India spent years trying to persuade offshore funds — many of them structured through Mauritius or Singapore — to move to GIFT City. The obvious obstacle was tax: relocating meant transferring assets, and transferring assets meant capital gains.
Section 10(23FF) removes that obstacle, and Form 10-IJ is the certificate that proves the exemption was computed properly.
At a glance
- What it exempts
- Capital gains on transfer of shares of an Indian company, arising to a specified fund or non-resident
- Context
- Relocation of an offshore fund to an IFSC
- Form
- Form 10-IJ — certificate of an accountant under section 10(23FF)
- Computation rule
- Rule 2DD
- Linked statement
- Form 10-II, the fund’s annual statement
- Limiting factor
- Exempt only to the extent attributable to non-resident unit holders
- Under the 2025 Act
- Schedule VI
The problem it solves
When an offshore fund relocates to an IFSC, its Indian shareholdings move from the original fund to the resultant fund. That movement is a transfer, and a transfer of shares in an Indian company would ordinarily attract capital gains tax — a charge on a reorganisation that produced no cash and no change in ultimate ownership.
Section 10(23FF) exempts income of the nature of capital gains arising or received on account of the transfer of shares of a company resident in India, where the gain relates to that relocation, in the hands of a non-resident or a specified fund.
The exemption is partial by design. It runs only to the extent the income is attributable to units held by non-residents. Where the fund has resident unit holders, their share of the gain is not exempt. Computing that proportion correctly is the entire substance of the exercise — and the reason a certificate is required at all.
Rule 2DD and Form 10-IJ
Rule 2DD prescribes how the exempt income of a specified fund is computed for the purposes of clause (23FF) of section 10. It was notified by the CBDT through the Income-tax (34th Amendment) Rules, 2021.
Form 10-IJ is the certificate to be issued by an accountant under that clause. The accountant examines the books of account and other documents — including the fund’s annual statement in Form 10-II — and certifies the particulars of the capital gains income received by the specified fund on the transfer of shares of an Indian company, and the portion attributable to units held by non-residents.
Form 10-II and Form 10-IJ work as a pair. Form 10-II is the fund’s own annual statement; Form 10-IJ is the accountant’s certificate examined against it. Reconciling one to the other is the first step in the engagement, and inconsistencies between them are the first thing an assessment will find.
What the accountant verifies
- That the fund is a specified fund within the meaning of the provision.
- That the gain arises on transfer of shares of a company resident in India, in the relocation context.
- The unit holder composition — resident versus non-resident — at the relevant time.
- The attribution computation under Rule 2DD.
- Consistency with the annual statement in Form 10-II.
Unit holder composition is where the work concentrates. Funds have registers that change through the year, and the attribution depends on getting the relevant position right rather than a year-end snapshot taken for convenience.
The neighbouring provisions
| Provision | Subject | Related form or rule |
|---|---|---|
| Section 10(23FF) | Capital gains on relocation of offshore funds | Rule 2DD; Form 10-IJ |
| Section 10(4D) | Income of a specified fund, including the investment division of an Offshore Banking Unit | Rules 21AJA and 21AJAA; Form 10-IK |
| Section 10(23FE) | Sovereign wealth and pension fund investment in infrastructure | Audit Report SWF |
| Section 80LA | Deduction for IFSC units and Offshore Banking Units | Form 10CCF |
UDIN on Form 10-IJ
Form 10-IJ is a certificate issued by a practising Chartered Accountant, so it falls in the Certificates category — UDIN mandatory since 1 February 2019.
Update within 60 calendar days of upload. A form uploaded without a UDIN and left un-updated past that point is treated by the CBDT as invalid, with all due consequences of law, even after acceptance. Revocation is possible only within 48 hours of generation. For a fund whose exemption may run to substantial sums, this is a disproportionate risk from a procedural step.
See our guide to UDIN generation for the sequence and for correcting an error found after acceptance.
Section 10(23FF) under the Income-tax Act, 2025
The Income-tax Act, 2025 replaced the long list of clauses in section 10 with schedules. Per ICAI’s tabular mapping, the IFSC-related exemptions sit in Schedule VI, which covers income not to be included in total income of certain eligible persons in an International Financial Services Centre:
| Provision | 1961 Act | 2025 Act |
|---|---|---|
| Relocation capital gains | Section 10(23FF) | Schedule VI (Table Sl. No. 10) |
| Specified fund income | Section 10(4D) | Schedule VI (Table Sl. Nos. 1 and 2) |
| Sovereign and pension funds | Section 10(23FE) | Schedule V (Table Sl. No. 7) |
Note that 10(23FE) and 10(23FF) sit in different schedules. Sovereign wealth and pension fund relief is in Schedule V; the IFSC-related exemptions, including relocation gains, are in Schedule VI. The clause numbers are one letter apart and the schedules are not the same.
Frequently asked questions
What is Form 10-IJ?
A certificate issued by an accountant under clause (23FF) of section 10, supporting the computation of a specified fund’s exempt capital gains on transfer of shares of an Indian company.
What does section 10(23FF) exempt?
Capital gains arising or received on transfer of shares of a company resident in India, in the context of relocation of an offshore fund to an IFSC, in the hands of a non-resident or specified fund.
Is the whole gain exempt?
No. Only to the extent attributable to units held by non-residents. The share attributable to resident unit holders is not exempt.
Which rule governs the computation?
Rule 2DD of the Income-tax Rules, 1962, notified through the Income-tax (34th Amendment) Rules, 2021.
What is Form 10-II?
The specified fund’s annual statement, which the accountant examines when issuing the Form 10-IJ certificate.
Who can issue Form 10-IJ?
An accountant — a Chartered Accountant in practice.
Is UDIN required?
Yes, in the Certificates category, with the 60-calendar-day update rule after upload.
Where does 10(23FF) sit under the Income-tax Act, 2025?
In Schedule VI, which houses the IFSC-related exemptions.
Is this the same as the sovereign wealth fund exemption?
No. That is section 10(23FE), which sits in Schedule V and has its own audit report.
What is the hardest part in practice?
Establishing unit holder composition at the relevant time and applying the attribution correctly under Rule 2DD.
In short
Form 10-IJ exists because section 10(23FF) grants a partial exemption, and partial exemptions need arithmetic somebody is prepared to certify. The tax analysis is usually straightforward; the work is in the unit register and the attribution. Reconcile Form 10-IJ to Form 10-II before filing, and cite Schedule VI — not Schedule V — when referring to the new Act.
Micro Advisor advises funds and fund managers on IFSC relocation, exemption computations and the related certification.
References
- Income Tax Department — Rule 2DD, computation of exempt income under section 10(23FF)
- Income Tax Department — Income tax forms
Disclaimer. General information, not professional advice. The IFSC and specified fund provisions are amended frequently; verify the current position for the fund and year concerned.