Rule 157 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 157 switches off the duty to obtain a Permanent Account Number (PAN) under section 262 of the Income-tax Act, 2025 for two groups of non-residents: those whose only Indian income is from a specified fund, and eligible foreign investors who deal only in certain assets listed on an exchange in an International Financial Services Centre. What counts as a "specified fund" in sub-rule (5)(c) was substituted by Notification 94/2026.
This article is written as per the Income-tax Rules, 2026 (G.S.R. 198(E), notified on 20 March 2026), read with the amending notifications issued up to 22 September 2026. Later notifications should be checked before you act.
Section 262 does not apply to a non-resident (not a company or a foreign company) who invests in a specified fund, if the only Indian income is from that investment, tax is deducted and remitted by the fund, and the investor hands over four sets of details to the fund. Sub-rule (5)(c), as substituted by the Income-tax (Second Amendment) Rules, 2026 (G.S.R. 646(E), 21 July 2026, in force on publication), defines "specified fund" as a Category I or Category II Alternative Investment Fund regulated under the SEBI or IFSCA regulations it names, or a fund referred to in Schedule VI, Note 1(g). The fund or stock broker reports to the Director General of Income-tax (Systems) in Form 92 every quarter.
Non-resident investors and fund managers who are unsure about the exemption can start with our NRI tax filing team.
What changed after March 2026
Notification 94/2026 is made under section 533 read with section 262 of the Act. It came into force on the date of its publication in the Official Gazette, 21 July 2026.
| Provision | As notified in March 2026 | After the amendment |
|---|---|---|
| Rule 157(5)(c), "specified fund" | The expression has the meaning assigned in Schedule VI to the Act | (i) any fund established or incorporated in India as a trust, company, limited liability partnership or body corporate that holds a certificate of registration as a Category I or Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012, or under the International Financial Services Centres Authority (Fund Management) Regulations, 2022 and is located in an International Financial Services Centre; or (ii) any fund referred to in Schedule VI to the Act |
The notification prints the whole of clause (c) afresh. It does not touch any other part of the rule. The two sets of regulations are named in the notification; please check that law for its own terms.
Sub-rule (1): the non-resident who invests in a specified fund
Section 262 does not apply to a non-resident (not being a company or a foreign company) who has, during a tax year, made an investment in a specified fund, if three conditions are met:
- Only fund income. The non-resident does not earn any income in India other than the income from the investment in the specified fund during the tax year (clause (a)).
- Tax deducted and remitted. The income-tax due on that income is deducted at source and remitted to the Central Government by the specified fund at the rates specified in the sections that clause (b) lists: section 393(1) , section 393(2) and section 393(4) .
- Details and documents. The non-resident furnishes to the specified fund: name, email id and contact number; address in the country or specified territory outside India where he is resident; a declaration that he is a resident of a country or specified territory outside India; and the Tax Identification Number (TIN) in that country or territory, or, if none is available, a unique number by which the government of that country or territory identifies him (clause (c)).
Sub-rule (2): what the specified fund must do
The specified fund shall:
- furnish a quarterly statement for the quarter of the financial year in which the details and documents are received in Form 92, electronically, to the Director General of Income-tax (Systems) or a person authorised by him; and
- upload the declaration of foreign residency within fifteen days from the end of the quarter to which the statement relates.
Sub-rules (3) and (4): eligible foreign investors in an IFSC
Section 262 also does not apply to a non-resident who is an eligible foreign investor and has made transactions only in capital assets referred to in section 70(1)(r) that are listed on a recognised stock exchange in an International Financial Services Centre, with the consideration paid or payable in foreign currency, if:
| Condition | Source |
|---|---|
| The investor earns no income in India other than from transfer of those capital assets | Sub-rule (3)(a) |
| The investor gives the stock broker through whom the transaction is made the same four sets of details as in sub-rule (1)(c) | Sub-rule (3)(b) |
| The stock broker furnishes a quarterly statement in Form 92 to the Director General of Income-tax (Systems) for the quarter in which the details are received | Sub-rule (4)(a) |
| The stock broker uploads the foreign residency declaration within fifteen days from the end of that quarter | Sub-rule (4)(b) |
If you advise or manage non-resident investors and want to be sure the conditions are met before a tax year ends, our NRI tax filing team can walk through them with you.
Sub-rule (5): the definitions
"Eligible foreign investor" means a non-resident who operates in accordance with a Securities and Exchange Board of India circular dated 4th January, 2017, which the rule names; please check that circular. "International Financial Services Centre" has the meaning in section 2(q) of the Special Economic Zones Act, 2005; please check that Act. "Specified fund" is as amended above. "Stock broker" means a person having trading rights in a recognised stock exchange located in an International Financial Services Centre and the member of that exchange.
An example
Lotus Growth Fund is a Category II Alternative Investment Fund incorporated in India as a trust and regulated under the SEBI regulations named in sub-rule (5)(c)(i)(A). Hana Berg, a non-resident individual, invests in the fund. Her only income in India during the tax year is from that investment, and the fund deducts tax at source and remits it. She gives the fund her name, email and contact number, her foreign address, a declaration of residence outside India and her foreign TIN. The fund furnishes a Form 92 statement for the quarter in which it received those details and uploads her declaration within fifteen days from the end of that quarter. Under rule 157(1), section 262 does not apply to Hana for that tax year.
The section of the Act behind the rule
Rule 157 is made under section 262, which deals with the Permanent Account Number. Our article on section 262 explains the section, and our post on rule 139, exempt income of a specified fund covers a related use of the same expression.
Need help with non-resident PAN questions?
Non-resident investors and the funds that serve them often ask whether a PAN is needed at all. We can help you map the facts to rule 157 through our tax planning advisory service.
Key takeaways
- Rule 157 exempts two groups of non-residents from section 262.
- The meaning of "specified fund" was substituted by G.S.R. 646(E) of 21 July 2026.
- The fund or stock broker files Form 92 quarterly and uploads the residency declaration within fifteen days of quarter-end.
- A company or foreign company cannot use sub-rule (1).
Read next
- Rule 158: PAN application in Forms 93 to 96
- Rule 159: transactions requiring a PAN
- Rule 160: Form 98 statement of Form 97 declarations
- Rule 217: no higher TDS rate without PAN for non-residents
- Section 262: Permanent Account Number
Disclaimer: Based on the Income-tax Rules, 2026 (G.S.R. 198(E), notified on 20 March 2026), read with the amending notifications issued up to 22 September 2026, as consulted on 2 October 2026. It explains the words of the rules and forms only; later notifications, the forms and utilities on the e-filing portal, circulars and the way the tax authorities apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.