Mumbai, Feb. 1 -- A 10-year-long lobbying effort by the private equity and venture capital industry bore fruit on Saturday when finance minister Nirmala Sitharaman amended section 2 (14) of the Income Tax Act on "capital assets" to include alternative investment fund (AIF) investments in securities.

This means that AIF income, previously treated as business income, will now be considered capital gains. While capital gains are taxed at 12.5%, the highest business income tax slab is 30%.

The amendment is significant given that, according to data from the Securities and Exchange Board of India (Sebi), more than 1,400 AIFs in the country had raised a cumulative Rs.5 trillion as of September 2024.

AIFs are pooled investment vehicles for ins...