AIF Fund Services

AIFs are registered under the SEBI (Alternative Investment Funds) Regulations 2012. Category I covers VCFs, SME funds, social-impact funds, and infrastructure funds; Category II covers PE and debt funds; Category III covers hedge funds and entities using leverage. Each category carries distinct investment restrictions and reporting obligations set out in Schedules I to III of the Regulations. Registration is mandatory under Regulation 3 before accepting commitments from investors.

Regulation 22 requires every AIF to file quarterly reports with SEBI in the prescribed format through the SEBI EFS portal within 10 days of each quarter end. An annual audited statement under Regulation 20(13) — including NAV per unit, management fee disclosures, and a portfolio schedule at fair value per SEBI circular SEBI/HO/AFD/PoD-1/P/CIR/2023/131 — must be submitted within 180 days of the fiscal year end.

Category I and II AIFs enjoy pass-through status under Section 115UB of ITA 1961 — income retains its character (capital gains, interest, dividend) and is taxed in the hands of investors at applicable rates; the fund files Form 64B to report allocations to each investor. Category III AIFs are taxed at fund level: business income at 42.74% (surcharge and cess), STCG under Section 111A at 15%, and LTCG under Section 112A at 10% above Rs 1 lakh.

The investment manager charges a management fee that is a taxable supply of portfolio management services under SAC 997152, attracting 18% GST under the CGST Act 2017. Where the fund pays sub-advisors or placement agents outside India, Reverse Charge Mechanism applies under Sections 9(3) and 5(3) of the CGST Act and IGST Act 2017 respectively — the fund must obtain GST registration and discharge RCM on such import-of-services payments.

Regulation 20(13) of the SEBI AIF Regulations mandates annual audit by a Chartered Accountant with a valid CoP. The accounts must disclose NAV per unit, performance-linked management fees, carried interest accruals computed per the fund LPA, and a schedule of investments at fair value. In addition, Form 64A (fund-level) and Form 64B (investor-level) must be filed under Section 115UB read with Rule 12CB of the Income Tax Rules 1962 before the due date under Section 139(1) of ITA 1961 (or Section 263 of ITA 2025 for TY 2026-27 onwards).