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Rule 140Published

Rule 140: Specified-fund income allocation for concessional rates

Rule 140 determines the income attributable to qualifying non-resident unit holders for section 210(2). Capital gains use an acquisition-to-transfer daily AUM ratio; securities income uses a receipt-date ratio. Form 69 compliance is linked to the specified rates.

Official notified Income-tax Rules, 2026

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This article is for general information. Read the official Rules and applicable Act amendments, including the Taxation and Other Laws (Amendment) Act, 2026. If you need professional advice for your situation, contact Bizeneed.

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Bare law

Rule 140 - Determination of income of a specified fund attributable to units held by non-residents under section 210(2)

(1) For the purposes of section 210(2), the income of a specified fund by way of short-term or long-term capital gains, referred to in section 210(1) [Table: Sl. Nos. 2 to 5], that is attributable to the units held by a non-resident (other than the permanent establishment of a non-resident in India), shall be calculated using the following formula:— A = B × C Where,– A = income attributable to the units held by non-resident (not being the permanent establishment of a non-resident in India); B = income arising from transfer of the security; and C = ratio of the aggregate of daily ―assets under management‖ of the specified fund held by non- resident unit holders (not being the permanent establishment of a non-resident in India) to the aggregate of daily total ―assets under management‖ of the specified fund, from the date of acquisition of the security to the date of transfer of such security.

(2) For the purposes of section 210(2), the income of a specified fund by way of income received in respect of securities referred to in section 210(1)[Table: Sl. No. 1], that is attributable to the units held by a non-resident (other than the permanent establishment of a non-resident in India) shall be calculated using the following formula:— X = Y × Z Where,– X = income attributable to the units held by non-resident (not being the permanent establishment of a non-resident in India); Y = income received in respect of securities; and Z = ratio of the ―assets under management‖ in the specified fund held by non-resident unit holders (not being the permanent establishment of a non-resident in India) to the total ―asset under management‖ of the specified fund, as on the date of receipt of such income.

(3) The specified fund shall furnish an annual statement of income eligible for concessional taxation in Form No. 69, on or before the due date specified under section 263(1)(c).

(4) The income of a specified fund referred to in section 210(1), attributable to the units held by a non-resident (other than the permanent establishment of a non-resident in India), shall not be eligible for tax rates specified in section 210 unless such fund complies with sub-rule (3).

(5) For the purpose of this rule, the expressions,— (a) "assets under management" means the closing balance of the value of assets or investments of the specified fund as on a particular date; (b) "permanent establishment" shall have the same meaning as assigned to it in section 173(c); (c) "securities" shall have the meaning assigned to it in Schedule VI [Note 1(e)] to the Act; (d) "specified fund" shall have the meaning assigned to it in Schedule VI [Note 1(g)(i)] to the Act; and (e) "units" shall have the meaning assigned to it in Schedule VI [Note 1(j)] to the Act.

Rule breakdown

Check current exemptions before attributing taxable income

First establish whether the receipt or gain enters taxable total income under the current Act, including any applicable exemption and its conditions. This attribution rule does not itself determine whether an income item is exempt or override an exemption available under the amended Act.

Read the Taxation and Other Laws (Amendment) Act, 2026 together with the relevant current Act provisions before applying the allocation and rate rules; a specified-fund label alone does not establish an exemption.

Capital gains use B multiplied by C

For the identified short- and long-term gains, B is income from transferring the security. C is the ratio of aggregate daily qualifying non-resident AUM to aggregate daily total AUM from acquisition to transfer.

For example, transfer income of ₹20 lakh and a properly calculated daily ratio of 75% give ₹15 lakh attributable income under this limb. The applicable rate remains a separate section 210 question.

Securities receipts use Y multiplied by Z

For the identified securities income, Y is the income received and Z is the qualifying AUM ratio on the receipt date.

Keep the receipt date and closing asset values for that day. The capital-gain averaging period cannot simply be reused for this different limb.

Check fund and holder definitions

The rule defines the specified-fund category and other terms through the cited Act provisions. The qualifying non-resident holding excludes the stated Indian permanent-establishment category.

Establish the legal category before applying the formulas; a general investment-fund label alone is insufficient.

File the annual Form 69 statement

The annual statement of income eligible for concessional taxation is Form 69, due by the prescribed return-linked date. The quote prints section 263(1)(c), so check the current applicable deadline provision.

Sub-rule (4) expressly links eligibility for the section 210 rates to compliance with the statement requirement.

Reconcile income, ratios and reporting

Maintain a security-wise computation of transfer income, acquisition and disposal dates, daily AUM and receipt-date allocations. Tie these records to Form 69 and the return.

Keep exempt-income calculations under Rule 139 distinct from this concessional-rate calculation.

Key takeaways

Two allocation formulas

Gains and securities receipts use different ratios.

Attribution is not the tax rate

Determine the rate separately under section 210.

Form 69 condition

The specified rates require statement compliance.

Practical checklist

  • Keep security-wise daily AUM records.
  • Distinguish gains from income receipts.
  • Retain the Form 69 filing record.

Avoid

  • Do not confuse attributable income with the tax payable.

FAQs

Is this an exemption calculation?

It determines attributable income for the stated section 210 treatment; Rule 139 addresses the separate specified exemption.

Which form applies?

Form 69.

Do both formulas use daily AUM from acquisition to disposal?

Only the capital-gain limb uses that period. The securities-income limb uses the receipt-date ratio.

Glossary

C ratio
The acquisition-to-transfer aggregate-daily AUM ratio for the capital-gain formula.

Official sources