Rule 144: Specified-fund unit holders who become residents
Rule 144 sets additional conditions for the identified specified-fund category when a unit holder becomes resident after the year of issue. It provides an exit period for the covered holder, requires records and links Form 68 certification to the stated exemption.
Official notified Income-tax Rules, 2026Need advice on Rule 144?
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Rule 144 - Other conditions required to be fulfilled by a specified fund as referred to in Schedule VI [Note 1(g)(i)] to Act
(1) For the purposes of Schedule VI [Note 1(g)(i)] to the Act, the ―other conditions‖ required to be fulfilled by a specified fund shall be that — (a) the unit holder of the specified fund, other than the sponsor or manager of such fund, who becomes a resident under section 6(2) to (7) in any tax year subsequent to the tax year in which such unit or units were issued, shall cease to be a unit holder of such specified fund within a period of three months from the end of the tax year in which he becomes a resident; (b) for the purposes of clause (a), the specified fund shall maintain the following documents in respect of its unit holders: — (i) name of the unit holder; (ii) tax identification number of the unit holder in the country of residence at the time the units were issued; (iii) permanent account number, if available; (iv) total number of units held; (v) total value of units held; (vi) whether unit holder is a sponsor or a manager; (vii) the tax year in which the unit holder became resident; and (viii) date of exit from specified fund.
(2) The specified fund shall certify that it has fulfilled the conditions under sub-rule (1) and furnish information in respect of units held by residents in the annual statement of exempt income in Form No. 68.
(3) The income attributable to units held by a non-resident (not being the permanent establishment of a non-resident in India) in a specified fund shall not be exempt under section 11(1) read with Schedule VI [Table: Sl. Nos. 1 to 4] to the Act unless the specified fund complies with sub-rule (2).
(4) For the purposes of this rule, ―specified fund‖ shall have the same meaning as assigned to it in Schedule VI [Note 1(g)] to the Act.
Rule breakdown
Identify the covered change in residence
The condition concerns a unit holder other than the sponsor or manager who becomes resident under the cited section 6 provisions in a tax year after the year in which the units were issued.
Review the legal residence test and the year of issue. Do not assume that every change of address or every existing resident holding falls within this precise transition clause.
The covered holder must exit within the stated period
The holder must cease to hold units within three months from the end of the tax year in which the residence change occurs.
For a covered tax year ending 31 March, the three-month period runs to 30 June. Record the residence year and actual exit date.
Maintain all eight required particulars
Keep the holder’s name, country-of-residence tax number at issue, PAN if available, number and value of units, sponsor or manager status, the year residence arose and the exit date.
These records connect the residence analysis to the unit register and the actual exit rather than merely recording an intention to exit.
Certify compliance in Form 68
The fund certifies fulfilment of sub-rule (1) and gives the information on resident-held units in the annual exempt-income statement in Form 68.
Sub-rule (3) expressly links the identified exemption for qualifying non-resident units to compliance with this certification and information requirement.
Monitor holders before annual reporting
Review residence information, identify the transition cases, track the deadline and reconcile unit movements before certifying the annual statement.
The sponsor-or-manager exception is stated for the exit condition; it should not be expanded into an unsupported exemption from every other fund requirement.
Key takeaways
Specific transition case
The residence change must follow the units’ issue year.
Three months after year-end
Track the covered holder’s exit deadline.
Records and certification
Keep eight particulars and certify through Form 68.
Practical checklist
- Track residence changes and issue years.
- Maintain all eight holder particulars.
- Reconcile actual exits and Form 68 certification.
Avoid
- Do not rely on an address change as the complete residence test.
- Do not expand a narrow exception beyond its stated role.
FAQs
Does the exit condition apply to the sponsor or manager?
Clause (1)(a) excludes the sponsor or manager from the stated exit condition.
When must a covered holder exit?
Within three months from the end of the tax year in which the holder becomes resident.
Is recording an intended exit enough?
The rule says the holder must cease to be a unit holder within the period and requires the actual exit date among the records.
Glossary
- Resident-transition holder
- A holder covered by Rule 144(1)(a) who becomes resident in a tax year after the units’ issue year.