New Delhi, Feb 28 (KNN) Union Budget has allowed the Tax pass-through for all categories of alternative investments meeting the long standing demand of Alternative Investments Funds (AIFs).  

The tax pass through status provides for the income to be exempt at the fund level and taxable only in the hands of the investors avoiding double taxation.  

SEBI had notified regulations on alternative investment funds (AIF) in May, 2012 and created  three categories of registrations for all AIFs. The category-I AIF consists of venture capital funds, SME funds, infrastructure funds and social venture funds.  Category-II AIF consists of private equity funds, debt funds and Category-III AIF are in the nature of domestic hedge fund structures.

Currently the automatic tax pass through status is restricted to a sub-category of Category I AIF (Venture Capital Funds or VCFs) whereas the rest of the AIFs are not accorded such a status.

With interest of Private Equity (PE) and Venture Capital (VC) Fund investors rising in Indian companies especially MSMEs which offer greater and faster growth potential, the move is welcomed both by the MSMEs and Investors.  

Trade estimates  suggest that investments worth over US Dollar 80 billion have been made in Indian companies by PE/VC Funds over last 10 years.
The move may give a fillip to Prime Minister Modi’s pet ‘Made in India’ project. (KNN/AB)