Colonel Ali Altaf Khan was born in Kapurthala State. He belonged to a Rajput family of Kapurthala that served as generals and ministers of this Princely State. Ali Altaf Khan received his military training in Kapurthala and both him and his father, Colonel Mohammed Ali Khan (1815-1890), rendered service at the Bannu Frontier during the 2nd Afghan War of 1878-1880. The Maharaja of Kapurthala had provided his army to aid the British fight against the Amir of Afghanistan. Ali Altaf Khan was honored by the British after the War and was sent to England (in 1880) for further military training at the Honorable Artillery Company of England.

After his return to Kapurthala State, Ali Altaf Khan became the highest ranking officer of the Kapurthala State Artillery Forces. His father, Colonel Mohammed Ali, had been the Chief of Imperial Service Troops of the Kapurthala State. Ali Altaf Khan's older brother, Colonel Ghulam Jilani, had also served for the Kapurthala State forces. Ghulam Jilani did not have any children. Ali Altaf Khan had two daughters, Fazal Begum and Amrao Begum. Fazal Begum was married to Azmat Ali Khan, and had two children, Mohammed Hayat Khan of Lyallpur and Mehndi Begum. Mehndi Begum was married to Khan Bahadar Altaf Hussain Khan of Batala. Colonel Ali Altaf Khan is the maternal great-grandfather of Professor Namdar Khan.

In the 1890's Colonel Ali Altaf Khan studied Bar-at-Law in London and was admitted tp Lincoln's Inn, Trinity Team, in 1903. In 1907 Colonel Ali Altaf Khan was admitted In the Chief Court of the Punjab at Lahore by Henry Duffield Craik, Registrar of the Court. In 1920's Ali Altaf Khan moved to Lyallpur and built a family residence. He settled in Lyallpur after retiring. In 1930, Namdar Khan, a young student at Government College Lyallpur at the age of fifteen, frequently visited Colonel Ali Altaf Khan, who insisted in cooking his own meals.