2. About AIF
An investment that is not one of the three traditional asset
types (stocks, bonds and cash)
Include funds established or incorporated in India in the
form of a trust, company, limited liability partnership or a
body corporate
Limited regulations and relative lack of liquidity
Separate legislation called SEBI (AIF) Regulation 2012
3. Categories of AIF
Category-I AIF Category-II AIF
• Included venture capital
funds, SME funds, social
venture funds etc.
• Funds which do not fall in
Category I and III and do not
undertake leverage or
borrowing other than to meet
day-to-day operational
requirements.
4. PASS Through for AIF
A pass through is provided to this investment vehicle
However the same has been restricted to only Category I AIFs
and Category II AIFs.
New chapter, Chapter XII-FB has been inserted in the Income
Tax Act
5. APPLICABILITY
VCF’s Prior to AIF regulations VCF’s As per AIF regulations
• Chapter XII-F of the
Income Tax Act and Section
10(23FB) dealing with the
provisions pertaining to
Venture Capital Fund or
Venture Capital Company
shall apply.
• Chapter XII-FB as inserted
by Finance Bill, 2015 shall
apply
6. Reclassification of section
Section 115U Reproduced Sec. 115U
• Any income which has got
accrued or has been received
by the unit holders on account
of the investment made in the
units of investment fund shall
be assumed that the
investments have been made
directly by the unit holders
and hence will be chargeable
to tax in the same manner as
that of the fund.
• any income accruing or arising
to, or received by, a person,
being a unit holder of an
investment fund, shall be
chargeable to income-tax in
the same manner as if it were
the income accruing or arising
to, or received by, such person
had the investments made by
the investment fund been
made directly by him
7. Taxation Treatment
Section 10(23FBA) Section 10(23FBB)
Investment Fund
The income of the investment
fund (other than the
income from business or
profession) shall be
exempt.
Unit Holders
where any income has accrued
or has been received by the
unit holder which is in the
nature of business or
profession then such stream of
income will be exempt in the
hands of unit holders
8. In the Hands
of
Income from
Business or
profession
Other than
Business or
Profession
Taxation Rates
Investment
Fund
Taxable
By virtue of
10(23FBA)
Exempt
By virtue of
10(23FBA)
In case the fund is in the
form of company or firm –
Rate As applicable to
them;
Unit Holders Exempt
By virtue of
10(23FBB)
Taxable
By virtue of
10(23FBB)
Taxable as per the
applicable rate of the
respective unit holders.
Investment Fund is
required to deduct TDS at
the rate of 10% by virtue
of 194LBB.
9. Current Dichotomy
The new regime provides pass through only to AIF Category-I and
Category-II
The new regime only provides a partial pass through as the
business income continues to be taxed at the Maximum Marginal
Rate
