Indian Alternative Investment Funds (AIFs) are pass-through vehicles for income tax purposes (for Category I and II), which means the income earned by the fund is taxed in the hands of the investors, not the fund. To make this pass-through operational, the Income Tax Act requires AIFs to file three forms — Form 64A, Form 64B, and Form 64C — that establish what income is attributable to which investor. This guide explains what each form is, who files it, when, and what happens if you don't.
The pass-through principle
Section 115UB of the Income Tax Act, 1961 establishes that income earned by a Category I or Category II AIF (other than business income) is taxable in the hands of the investor, in the same manner and to the same extent as if the investor had directly earned that income. Business income earned by the AIF, on the other hand, is taxed at the fund level.
This creates an information requirement: each investor needs to know exactly what type of income (capital gains, dividends, interest, business income) and how much, was earned by the fund on their behalf during the year. Forms 64A, 64B, and 64C make this happen.
Form 64A — Statement to the Income Tax Department
Form 64A is filed by the AIF with the Principal Commissioner or Commissioner of Income Tax. It provides:
- Name, PAN, and registration details of the AIF
- Category of the AIF (I, II, or III)
- Investor-wise breakdown of income earned and credited during the financial year
- Nature of each income head — capital gains (short-term / long-term), business income, dividends, interest, other
- TDS, if any, deducted by the fund
Due date: 15 June following the end of the financial year. So for FY 2025-26, Form 64A is due by 15 June 2026.
Form 64B — Statement to each investor
Form 64B is the certificate that the AIF issues to each investor, mirroring the data in Form 64A for that particular investor. It is the investor's primary document for declaring AIF income in their own tax return.
The form contains:
- Investor's name, PAN, and unit details
- Income earned during the year, broken into heads (capital gains, dividends, interest, business income)
- TDS credit available to the investor
- Date of credit of income to the investor account
Due date: 30 June following the end of the financial year. Investors should receive Form 64B before they begin preparing their personal or corporate income tax return.
Form 64C — Category III AIF specifics
Category III AIFs (hedge funds, long-short equity, etc.) are not pass-through entities — they are taxed at the fund level. However, where a Category III AIF distributes income to investors, it must report this distribution. Form 64C captures:
- Distributions made during the year, characterised as dividends, interest, or capital gains
- Distribution per unit and per investor
- TDS deducted on the distribution
Form 64C is filed with the IT department by 15 June and a similar certificate is provided to investors by 30 June.
Worked example
Consider Acme Growth Fund I, a Category II AIF with three investors:
- Investor A — 40% commitment, ₹40 crore
- Investor B — 35% commitment, ₹35 crore
- Investor C — 25% commitment, ₹25 crore
During FY 2025-26, the fund earned:
- Long-term capital gains on equity exits: ₹20 crore
- Dividend income from portfolio companies: ₹2 crore
- Interest on bank deposits: ₹0.5 crore
Form 64A would report — for Investor A — LTCG of ₹8 crore, dividend ₹0.8 crore, interest ₹0.2 crore. For Investor B — LTCG ₹7 crore, dividend ₹0.7 crore, interest ₹0.175 crore. And so on. Investor A then declares ₹8 crore as LTCG in their ITR, taxable at 12.5% (post Finance (No. 2) Act 2024) without indexation. Investor B declares the same proportionally.
Penalties under Section 271FAA
Failure to file Form 64A on time attracts a penalty under Section 271FAA of the Income Tax Act — ₹5,000 for every day during which the failure continues. There is no maximum cap. A fund that delays filing by 90 days faces a ₹4.5 lakh penalty; a year's delay is ₹18 lakh.
Failure to issue Form 64B to investors attracts a penalty of ₹100 per day per investor under Section 272B. For a fund with 50 LPs, that's ₹5,000 per day — material, but secondary to the 271FAA exposure.
Beyond money, late filing causes operational pain: investors who don't have Form 64B by mid-July often delay their own ITR filings, leading to investor relations friction.
Practical tips for AIF managers
- Start preparing Form 64A in May, immediately after the fund's audited financials are signed
- Reconcile investor-wise income against the unitholder ledger before filing
- For LPs that are themselves funds or trusts, ensure their PAN and TAN are captured correctly
- For foreign LPs (FPIs, offshore funds), capture treaty residency and Tax Residency Certificate (TRC) details
- File Form 64A electronically through the Income Tax e-filing portal; manual filing is no longer accepted
- Issue Form 64B to each investor by 30 June with a covering note explaining how to declare the income in their ITR
How Kapitalyze helps
Kapitalyze Fund OS auto-generates Form 64A, 64B, and 64C from your fund's general ledger and unitholder records. AIF reporting tags every income item by head (LTCG, STCG, dividend, interest, business) at the time of booking, so by 31 March each investor's income breakdown is already 95% complete.
The platform produces investor-ready Form 64B PDFs with the AIF's digital signature and a PAN-validated mailing list. Investor portal publishes Form 64B securely to each LP's login — eliminating email attachments with sensitive PAN data.
For fund managers running multiple schemes, multi-scheme reporting consolidates all 64A filings into a single MIS, with penalty exposure alerts if any scheme is approaching the 15 June deadline.
Frequently Asked Questions
Are Category III AIFs required to file Form 64A?
Category III AIFs are not pass-through, so Form 64A in the standard sense does not apply. However, where they distribute income, Form 64C is the equivalent reporting form.
What if my AIF had no income during the year?
Form 64A must still be filed as a Nil return. Failure to file even a Nil return triggers Section 271FAA penalty.
Can I revise Form 64A after filing?
Yes. A revised Form 64A can be filed within the assessment period if errors are discovered. Investors should be informed and reissued Form 64B with corrected figures.
Do foreign investors also need Form 64B?
Yes. Foreign LPs need Form 64B to claim treaty benefits and to file Form 10F/treaty declarations with their tax filings. For Mauritius and Singapore LPs, this is the document the local tax administration may also request.
Is TDS deducted on income distributed by an AIF?
Section 194LBB requires the AIF to deduct TDS at 10% on income credited or paid to a resident investor (other than business income, which is taxed at fund level). For non-resident investors, TDS is at the rates in Section 195 read with the applicable DTAA.
Reconciliation between Form 64A and ITR
One of the most common audit notices an Indian LP receives is a mismatch between income reported in their personal ITR and the corresponding entry in the AIF's Form 64A (which the IT department sees via Annexure-Less Return data). Common causes:
- The AIF allocated income on accrual basis (e.g., dividends declared but not yet paid) while the LP reported on receipt basis
- Capital gains characterised differently — the AIF may treat a unit redemption as LTCG while the LP's tax adviser treats it as STCG
- TDS credit claimed by the LP doesn't match Form 26AS, because the TDS was deposited under the AIF's TAN, not directly visible to the LP
To avoid these mismatches, AIFs should: (a) issue Form 64B with a clear allocation table and TDS credit explanation, (b) issue it before 30 June each year, (c) provide LPs a written guidance note on how to report AIF income in ITR, and (d) ensure the AIF's tax filings (Form 64A and TDS returns) reconcile bit-for-bit.
Worked example — split between heads of income
Consider Acme Growth Fund II, a Category II AIF. During FY 2025-26, the fund:
- Exited Portfolio Co. A for ₹40 crore (cost ₹15 crore, held 3.5 years) — LTCG of ₹25 crore
- Exited Portfolio Co. B for ₹12 crore (cost ₹8 crore, held 1.5 years) — STCG of ₹4 crore
- Received ₹3 crore in dividends from listed portfolio companies
- Earned ₹0.8 crore on bank fixed deposits — interest income
- Earned ₹0.5 crore from a structured note sale — treated as business income under Section 28
Form 64A would allocate each head of income to each LP pro-rata to their commitment. The business income of ₹0.5 crore is taxed at the fund level (since it's not pass-through under Section 115UB), so doesn't appear in Form 64B. The remaining income flows to LPs and is reported in their ITRs under the appropriate heads — LTCG at 12.5%, STCG at slab rate, dividends at slab rate, interest at slab rate.