Alternative investment funds receive a set back
After extensive stakeholder consultations alternative investment fund (AIF) regulations were notified in May 2012. The Securities and Exchange Board of India (SEBI) after recognising the need for long-term, cost-effective funding source from the private sector, capital markets or private pool of capital for start-ups, small & medium businesses and infrastructure came out with this.
As of May 2014, SEBI had granted registrations to over 100 AIFs and, until March 2014. AIFs had raised net commitments totalling Rs 13,465 crore. Currently, there is a provision in the tax law that provides a pass-through tax status on specified income to AIFs that are registered under the venture capital fund (VCF) sub-category of category 1 AIFs. Hence this is beneficial for the investor.
The same status is also available to VCFs registered under the erstwhile SEBI (VCF) Regulations, 1996. However, funds registered as category 1 (other than VCF), category 2 and category 3 AIFs—which include small & medium enterprises, social ventures, private equity, debt and hedge funds, have to deal with ambiguities and uncertainties of the trust taxation provisions in the Indian tax laws. Most of these have been formed as trusts and they are waiting for some clarity on the tax sops to be provided by the government.
The market experts are keeping a close eye on any developments and everyone is hoping that the ambiguity will be finished soon in this regard.
Source- The Financial Express
