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

Understand Fund Taxation in India

How funds, investors and fund managers are taxed, in plain language, with the law one click away.

Three parties, three separate tax questions

An investor puts ₹10 lakh into a fund. The fund invests it and earns income. The fund manager is paid a fee for running the fund.

A tax benefit for the fund manager does not make the investor’s returns tax-free. A tax benefit for the investor does not exempt the fund manager’s income.

Key topics explained

Practical guides on how different funds, investors and fund managers are taxed in India.

When Your Fund Makes Money, Who Pays the Tax?It depends on how the fund is set up. In a Category I or II fund, you pay tax on your share of what the fund earns, as if you had made the investment yourself. In a Category III fund, the fund pays the tax before the money reaches you.Read more →GIFTIFSCCan You Get Tax-Free Returns From a GIFT City Fund?Sometimes, and only in one situation: you are a non-resident investing in a GIFT IFSC fund that qualifies as a specified fund. Registration in GIFT City does not, by itself, make anyone’s returns tax-free.Read more →₹1.25 LAKHEXEMPTIONMade a Profit on Shares? How the ₹1.25 Lakh LTCG Exemption WorksIf you make a long-term profit on listed shares or equity fund units, the first ₹1,25,000 of that profit in a year is not taxed. Above that, the rate is 12.5%, plus 4% cess.Read more →Can a Fund Manager in GIFT City Pay Zero Income Tax?On its eligible income, it can, if four things line up: it is a company that is an IFSC unit, the income comes from its approved IFSC business, it is within its deduction period, and it has opted for the section 200 regime. If any of these is missing, tax or a minimum tax can still arise.Read more →

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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.