Master File Obligations for AIF Manager Groups Crossing the ₹500 Crore Threshold

The Direct Tax Code (DTC) 2025 imposes significant documentation obligations on AIF manager groups that cross specified transaction thresholds. The master file requirement, which applies to international groups with significant cross-border transactions, is particularly relevant for AIF manager groups with operations across multiple jurisdictions. This guide analyses the master file obligations and compliance requirements.

The Master File Framework

Section 171 — Maintenance of Information and Documents

Section 171(1) requires every person who has entered into an international transaction or specified domestic transaction to keep and maintain such information and document in respect thereof and for such period and in such manner, as may be prescribed.

Rule 123 — Master File Requirements

Rule 123 of the Income-tax Rules, 2026 prescribes the specific information and documents to be maintained by constituent entities of international groups.

Threshold for Master File

Rule 123(1) provides that every person, being a constituent entity of an international group shall maintain the master file if:

1. The consolidated group revenue of the international group, as reflected in the consolidated financial statement for the accounting year, exceeds five hundred crore rupees; and
2. The aggregate value of international transactions:
   • During the accounting year, as per the books of account, exceeds fifty crore rupees; or
   • In respect of purchase, sale, transfer, lease or use of intangible property during the accounting year, as per the books of account, exceeds ten crore rupees

Rule 123(2) — Filing Requirement

The information and document specified in Rule 123(1) shall be furnished to the Joint Director referred to in Rule 124(1), in Form No. 56, on or before the due date for furnishing the return of income as specified under Section 263(1)(c).

Rule 123(3) — Part A Filing

The constituent entity shall furnish Part A of Form No. 56 even if the conditions specified in sub-rule (1) are not satisfied.

Rule 123(4) — Designated Entity

Where there are more than one constituent entities of an international group required to file the information, Form No. 56 may be furnished by any one constituent entity, if:

• The international group has designated such entity for this purpose; and
• The information has been conveyed in Form No. 57 to the Joint Director, thirty days before the due date of furnishing Form No. 56.

Contents of the Master File

Rule 123(1) — Required Information

The master file must contain the following information and documents of the international group:

1. List of Entities: A list of all entities of the international group along with their addresses

2. Ownership Structure: A chart depicting the legal status of the constituent entity and ownership structure of the entire international group

3. Business Description:

   • Nature of the business or businesses
   • Important drivers of profits
   • Description of the supply chain for the five largest products or services
   • List and brief description of important service arrangements
   • Description of the capabilities of the main service providers
   • Details about the transfer pricing policies for allocating service costs
   • List and description of the major geographical markets
   • Description of the functions performed, assets employed and risks assumed
   • Description of the important business restructuring transactions

4. Intangible Property:

   • Description of the overall strategy for development, ownership and exploitation of intangible property
   • List of all entities engaged in development and management of intangible property
   • List of all important intangible property or groups of intangible property
   • List and brief description of important agreements related to intangible property
   • Detailed description of the transfer pricing policies related to R&D and intangible property
   • Description of important transfers of interest in intangible property

5. Financing Arrangements:

   • Detailed description of the financing arrangements
   • List of group entities that provide central financing functions
   • Detailed description of the transfer pricing policies related to financing arrangements

6. Financial Statements: A copy of the annual consolidated financial statement of the international group

7. Advance Pricing Agreements: A list and brief description of the existing unilateral advance pricing agreements and other tax rulings in respect of the international group for allocation of income among countries

Application to AIF Manager Groups

When Does the Master File Apply to AIF Managers?

The master file applies to AIF manager groups if:

1. The group is an international group (two or more enterprises in different countries)
2. The consolidated group revenue exceeds ₹500 crore
3. The aggregate value of international transactions exceeds ₹50 crore (or ₹10 crore for intangible transactions)

Common AIF Manager Group Transactions

Typical international transactions of AIF manager groups include:

• Management fees paid to/from offshore entities
• Performance fees or carried interest allocated across borders
• Cost-sharing arrangements for research, administration, or investment services
• Transfer of intangible property (brand, reputation, proprietary systems)
• Financing arrangements

Specific Master File Considerations for AIF Managers

1. Intangible Property

• AIF managers often have significant intangible assets (brand, reputation, proprietary investment systems)
• The master file must describe the strategy for development, ownership, and exploitation of these intangibles
• Any transfers of intangibles must be documented

2. Financing Arrangements

• AIF manager groups may have significant financing arrangements
• The master file must describe these arrangements and the transfer pricing policies

3. Service Arrangements

• AIF manager groups often have complex service arrangements (management services, administration, research)
• The master file must describe these arrangements and the transfer pricing policies

Compliance Requirements

Form No. 56 — Filing

The master file must be furnished in Form No. 56 to the Joint Director on or before the due date for furnishing the return of income.

Form No. 57 — Designation

If a designated entity files the master file on behalf of the group, Form No. 57 must be furnished thirty days before the due date.

Retention Period

Rule 123(5) requires that the information and documents be kept and maintained for a period of nine years from the end of the relevant tax year.

Penalties for Non-Compliance

Section 459 — Penalty

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

Section 442 — Penalty

Section 442 provides for a penalty of 2% of the value of each international transaction or specified domestic transaction for failure to keep and maintain documentation.

Practical Compliance Strategies

1. Assess Applicability

• Determine whether the AIF manager group meets the master file thresholds
• Identify all constituent entities
• Identify all international transactions

2. Gather Information

• Gather information on the group structure
• Gather information on the business, intangible property, and financing arrangements
• Gather financial statements

3. Prepare the Master File

• Prepare the master file in the prescribed format
• Ensure completeness and accuracy
• Coordinate with group entities

4. File Timely

• File Form No. 56 on or before the due date
• File Form No. 57 if applicable
• Ensure timely compliance

5. Maintain Records

• Maintain records of the master file
• Keep records for the prescribed period
• Update records as necessary

Expert Legal Guidance

Anuj Desai & Associates provides comprehensive legal advisory services on master file compliance for AIF manager groups. Our international tax experts help AIF managers understand master file obligations, prepare documentation, and navigate the regulatory framework. We assist in applicability assessment, document preparation, and representation before income-tax authorities.

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Disclaimer: This article provides general information and does not constitute legal advice. For specific guidance on master file compliance or any other international tax matter, please consult qualified legal professionals.

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Need Expert Legal Guidance?

Navigating the complex master file framework for AIF manager groups requires experienced legal counsel. At Anuj Desai & Associates, we provide comprehensive international tax advisory services, including:

• Applicability Assessment: Evaluation of master file obligations
• Document Preparation: Assistance with Form No. 56 preparation
• Compliance: Guidance on ongoing compliance requirements
• Representation: Representation before income-tax authorities

Contact us for expert legal guidance on your master file compliance matters.

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