The revenue department on Monday set up a three-member committee for recommending advance approval to offshore funds for setting up management office in India.

The committee will examine the application of overseas fund managers and submit its recommendations to the Central Board of Direct Taxes (CBDT) regarding grant of approval or otherwise.

"With the announcement of a three-member committee, the CBDT has now operationalised the framework for seeking an advance approval by offshore funds which set up their fund management office in India," said Rajesh H Gandhi, Partner, Deloitte Haskins and Sells.

Chief Commissioner of Income Tax or I-T (International Taxation), West Zone, Mumbai is Chairman of the Committee. CIT (International Taxation)-1, Mumbai and CIT (Transfer Pricing)-1 Mumbai are members. The committee will give its recommendations to the CBDT and the order of the CBDT will be binding on the tax authorities, Gandhi said.

"Funds seeking certainty on the tax treatment of their fund management business can choose to apply for an advance approval," he said. The Finance Act, 2015 inserted a new section to the Income-tax Act, 1961 with effect from April 1, 2016 to provide for a special regime in respect of offshore funds having fund managers located in India.

The rule, the Finance Ministry said provides for mechanism of fund being approved by the Board. The fund seeking approval is required to make an application to Member (I-T), CBDT.