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WHAT IS AN ALTERNATIVE INVESTMENT FUND? Alternative Investment Fund or AIF means any fund established or incorporated in India which is a privately pooled investment vehicle that collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined
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FAQ :
An Alternative Investment Fund (AIF) is a privately pooled investment vehicle established in India that collects funds from sophisticated investors, both Indian and foreign, to invest according to a defined policy for the benefit of its investors.
There are three categories: Category I AIFs invest in socially or economically desirable sectors like start-ups or infrastructure. Category II AIFs invest in equity and debt securities and include funds not classified elsewhere. Category III AIFs use complex trading strategies and may employ leverage.
Applicants must submit their registration applications online through the SEBI Intermediary Portal. A Private Placement Memorandum (PPM) detailing the AIF's information is a key document, and schemes are launched after filing the PPM with SEBI.
AIFs must provide various reports to investors, including annual reports with financial information and risk management details. They also have reporting obligations to trustees, sponsors, and SEBI, covering compliance, leverage, and changes to fund documents.
Category I and II AIFs registered with SEBI generally have 'pass-through' tax status. Income earned by these AIFs (other than business income) is exempt from tax at the fund level and is instead taxable directly in the hands of the investors.
Category III AIFs do not have pass-through tax status. Income from these funds is taxed at the investment fund level, and the tax obligation does not pass through to the unit holders. Business income is taxed at the marginal rate.
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