AIF means any fund integrated, which is a privately pooled funding automobile that collects funds from subtle buyers, for investing it following an outlined funding coverage for the good thing about its buyers. These are ruled by the SEBI (Various Funding Funds) Laws, 2012. There are three classes of AIFs.
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Class I
Enterprise capital funds, Angel Funds, SME Funds, Social Enterprise Funds, Infrastructure funds.
Class II
AIFs that don’t fall underneath Class I & III, and which don’t undertake leverage or borrowing like actual property funds, personal fairness funds, debt funds, and many others.
Class III
AIFs which make use of complicated buying and selling methods or using leverage like derivatives corresponding to hedge funds, PIPE Funds, and many others.
Taxation
Class I & II AIFs have been given a pass-through standing u/s 115UB. This implies any revenue (aside from enterprise revenue) earned by the AIF is tax-exempted u/s 10(23FBA). Since enterprise revenue is taxable within the arms of AIF, it’s exempted for the unit holders u/s 10(23FBB). So, for the investor, any revenue from investments made in such AIFs, are chargeable to tax because it had been the revenue arising to such individual, had the investments made instantly by him. For Class III AIFs, the tax legal responsibility relies on the relevant charges comparable to their structure and the character of the revenue; they don’t have a pass-through standing. A particular tax framework doesn’t exist for Class III AIFs.
Modification in Price range 2025
The definition of “capital asset” u/s 2(14) was amended to incorporate securities held by AIFs of Class I & II. This ensures that revenue arising out of transfers of such securities invested in AIFs are all the time handled as capital good points. So, successfully, there isn’t a change. The modification clarified the standing as capital asset for AIF Class I & II.
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