Moneycontrol
HomeNewsBusinessMarketsAIFs see more institutional, Family Office investment after Budget clarifies treatment of capital gains
Trending Topics

AIFs see more institutional, Family Office investment after Budget clarifies treatment of capital gains

In order to clear the tax uncertainty, the Union Budget had clarified that income generated by Category I and II AIFs will be treated as capital gains. Earlier, FPIs investing in Indian AIFs faced multiple litigations over whether their gains were capital gains or business income.

February 06, 2025 / 10:40 IST
Story continues below Advertisement
Representative image

With the Union Budget providing clarity on taxation of Category I and II Alternative Investment Funds (AIFs), experts see more institutional capital coming into Indian equities, with Family Office flows too likely to see a rise.

In order to clear the tax uncertainty for AIFs, the Union Budget had clarified that income generated by Category I and II AIFs will be treated as capital gains. Till now, there was no specific provision on how such income would be treated — either as capital gains or business income.

Story continues below Advertisement

In the Budget 2025, government had expanded the definition of capital asset to include gains made by AIFs under the Income Tax Act, a move that is expected to benefit Indian AIFs.

Siddarth Pai, founding partner at 3one4 Capital said the classification of securities held by an Indian AIF as a 'capital asset' will ensure all gains from their sale will be taxed as capital gains, and not 'business income'.