To promote domestic investments and manufacturing as spelt out in the ‘Make in India’ programme, the Government has proposed to allow foreign direct investments in Alternative Investment Funds — a privately pooled investment fund for real estate, private equity and hedge funds. Such funds will also be given a tax ‘pass through’ status (both category-I and category-II), which will allow tax liability to be passed on from the fund to the end-investor, Finance Minister Arun Jaitley said in his Budget speech. A pass through helps investors save on taxes by avoiding double taxation.

“This will step up the ability of these funds to mobilise higher resources and make higher investments in small and medium enterprises, infrastructure and social projects and provide the much required private equity to new ventures and start-ups,” Jaitley said. It would also lead to job creation through revival of growth and investment and promote domestic manufacturing and ‘Make in India’, he added. To simplify procedures for domestic companies to attract foreign investments, Jaitley has proposed to do away with the distinction between different types of foreign investments, especially between foreign portfolio investments and foreign direct investments, and replace them with composite caps

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