Alternative Investment Funds (AIFs) Vis-à-vis BUDGET 2015-16

SEBI came out with Alternate Investment Fund Regulations in May 2012, though since then, no specific exemptions ever found placed under the Taxation provisions to promote these funds. By and large since the applicability of these Regulations close to 120 AIF were registered with SEBI within a span of short 2 years wherein majority of these funds had been in the nature of Trust to avail the benefit of Tax pass through following the advance ruling of AIG (in Re: Advance Ruling P. No. 10 of 1996).

Lately The Central Board of Direct Taxes (“CBDT”) issued a Circular No. 1 dated July 28, 2014 (“Circular”) to provide ‘clarity’ on the taxation of Alternative Investment Funds wherein it was provided that if ‘the names of the investors’ or their ‘beneficial interests’ are not specified in the trust deed on the ‘date of its creation’, the trust will be liable to be taxed at the ‘Maximum Marginal Rate’. This said circular created lots of hue and cry in the entire AIF industry as well as proved dampening to the domestic as well as foreign investors. 

Having due regard to the large number of representation received from various Industry and Investor Association(s), the present budget 2015-16 has come up with special tax regime for Investment Fund (Alternative Investment Fund (AIF) Category I and II registered under SEBI (AIF) Regulations, 2012 to improve the investment climate in the Country and also to promote the domestic manufacturing.

Find below the article on AIFs vis-a-vis Union Budget 2015-16 with all proposed tax provisions and our comments. You can also download this for future reference-

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