What are Alternative Investment Funds (AIF)?
AIFs are
licensed investment vehicles established & incorporated in India for
collectively & privately investing on behalf of a niche segment of
sophisticated investors. The minimum ticket size of 1 cr makes these products ultra
- exclusive in their investment approach. Alternate Investment Funds combine
the operational ease of a mutual fund and the flexibility of a PMS making it a
perfect blend geared for generating optimum performance for a stipulated
investment objective. To enhance risk-adjusted performance, these products are
allowed to use complex strategies like unlisted equity investments, long -
short hedging style of investments etc. Some of the star fund managers have
taken a plunge and started their own Alternate Investment Funds that have delivered
great performance for the investors. We present all facts about options in this
space categorising these into Equity oriented, Debt oriented and Structured
products.
Taxation of AIFs?
Technically,
AIFs are classified in 3 categories. Cat I and Cat II Alternate
Investment Funds have been accorded a pass-through status, which
essentially means that income accruing from such funds is taxed at the investor
level and not the fund level with a requirement to deduct 10% on income
credited to the investor. The Cat III AIFs have still not been accorded a pass
through status, and are taxed at the investment fund level and the tax the obligation doesn't pass through to the investor. In CAT 3 tax rate depends upon
the investment strategy and asset allocation of the fund (where the income of
the fund is characterized as income under the head Profits or gains from
business or profession, the investment fund is taxed in respect to such income
at the maximum marginal rate of tax)
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