source and remitted by the fund at the rates in the section 393 tables the rule cites. And the non-resident must furnish the fund a name, e-mail id and contact number, an overseas address, a declaration of foreign residency, and a Tax Identification Number, or a unique identifier where the country of residence issues none.
By naming SEBI-registered Category I and Category II AIFs in limb (i), the clause places domestic funds in those two categories alongside GIFT City fund management entities within the definition the rule turns on. Category III is not named.
The obligation that follows sits with the fund, not the investor. Rule 157(2) requires a quarterly statement in Form No. 92 to the Director General of Income-tax (Systems), and upload of the foreign residency declaration within fifteen days of the quarter end.
When it applies
The rules come into force on the date of their publication in the Official Gazette. The notification carries the date 21 July 2026.
The note appended to the notification records that the Income-tax Rules, 2026 were published as G.S.R. 198(E) on 20 March 2026 and were last amended as G.S.R. 241(E) on 31 March 2026.
What is not settled
The notification prints the substituted clause and not the clause it replaces, so the text as it stood between 20 March and 21 July 2026 is not recoverable from the instrument itself. CBDT states the object was alignment with rule 114AAB of the 1962 Rules; the notification does not say in what respect the earlier wording diverged.
Rule 157 governs the PAN requirement alone. Nothing in this notification addresses the pass-through treatment of an AIF's income, which sits elsewhere in the Act and the Rules.
Sources
- Notification No. 94/2026 [F. No. 370142/24/2026-TPL] / G.S.R. 646(E) — Income-tax (Second Amendment) Rules, 2026 — Central Board of Direct Taxes, 21 July 2026 · primary
- Rule 157, Income-tax Rules, 2026 — Persons exempt from obtaining Permanent Account Number under section 262 — Central Board of Direct Taxes, 20 March 2026 · primary
Dated 28 August 2026. The dateline is the date of the instrument this item reports, not the date the page was written. This page reports what a document says. It is information, not legal, tax or investment advice, and it is not a recommendation about any fund.