Corpzo Ventures Private Limited

The Manager's taxation would be determined by the form of the revenue stream in question.

The management fees or carried interest are, in general, the principal sources of revenue. A goods and services tax (GST) of 18 percent would be applied on management fees. In practise, the Fund is responsible for this. Furthermore, because the management fee is an income for the Manager, it is subject to income tax under the ITA.

In contrast to other countries, Indian taxation rules do not recognise "carried interest" as a specialised source of revenue. As a result, "carried interest" would be taxed under one of the other available revenue streams. In general, managers structure their revenue from "carried interest" as a return on their continuing interest investment kept in the AIF in order to qualify it as capital gains (at a rate of up to 23.296 percent). Tax authorities, on the other hand, may contest such a claim and attempt to categorise "carried interest" as fee income, subjecting it to harsher taxation than management fees.

It should be noted that, in lieu of a "carried interest," Category III AIFs frequently charge a performance fee, which is taxed similarly to management fees

3. Are there any taxes imposed on an investor's participation in an Alternative Investment Fund or on the transfer of the investor's interest?

In India, there is no concept of an establishment tax for AIFs. A transfer of an investor's stake would be considered a "capital asset" and could be liable to capital gains tax.

4. What is the local tax treatment of alternative investment fund investors who are (a) residents, (b) non-residents, and (c) pension fund investors (or any other typical investor type)?

Category I and Category II AIFs are tax pass-through vehicles, as (an open-ended Category III AIF does not have tax pass-through status and is taxed at the applicable rates). Under the two broad areas of capital gains and other income, a generalised overview of local Indian taxation with respect to numerous securities and investor types is presented below.

Capital Gain

Long-term assets (“LTA”) and short-term assets (“STA”) are classified as long-term assets (“LTA”) and short-term assets (“STA”), respectively, based on the period of holding these assets from the date of acquisition to the date of transfer, and the gains may be taxable as short-term capital gains (“STCG”) or long-term capital gains (“LTCG”).

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Benefits of Tax Treaties

According to Section 90(2) of the ITA, the ITA's provisions apply to the extent that they are more beneficial than the provisions of the Double Taxation Avoidance Agreement (“DTAA”) between India and the offshore investor's country of residence, to the extent that DTAA benefits are available to the offshore investor.

The investor would have to provide the necessary information and documents, including a tax residency certificate.

5. Is obtaining a tax ruling from the tax or regulatory authorities required or advisable before forming an Alternative Investment Fund?

Obtaining a tax ruling is not required.

6. What actions have been made, or are being done, to put the US Foreign Account and Tax Compliance Act of 2010 (FATCA) and other similar information-reporting regimes, such as the OECD's Common Reporting Standard, into effect?

According to the Inter-Governmental Agreement between the United States and the United Kingdom,  Foreigners in the United States and India are required to comply with FATCA regulations. In India, financial organisations are required to report tax data to the Indian government regarding US account holders FATCA rules have been established by the Indian government.

In India, reporting It is necessary to provide a statement. Every calendar year, by the 31st of May, fill out Form 61B online the International Telecommunications Union (ITA). The Reporting Financial Institution (including an AIF) is responsible for keeping track of and reporting the required data for each reportable account. Furthermore, specific instructions for doing due diligence on reportable accounts, such as US reportable accounts and other reportable accounts, are available. SEBI also mandates that all AIFs comply with FATCA regulations.

7.What steps are being taken to implement the OECD's Action Plan on Base Erosion and Profit Shifting (BEPS), particularly Actions 2 (hybrids) (for example, ATAD I and II), 6 (prevention of treaty abuse) (for example, the MLI), and 7 (permanent establishments), insofar as they affect the operations of Alternative Investment Funds?

Under section 90(1) of the ITA, India has notified the provisions of the BEPS Multilateral Instrument, with the date of entry into effect set for October 1, 2019.

8. Are there any asset classes or structures that are tax-advantaged? What is the extent of their use?

AIF registration in India is required for any pooling of funds from third parties on a private placement basis with the underlying purpose of earning a fee by making investments under any pre-defined strategy. Other pooling structures, such as SEBI-regulated collective investment schemes (CIS) and RBI-regulated non-banking financial corporations (NBFC), are not preferred over AIFs in terms of taxation and serve distinct functions.

REFORMS

1. What reforms (if any) are suggested in the Alternative Investment Funds space?

In March of 2015, SEBI established a standing body called the "Alternative Investment Policy Advisory Committee" ("AIPAC"). Since then, AIPAC has submitted a number of suggestions to SEBI, some of which have already been enacted. In Gujarat, the Gandhinagar Fin-Tech City (“GIFT City”) was notified as India's first international financial services centre (“IFSC”), welcoming the establishment of offshore, India-focused pooling vehicles on Indian soil as an alternative to traditional offshore jurisdictions such as Mauritius and Singapore. Several tax reforms and regulatory adjustments have been proposed in the past, and more are now being considered in order to make the IFSC more appealing to managers and foreign investors. To speed up the development of GIFT City, the Central Government has announced the creation of an uniform regulator, the International Financial Services Centre Authority.

SEBI has also proposed governance reforms, stating that AIFs investing in listed securities will be required to adopt a Stewardship Code in the future.