n NISM Certifications
X NISM Series X
Medium

AIFs being tax neutral at the entity level means that the income is exempt at the fund level and taxed directly in the hands of the investors, maintaining their tax status as if they invested directly.

Practice question from NISM Series XIX A- Alternative Investments Funds (AIF) Distributors Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    Tax exemption for the investors

  2. B

    Tax exemptions for both the investors and the trust

  3. C

    The trust to tally its income and expenses and to make it tax neutral

  4. The investor to have the same tax status applicable if they had invested at individual level

    Correct answer

Why this is the answer

Tax neutrality ensures income flows through to investors without fund-level tax, matching their individual tax positions.

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NISM Series XIX A- Alternative Investmen…