FME Regulatory Intelligence, Learning & Practice · IFSCA (Fund Management) Regulations, 2025

Compare Tax Across AIF, PMS and GIFT IFSC Funds

See how each route is taxed, and the estimated tax on the same income through each one. This compares tax only and is not a recommendation.

Category I or II AIF (SEBI or GIFT IFSC)

How it works
Pass-through: income keeps its character and is taxed in the investor’s hands, as if the investor held the investments.
Who bears the tax
The investor.
Withholding
Yes: the fund deducts tax before paying out (10% for residents).
Watch for
Business income stays taxable at the fund.
Read the explanation

SEBI Category III AIF

How it works
Taxed as a trust: the trustee is taxed on the fund’s income on behalf of the investors.
Who bears the tax
The fund (trustee), so the tax is reflected in the NAV.
Withholding
Tax is paid at fund level by the trustee, as representative of the investors.
Watch for
Where investors’ shares are not fixed, the maximum marginal rate can apply. A gain on redeeming units is the investor’s own capital gain.
Read the explanation

GIFT IFSC Category III, retail scheme or ETF held only by non-residents (a “specified fund”)

How it works
Investors: income from the fund and gains on its units are left out of their Indian income. Fund: pays tax on Indian income at section 210 rates.
Who bears the tax
The fund, on its Indian income.
Withholding
Not at investor level for the left-out income.
Watch for
All units other than the sponsor’s or manager’s must be held by non-residents (limited 5% exception).
Read the explanation

GIFT IFSC Category III fund with Indian resident investors

How it works
Not a specified fund, so taxed as a trust like a SEBI Category III AIF.
Who bears the tax
The fund (trustee).
Withholding
As for a trust.
Watch for
A gain on redeeming units is the investor’s own capital gain.
Read the explanation

SEBI PMS

How it works
No pooling: the shares and securities are yours, and you pay tax as a direct investor.
Who bears the tax
You.
Withholding
Depends on the income and your residence; check with the payer.
Watch for
Rates depend on what you sold and how long you held it.
Read the explanation

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Prashant Kumar

Meet the expert

CS Prashant Kumar

Company Secretary & Compliance Officer
Global Horizons Capital Advisors (IFSC) Private Limited — an IFSCA-licensed investment banker

13+ years of experienceFCS Fellow member, ICSIAuthor Audit Under Fire

Published in The Chartered Accountant (Jun 2025, Jan 2025, Mar 2024) and Chartered Secretary (Aug 2023)

Prashant Kumar is a seasoned Company Secretary and corporate governance strategist with more than 13 years of experience advising large corporates, promoter-led groups and global businesses on compliance, regulatory risk and board governance. In GIFT IFSC, the IFSCA regime is his day job rather than a research topic.