Country-by-Country Reporting (CbCR) is a key component of the Base Erosion and Profit Shifting (BEPS) framework, requiring multinational enterprises to report income, taxes, and economic activity on a country-by-country basis. For AIF sponsor groups with multiple fund vehicles, understanding CbCR obligations is essential to ensure compliance and avoid penalties.
The CbCR Framework Under the DTC
Section 511 — Furnishing of Report in Respect of International Group
Section 511 of the DTC provides the statutory framework for CbCR in India. Key provisions include:
Section 511(1) : Every constituent entity resident in India shall, if it is constituent of an international group, notify the prescribed income-tax authority in the form and manner, on or before such date, as may be prescribed, whether it is the alternate reporting entity or the details of the parent entity or the alternate reporting entity.
Section 511(2) : Every parent entity or the alternate reporting entity, resident in India, shall, for every reporting accounting year, in respect of the international group of which it is a constituent, furnish a report to the prescribed income-tax authority within twelve months from the end of the said reporting accounting year.
Section 511(4) : A constituent entity of an international group, resident in India, other than the entity referred to in sub-section (2), shall furnish the report in respect of the international group for a reporting accounting year within the period as may be prescribed, if the parent entity is resident of a country or territory:
- Where the parent entity is not obligated to file the report; or
- With which India does not have an agreement providing for exchange of the report; or
- Where there has been a systemic failure of the country or territory
Section 511(8) : The provisions of this section shall not apply to an international group for an accounting year, if the total consolidated group revenue, as per the consolidated financial statement for the accounting year preceding such accounting year, does not exceed the prescribed amount.
Rule 124(7) — Prescribed Threshold
Rule 124(7) of the Income-tax Rules, 2026 prescribes that the total consolidated group revenue of the international group shall be six thousand four hundred crore rupees for the purpose of Section 511(8).
Application to AIF Sponsor Groups
What Constitutes an International Group?
Section 511(10)(g) defines "international group" as any group that includes:
- Two or more enterprises which are resident of different countries or territories; or
- An enterprise, being a resident of one country or territory, which carries on any business through a permanent establishment in other countries or territories
What Constitutes a Constituent Entity?
Section 511(10)(d) defines "constituent entity" as:
- Any separate entity of an international group that is included in the consolidated financial statement of the said group for financial reporting purposes, or may be so included
- Any such entity that is excluded from the consolidated financial statement solely on the basis of size or materiality
- Any permanent establishment of any separate business entity of the international group
Are AIF Fund Vehicles Constituent Entities?
The question of whether AIF fund vehicles are constituent entities depends on whether they are included in the consolidated financial statement of the AIF sponsor group. This is a complex question that depends on:
- The accounting treatment of the fund vehicles
- The level of control exercised by the sponsor
- The consolidation rules applicable to the group
Does CbCR Apply to AIF Sponsor Groups?
CbCR applies to AIF sponsor groups if:
- The group is an international group (two or more enterprises in different countries)
- The total consolidated group revenue exceeds ₹6,400 crore (approximately €750 million)
- The group has a constituent entity in India
For large AIF sponsor groups with multiple fund vehicles across jurisdictions, CbCR obligations are likely to apply.
Filing Requirements
Primary Filing Entity
The primary filing entity is the parent entity of the international group. If the parent entity is resident in India, it must file the CbCR.
Secondary Filing (Local Filing)
If the parent entity is not resident in India, a constituent entity resident in India may be required to file the CbCR if:
- The parent entity is not obligated to file the report; or
- India does not have an agreement providing for exchange of the report; or
- There has been a systemic failure of the country or territory
Form and Content of Report
Section 511(3) specifies that the report shall include:
- Aggregate information in respect of the amount of revenue, profit or loss before income-tax, amount of income-tax paid, amount of income-tax accrued, stated capital, accumulated earnings, number of employees and tangible assets with regard to each country or territory
- Details of each constituent entity including the country or territory in which such constituent entity is incorporated or organised or established and the country or territory where it is resident
- The nature and details of the main business activity or activities of each constituent entity
- Any other information as may be prescribed
Form No. 59
Rule 124(3) provides that the report shall be furnished in Form No. 59.
Implications for AIF Sponsor Groups
1. Data Collection Challenges
AIF sponsor groups with multiple fund vehicles face significant data collection challenges:
- Gathering data from multiple fund vehicles across jurisdictions
- Ensuring data consistency across different accounting systems
- Coordinating with fund administrators and custodians
2. Confidentiality Concerns
- CbCR data is shared with tax authorities in other jurisdictions
- There may be concerns about the confidentiality of commercial information
- However, the data is subject to strict confidentiality provisions
3. Operational Complexity
- Establishing processes and systems for CbCR compliance
- Training personnel on CbCR requirements
- Coordinating with group entities across jurisdictions
4. Penalty Risk
Section 459 provides for penalties for:
- Failure to furnish the report: penalties ranging from ₹5,000 to ₹15,000 per day
- Furnishing inaccurate information: penalty of ₹5,00,000
Practical Compliance Strategies
1. Assess Applicability
- Determine whether the AIF sponsor group meets the CbCR threshold
- Identify the parent entity and its jurisdiction
- Identify all constituent entities
2. Establish Processes
- Establish processes for collecting CbCR data
- Ensure data accuracy and consistency
- Coordinate with group entities
3. Consider Alternative Filing
- If the parent entity is not in a jurisdiction with a CbCR exchange agreement, consider local filing
- Designate an alternate reporting entity if appropriate
4. Documentation
- Maintain documentation of CbCR compliance
- Keep records of data collection and reporting
- Document the basis for the CbCR filing
5. Seek Expert Advice
- Given the complexity of CbCR, seek expert legal and tax advice
- Obtain guidance on the application of CbCR to AIF structures
Expert Legal Guidance
Anuj Desai & Associates provides comprehensive legal advisory services on CbCR compliance for AIF sponsor groups. Our international tax experts help AIF sponsors understand CbCR obligations, establish compliance processes, and navigate the regulatory framework. We assist in applicability assessment, filing preparation, and representation before income-tax authorities.
Disclaimer: This article provides general information and does not constitute legal advice. For specific guidance on CbCR compliance or any other international tax matter, please consult qualified legal professionals.
Need Expert Legal Guidance?
Navigating the complex CbCR framework for AIF sponsor groups requires experienced legal counsel. At Anuj Desai & Associates, we provide comprehensive international tax advisory services, including:
- Applicability Assessment: Evaluation of CbCR obligations
- Compliance Process: Establishment of CbCR compliance processes
- Filing Assistance: Assistance with Form No. 59 filing
- Representation: Representation before income-tax authorities
Contact us for expert legal guidance on your CbCR compliance matters.