What is fund structuring?
Fund structuring is the process of designing the legal, regulatory, and tax architecture of an investment vehicle. It covers jurisdiction, legal form (trust / LLP / company), regulatory category (such as AIF Cat I / II / III), investor eligibility, fee and waterfall design, and tax pass-through, so the fund can operate efficiently for sponsors and investors.
Which jurisdictions are commonly used for fund setup?
For India-focused funds, common domestic options include AIFs registered with SEBI in India and IFSCA-registered funds in GIFT City. Offshore feeder structures are often set up in Singapore, Mauritius, or other neutral jurisdictions, depending on investor base and target investments.
What are the main differences between AIF Categories I, II, and III?
Category I AIFs invest in social, infrastructure, venture capital, or SME segments encouraged by the government. Category II covers most private equity and debt funds. Category III pursues complex strategies including listed equities, derivatives, and leverage. Each has different regulatory treatment, leverage limits, and tax rules.
Why is GIFT City IFSC becoming popular for funds?
GIFT City IFSC offers a range of regulatory, tax, and operational advantages — IFSCA-driven framework, currency flexibility, tax holidays, and ease of inbound and outbound investment — making it an attractive jurisdiction for India-focused and global funds with eligible investor profiles.
What is a feeder fund?
A feeder fund is an offshore vehicle that pools capital from foreign investors and invests through a master fund or directly into a target jurisdiction. Feeder structures are used to address investor preferences, tax considerations, and regulatory frameworks across jurisdictions.
How is taxation handled in an AIF?
Category I and II AIFs generally enjoy pass-through status under Section 115UB, where income (other than business income) is taxed in the hands of investors. Category III AIFs typically pay tax at the fund level, although developments and rulings continue to evolve. Tax structuring is an integral part of fund design.
Who should be involved in structuring a new fund?
Typical participants include sponsors and key fund managers, fund structuring advisors, tax and legal counsel, fund administrators, custodians, and prospective anchor investors. Early involvement of compliance, accounting, and reporting teams helps avoid rework once the fund is launched.