India’s market regulator has recommended new tax rules for alternative investment products that would boost the country’s fledgeling hedge fund industry. The Securities and Exchange Board of India is seeking “unit-based” taxation for products broadly classified as hedge funds. The designation would reduce fund managers’ administrative burdens and make the country’s equity hedge-fund investors eligible for capital-gains tax exemptions after one year, moving the rules more in line with those for mutual funds.
Unfavorable tax treatment has been a key barrier to growth for India’s $2 billion hedge fund industry, which pales in comparison to the $348 billion market in China. SEBI has also asked for a so-called tax pass through for losses in other alternative investment products, including venture capital, real estate and private equity, that would allow investors to offset their personal tax bill if fund stakes suffer losses.
Assets in alternative investment funds rose after last year’s budget granted tax pass through for profits in certain product types, enabling some investors to pay lower rates. Total AIF investments swelled to 435 billion rupees ($6.9 billion) in September 2017 from 285 billion rupees in December 2016, according to SEBI.
[Source: The Financial Express]