I have invested in Alternative Investment Fund II (AIF ii). This AIF fund invests in real estate projects. My question is regarding tax treatment related to income from AIF II. Fund manager is currently deducting tax on gross basis on the income of the fund and not offsetting any expenses or management fees from the income. 

What is going to be the treatment of such income in investors' hand? Can I offset management fees from the interest income of the fund? This management fee is charged by the fund for their services provided against the investment in the fund so I should be able to offset management fee and fund expenses from the income of the fund. Please advise

Also, I want to check with you if i can offset the equalisation amount received with the equalisation amount paid. Currently the fund is not netting equalisation amount and deducting tax on equalisation amount received. Please provide details on tax treatment for AIF II funds. 

Ans: We suggest consulting a CA regarding the same.

Ans: Dear Rajesh,

Firstly, I appreciate your diligence in managing your taxes. Now, coming to your query, the choice between ITR-1 and ITR-2 depends on the nature of your capital gains.

ITR-1, also known as Sahaj, is for individuals with income up to Rs. 50 lakh from salary, one house property, other sources (interest, etc.), and agricultural income up to Rs. 5,000. However, it does not allow you to report capital gains.

On the other hand, ITR-2 is for individuals and HUFs not having income from profits and gains of business or profession. It includes the provision to report capital gains.

In your case, since you have capital gains from the sale of mutual funds, even if it's less than the taxable limit, it would be more appropriate to file ITR-2. The TDS that has been deducted can be claimed as a refund in your return if your total income is below the taxable limit.

Please consult with a tax professional or chartered accountant to ensure you're following the correct procedure as per the latest tax laws.

Remember, it's always better to be accurate in your tax filings to avoid any future discrepancies or issues with the tax department.

I hope this helps.

Best Regards

Ans: Okay. Yes it is ITR 2. Apologies for the confusion

Ans: Form : ITR 2
Income head : Capital gains
Tax liability depends upon your other income sources. If only this is the amount of income then no tax liability.

Please consult with your CA as well on this.