Description: The Income-tax (Second Amendment) Rules, 2025, amends the Income-tax Rules, 1962 to include new provisions related to Venture Capital Funds, Finance Companies in International Financial Services Centres (IFSC), and retail schemes within these centres. 

• Venture Capital Fund: The rules now specify that a Venture Capital Fund referred to in the International Financial Services Centres Authority (Fund Management) Regulations, 2022, will be considered a Category I Alternative Investment Fund regulated by the IFSC Authority. 

• Finance Company in IFSC: A Finance Company operating in an IFSC must now only conduct specific activities, such as lending, factoring, and treasury services. It also specifies that the interest paid on debts issued by a non-resident must be in foreign currency. 

• Retail Schemes and Exchange-Traded Funds (ETFs): The rules introduce conditions for retail schemes, including investor limits and asset allocation rules. ETFs are required to be listed and traded on a recognised stock exchange and must comply with IFSC regulations. 

• Impact: These amendments clarify the operations of Venture Capital Funds and Finance Companies in IFSCs, providing clear guidelines for their activities. They also set conditions for retail schemes and ETFs in IFSCs, ensuring better compliance and regulation within the sector.