AIF Tax and Compliance Calendar: 115UB, TDS, SEBI Filings

Registration is the start of an AIF's obligations, not the end. Once the fund is live, the manager runs two calendars at once: SEBI's, covering reporting, valuation, audits and investor disclosures, and the tax calendar, covering withholding, statements to investors and the fund's own returns. Missing either can mean penalties, investor complaints and awkward questions at the next fundraise.

This note summarises how AIFs are taxed and sets out a practical calendar. Every date, rate and threshold can change, because SEBI circulars and tax law both change often. Section and form numbers below are the familiar Income-tax Act, 1961 references. The Income-tax Act, 2025 replaces that Act from 1 April 2026 and renumbers sections and forms, so ask your tax adviser to map each reference to the new Act before relying on it.

How Category I and II AIFs are taxed

Category I and II funds get pass-through status under Section 115UB of the Income-tax Act, 1961. Income other than business income is exempt at the fund level under Section 10(23FBA) and taxed in investors' hands as if they had invested directly, keeping its character as capital gains, interest or dividend.

Business income is the exception: it is taxed at the fund level, and the investor's share is then exempt under Section 10(23FBB). The Finance Act, 2025 treats securities held by Category I and II funds as capital assets, which narrows the argument that their gains are business income. Losses other than business losses can pass through to investors who have held their units for the required period.

The fund deducts tax at source on income it pays or credits to investors under Section 194LBB: 10 per cent for residents and the rates in force for non-residents. Whether a non-resident investor can get treaty relief, and at which stage, depends on the treaty, the investor's documents and the current law, so confirm it investor by investor.

How Category III AIFs are taxed

Category III funds do not get pass-through under Section 115UB, so tax is generally settled at the fund level, and the rate depends on the fund's legal form, whether the trust is determinate and the nature of its income. A determinate trust is usually taxed through the trustee as a representative assessee, but business income can push the fund to the maximum marginal rate.

Whether trading gains are capital gains or business income is the central tax question for a Category III fund, and it turns on the strategy, holding periods and documentation. Settle the position with your tax adviser before launch and apply it consistently.

GST, the manager and the investors

The manager charges management fees, and sometimes performance fees, to the fund, and those attract GST at the rate in force, currently 18 per cent. The manager files its own GST returns, and the fund usually cannot use that input credit, so the GST is a real cost to investors.

Investors need clear annual statements to file their own returns, because their share of fund income keeps its character. Statements that arrive late or lump income types together make investors' filings harder and lead to complaints.

Monthly and quarterly tasks

Most recurring work falls on the manager and the fund's accountants. Category III schemes must also disclose NAV to investors at least quarterly if close-ended and at least monthly if open-ended, which drives a shorter reporting cycle than for Category I and II.

The usual recurring items are below. Form numbers are the 1961 Act ones; confirm each form and date against the current rules:

• Monthly: deposit TDS by the 7th of the following month, with a longer window for March deductions; the manager files its GST returns on its monthly or quarterly cycle.
• Quarterly: file the activity report with SEBI within the window it prescribes after each quarter.
• Quarterly: file TDS returns in Form 26Q for residents and Form 27Q for non-residents, due 31 July, 31 October, 31 January and 31 May.
• Quarterly: pay advance tax where the fund has income taxable in its own hands, by 15 June, 15 September, 15 December and 15 March, at 15, 45, 75 and 100 per cent of the year's tax, cumulatively.

Half-yearly and annual tasks

Category I and II funds must have their investments valued by an independent valuer at least every six months, which can be extended to once a year with approval of investors holding 75 per cent by value.

The annual cycle is heavier and mixes SEBI, tax and FEMA filings. Many deadlines cluster between May and July, so start the audit early:

• Audit of the fund's accounts, then the annual report to investors, within 180 days of the year end for Category I and II.
• The manager's compliance test report on adherence to the AIF Regulations, shared with the trustee or sponsor within the time SEBI prescribes.
• The annual audit of compliance with the terms of the PPM, subject to the exemptions SEBI allows.
• Statements of income paid or credited to investors: under the 1961 Act rules, Form 64D to the tax department by 15 June and Form 64C to investors by 30 June.
• The FATCA and CRS statement in Form 61B by 31 May, where the fund is a reporting financial institution.
• The fund's own income-tax return, filed even when all its income passes through.
• The FLA return to RBI by 15 July, where the fund's foreign investment brings it into scope.

Event-driven filings, and who signs

Some obligations are triggered by events, not dates. Form InVi must be filed within 30 days of issuing units to a person resident outside India. Material changes to the PPM trigger SEBI filing and investor consent or exit requirements, complaints on SCORES must be answered within the prescribed time, and KYC records must be kept current.

Responsibility stays with the fund: the manager and trustee answer for SEBI filings, the auditor signs the audit report, and the fund's authorised signatory signs its tax filings. A chartered accountant can build and run the calendar, prepare the tax computations and investor statements, and review the numbers before they go out.

Frequently asked questions

Do Category I and II AIFs pay tax?

Generally not on income other than business income, which passes through to investors under Section 115UB. Business income is taxed at the fund level, and the fund still files a return and deducts TDS on distributions.

What is the TDS rate on AIF distributions?

Under Section 194LBB, 10 per cent for resident investors and the rates in force for non-residents. Check the position under the Income-tax Act, 2025 for payments from 1 April 2026.

How often must an AIF value its investments?

Category I and II funds need an independent valuation at least every six months, extendable to annual with approval of 75 per cent of investors by value. Category III funds disclose NAV at least quarterly or monthly, depending on whether the scheme is close-ended or open-ended.

Which AIF filings are due every year?

The main ones are the audit and annual investor report, the manager's compliance test report, the PPM audit where it applies, investor income statements, the fund's income-tax return and, where relevant, the FLA return.

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