SIF taxation follows the same pass-through structure as mutual funds. The fund itself pays no tax — under Section 10(23D) of the Income Tax Act, income at the fund level is exempt. Tax applies only when the investor redeems units. This is a significant structural advantage over Category III AIFs, where the fund pays tax at the highest marginal rate on every trade before distributing net returns to investors.
For Group A SIF funds — those where the gross equity allocation meets the equity-oriented threshold — Short Term Capital Gains (STCG) on units held less than 12 months are taxed at 20% flat under Section 111A. Long Term Capital Gains (LTCG) on units held more than 12 months are taxed at 12.5% under Section 112A. For Group B SIF funds — those with a lower equity allocation — STCG is taxed at the investor's applicable income slab rate, which can be up to 30% for investors in the highest bracket. LTCG for Group B funds is also taxed at 12.5% after 12 months. Importantly, a fund's SEBI category name does not determine its tax group — the actual portfolio construction does.
AND Fintech categorises all live SIF funds into Group A and Group B based on their portfolio construction and tax outcome. The critical difference is STCG treatment. A Group A investor paying 20% STCG vs a Group B investor paying 30% slab rate — on the same ₹1 lakh of short-term gains — pays ₹10,000 less in tax. What makes this more complex is that two funds in the same SEBI category can fall into different tax groups. This is not visible on any public dashboard. It is what the AND Fintech SIF Tax Guide is built to show.
For most SIF funds, the LTCG holding period is 12 months. However, at least one currently live SIF fund requires investors to hold for 24 months to qualify for the 12.5% LTCG rate. Gains redeemed before 24 months in this fund are taxed at the investor's full slab rate — potentially 30% for HNI investors. This is a material difference when planning exits and comparing post-tax returns. The AND Fintech SIF Tax Guide names the fund and explains the implication in detail.
In Portfolio Management Services (PMS), every portfolio trade creates a direct tax event for the investor. In Category III Alternative Investment Funds (AIFs), the fund pays tax at the highest marginal rate on income earned before distributing to investors, significantly reducing net returns. SIF investors, like mutual fund investors, are taxed only at redemption — not on every trade the fund manager executes. This pass-through structure makes SIF structurally more tax-efficient than both PMS and Category III AIF for most HNI investors.
The AND Fintech SIF Tax Guide maps every live SIF fund to its correct tax group — with sources cited from each fund's Scheme Information Document. It covers which funds are Group A, which are Group B, which fund has the 24-month rule, and how to use annual tax harvesting to legally reduce your LTCG liability every year. Free. Delivered to your inbox.
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Tax treatment depends on each fund's asset allocation as filed with SEBI and is subject to change. AND Fintech (ARN-301536) is an AMFI-registered Mutual Fund Distributor and not a tax advisor. Please consult a qualified Chartered Accountant before making tax-based investment decisions. Mutual Fund investments are subject to market risks. Please read all scheme-related documents carefully before investing.