Why Pass-Through Funds Need a Dedicated Reporting Form
Because Category I and Category II AIFs don't pay tax on most income at the fund level, the tax law needs a mechanism to tell both the investor and the tax department exactly what income was earned, in what character, and how much belongs to each investor. That's the function the Form 64 series of statements performs.
What the Statement Covers
The prescribed statement (historically issued as Form 64C to investors and Form 64D to the tax authorities under the erstwhile Income-tax Act, 1961 framework for pass-through investment funds, with corresponding forms now prescribed under the Income-tax Act, 2025 and its rules) sets out, for each investor:
- The nature of income (capital gains, business income, interest, dividend, or other)
- The quantum of income attributable to that investor
- Whether the income has actually been paid or merely accrued/credited during the year
Why This Matters for Investors
Investors rely on this statement to correctly report AIF-sourced income under the right head in their own income tax return. Getting the character wrong — reporting capital gains income as ordinary income, for instance — can trigger tax notices or incorrect tax outcomes for the investor, not the fund.
Why This Matters for Fund Managers
The fund (or the person responsible for making payments on its behalf) is legally obligated to furnish this statement within prescribed timelines. Delayed or inaccurate statements create downstream problems for investors' own filing deadlines, and reflect poorly on the fund's operational discipline — an area LPs increasingly diligence before committing capital to a manager's next fund.
Common Errors We See
- Statements that don't reconcile to the fund's audited financials
- Income character misclassified, particularly around business income vs capital gains for funds with a mix of realised exits
- Statements issued after investors have already filed their own returns, forcing revised filings
Getting This Right Every Year
We prepare and reconcile pass-through statements for AIF clients as part of our annual compliance cycle, ensuring the numbers tie back to audited fund financials before anything goes out to investors.
This article is for general informational purposes. Please consult us for the current prescribed form and filing timeline applicable to your fund under the Income-tax Act, 2025 and rules made thereunder.