CBDT Notifies Rules 2DAA & 21ACA Prescribing Conditions for VC Funds u/s 10(23FB) & IFSC Finance Companies u/s 94B
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Notification no. 10/2025, dated 27-01-2025
The Central Board of Direct Taxes (CBDT) has notified two new Rules, 2DAA & 21ACA, and amended Rules, 21AIA. The new rules are as follows:
(a) Rule 2DAA – Conditions for Venture Capital Funds
The rule specifies that Venture Capital Funds (VCFs) mentioned under sub-regulation (2) of Regulation 18 of the IFSCA (Fund Management) Regulations, 2022, are treated as Category I Alternative Investment Funds (AIFs). These funds are regulated under the IFSCA (Fund Management) Regulations, 2022, which are framed under the IFSCA Act, 2019.
(b) Rule 21ACA – Activities Permitted for Finance Companies in IFSC for Section 94B
The rule permits Finance Companies in IFSCs under section 94B of the Income-tax Act to engage in lending, factoring, forfaiting, and treasury functions like borrowing, hedging, and cash management. Interest payments to non-resident lenders shall be made in foreign currency.
(c) Rule 21AIA(4) – Conditions for Specified Funds (Retail Schemes and ETFs)
A new sub-rule (4) has been inserted in Rule 21AIA to provide that retail schemes under section 10(4D) shall have at least 20 investors, with no single investor holding over 25%. Investments are capped at 25% in associates, 15% in unlisted securities, and 10% in a single company. ETFs shall be listed, traded on recognized stock exchanges, and comply with IFSCA regulations.
Click Here To Read The Full Notification
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