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Unlike mutual funds, which are public offerings, AIFs are offered to a limited group of investors.

While multicap strategies have delivered CAGR of 25% over the last five years, large cap and mid & small cap PMSs generated CAGR of 17% and 16% in the corresponding period respectively, according to PMS AIF World data.

Experts believe that the move would encourage venture capitalists to invest in Indian start-ups.

CBDT has clarified that such a tax treatment is not new for the AIF category III investors.

This is one more instance of consolidation in the wealth management space.

The costs of setting up such fund is lower than setting up offshore funds, said Tyagi.

However, investors in category III AIFs focussing on futures and options would not get this exemption.

With this, start-ups need not pay 31% tax on funds they raise from angel investors and venture capitalists.

Infrastructure funds invest in companies having interests in infrastructure projects.

Artificial intelligence, internet of things and financial technology companies are among the venture capitalists top interests.

Of the 30 new offerings in the AIF space, AMCs have floated 16 AIFs schemes in Category II and Category III.