AIF means any fund included, which is a privately pooled funding car that collects funds from subtle traders, for investing it following an outlined funding coverage for the good thing about its traders. These are ruled by the SEBI (Different 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 below Class I & III, and which don’t undertake leverage or borrowing like actual property funds, non-public fairness funds, debt funds, and many others.
Class III
AIFs which make use of advanced buying and selling methods or using leverage like derivatives akin 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 particular person, 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 selected tax framework doesn’t exist for Class III AIFs.
Modification in Funds 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 at all times handled as capital positive aspects. So, successfully, there isn’t any change. The modification clarified the standing as capital asset for AIF Class I & II.
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