Alternative Investment Fund Income to be Taxed at 30 Per Cent: Revenue Department

New Delhi: Income of alternative investment funds (AIFs) will be taxed at the maximum rate of 30 per cent, the revenue department has said.

AIFs are basically funds established or incorporated in India for the purpose of pooling in capital from Indian and foreign investors for investing as per a pre-decided policy.

"...where the (AIF) trust deed either does not name the investors, or does not specify the beneficial interest...the entire income of the fund shall be liable to be taxed at the Maximum Marginal Rate of income tax in the hands of the trustees of such AIFs in their capacity as representative assessee," a Central Board of Direct Taxes (CBDT) circular said.

At present, there are different slabs of income tax going up to 30 per cent. Total incidence of the tax will also include education cess and surcharge.

The circular also said that once the tax has been paid by the representative assessee, the investors will not be liable for any tax.

It said that in cases where the beneficiaries of the fund are determined or mentioned in the trust deeds, "the tax on the whole of the income of the fund -- consisting of or including profits and gains of business -- would be leviable upon the trustees of such AIFs being representative assessee at the Maximum Marginal Rate".

The circular clarified, however, that the new norms will not operate in area falling in the jurisdiction of High Court, which has taken or takes contrary decision on the issue.

CBDT has issued the circular in view of representations received on taxation of AIFs, which are treated as venture capital funds.