The present invention relates to a water-soluble bioactive fraction obtained from the gum resin exudate of Boswellia serrata and to a process for the preparation thereof. The present invention also relates to a process for the isolation of a water soluble bioactive fraction containing a mixture of potassium and calcium salts of polysaccharides composed of units of arabinose, galactose and D-glucuronic acid, having marked anti-inflammatory and anti-arthritic activities from the gum resin exudate of Boswellia serrata and to the use thereof in the treatment of arthritis in the form of a pharmaceutical composition containing the bioactive fraction.