In a sticky situation: Sebi's Special Situations Fund may run into tax wall

The tax rate for business income is 42.7 per cent after surcharge and cess

The introduction of a new sub-category for investments in stressed assets through alternative investment funds (AIFs) will bring in a new set of investors and create a more efficient market for buying distressed assets, but may run into tax hurdles, said market players.

On Tuesday, the Securities and Exchange Board of India (Sebi) board amended the AIF regulations to introduce a Special Situations Fund (SSF), a sub-category under Category I AIF, which can invest in certain kinds of ‘stressed assets’.

This includes stressed loans available for acquisition in terms of the Reserve Bank of India (Transfer of Loan Exposures) Directions,