Overview: The Central Board of Direct Taxes (CBDT) has issued the Income-tax (Second Amendment) Rules, 2026, introducing significant revisions to Rule 157 of the Income-tax Rules, 2026. Exercising powers conferred by Section 533 read with Section 262 of the Income-tax Act, 2025 (30 of 2025), the amendment replaces clause (c) in sub-rule (5) to update and clarify the statutory definition of a “specified fund”.
Detailed Notification Information
The Central Board of Direct Taxes (CBDT), under the Department of Revenue, Ministry of Finance, officially notified the Income-tax (Second Amendment) Rules, 2026 via Notification No. G.S.R. 646(E) [F. No. 370142/24/2026-TPL] on 21st July, 2026.
The newly substituted definition brings greater regulatory clarity for alternative investment vehicles operating across mainland India as well as those established within International Financial Services Centres (IFSCs) like GIFT City. The amendment came into force immediately on the date of its publication in the Official Gazette (21st July, 2026).
Core Scope & Eligible Entities
To qualify as a “specified fund” under the amended sub-rule (5) of Rule 157, an entity must satisfy the following parameters:
- Eligible Legal Structures: Applies to any fund established or incorporated in India in the form of a Trust, Company, Limited Liability Partnership (LLP), or Body Corporate that holds a certificate of registration as a Category I or Category II Alternative Investment Fund (AIF).
- Dual Regulatory Framework: The fund must be regulated under either:
- The SEBI (Alternative Investment Funds) Regulations, 2012 (under the SEBI Act, 1992); OR
- The IFSCA (Fund Management) Regulations, 2022 (under the International Financial Services Centres Authority Act, 2019) and physically located in an International Financial Services Centre (IFSC).
- Schedule VI Coverage: Formally includes any fund explicitly referred to under Schedule VI [Note 1(g)] of the Income-tax Act, 2025.
Comparison: What Changed?
| Parameter | Earlier Provision (Income-tax Rules, 2026) | Amended Provision (Second Amendment Rules, 2026) |
|---|---|---|
| Primary Scope | Covered specific AIF formats under general parameters of the Income-tax Act, 2025. | Explicitly details and expands eligibility across Category I and Category II AIFs. |
| Legal Structures Covered | Standard trust or corporate fund setups. | Expressly includes Trusts, Companies, LLPs, and Bodies Corporate established/incorporated in India. |
| IFSC & Regulatory Scope | Addressed generic SEBI-registered alternative funds. | Dual coverage: SEBI-regulated AIFs (under 2012 Regulations) OR IFSCA-regulated AIFs (under 2022 Fund Management Regulations located in an IFSC). |
| Statutory Alignment | Relied on prior schedule classifications under the old framework. | Expressly includes any fund referred to in Schedule VI [Note 1(g)] of the Income-tax Act, 2025. |
Frequently Asked Questions
When do the Income-tax (Second Amendment) Rules, 2026 come into force?
Which entity structures can now qualify as a “specified fund” under Rule 157?
How Setindiabiz Helps
Setindiabiz assists AIF managers, investment entities, and corporate trusts in navigating complex direct tax amendments, managing end-to-end IFSC/SEBI regulatory compliances, and ensuring seamless Income-tax filings under the Income-tax Act.
In This Article
Author Bio
Setindiabiz Editorial Team is a multidisciplinary collective of Chartered Accountants, Company Secretaries, and Advocates offering authoritative insights on India’s regulatory and business landscape. With decades of experience in compliance, taxation, and advisory, they empower entrepreneurs and enterprises to make informed decisions.
