TaxTMI 
TaxTMI 
Question- What are the proposed special regime in Finance Bill 2015 for taxation of income of Alternative Investment funds?
Taxation - Pass through status to Category- i and Category- ii - Alternate Investment Funds
28 Feb 2015 
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Pass-through taxation for Category I and II AIFs shifts investment income to unit holders with fund-level tax on business income.
A special pass-through tax regime for Category I and II AIFs taxes investment income in the hands of unit holders as if they held the underlying investments directly; fund-level taxation applies only to profits and gains of business while other fund income is exempt at fund level and flows through to unit holders. Funds must file returns, furnish income-component details, deduct tax at source on distributable non-taxable amounts to unit holders, and retain fund-level losses to be carried forward; dividend/distributed income tax provisions are inapplicable to such distributions. (AI Summary)
A special pass-through tax regime for Category I and II AIFs taxes investment income in the hands of unit holders as if they held the underlying investments directly; fund-level taxation applies only to profits and gains of business while other fund income is exempt at fund level and flows through to unit holders. Funds must file returns, furnish income-component details, deduct tax at source on distributable non-taxable amounts to unit holders, and retain fund-level losses to be carried forward; dividend/distributed income tax provisions are inapplicable to such distributions. (AI Summary)