Resources · GIFT IFSC and SEBI AIF
Frequently asked questions
Short, plain-English answers on the GIFT IFSC FME, SEBI AIF and SEBI PMS rules, each with its source and a link to the full regulation.
Basics 5
Does an AIF need SEBI registration?
Yes. No entity or person can act as an Alternative Investment Fund without a certificate of registration from SEBI. (Reg 3(1))
Yes. Before acting as an Alternative Investment Fund in any way, the fund needs SEBI's certificate of registration.
A promoter group wants to pool money from 40 high-net-worth investors to invest in start-ups. It first registers the fund with SEBI as an AIF, and only then takes commitments.
Operating without registration is a serious breach, so register first.
What are Category I, II and III AIFs?
Category I invests in start-ups, early-stage or social ventures, SMEs, infrastructure or other areas the government or regulators want to encourage. Category II is anything not in I or III that does not use leverage beyond what the Regulations allow, such as private equity and debt funds. Category III uses diverse or complex trading strategies and may use leverage, including through derivatives. (Reg 3(4))
The category depends on what the fund invests in and how. Category I backs areas the government wants to encourage, such as start-ups and infrastructure. Category II covers funds like private equity and debt funds that don't use leverage beyond what is allowed. Category III uses complex trading strategies and may use leverage.
A fund backing early-stage start-ups is Category I. A private equity fund buying stakes in unlisted companies without leverage is Category II. A long-short fund trading listed shares with derivatives is Category III.
The category decides which investment conditions apply. The SEBI AIF Setup Navigator helps you pick.
Which funds fall under Category I?
Venture capital funds, SME funds, angel funds, social impact funds, infrastructure funds and special situation funds, among others SEBI may specify. (Reg 3(4)(a))
Category I is a family of sub-categories, each with its own investment focus.
An SME fund, an angel fund and an infrastructure fund are all Category I AIFs, each with its own investment condition.
Each sub-category has its own rules, so check the right one.
Can an AIF raise money from the public?
No. An AIF can raise money only by private placement. (Reg 10(g))
No. An AIF can raise money only through private placement, by approaching investors privately, never through a public offer.
A fund cannot advertise its scheme to the general public or invite anyone to apply. It reaches investors privately, with a placement memorandum.
Marketing must stay private, so check any publicity material before it goes out.
In what form are AIF units issued?
In dematerialised form, subject to SEBI's conditions. (Reg 10(aa))
Units are issued in dematerialised (demat) form, subject to SEBI's conditions.
An investor's AIF units appear in their demat account, just like shares.
Plan demat onboarding with the investor's papers.
Investors 5
What is the minimum investment in an AIF?
₹1 crore per investor. Employees and directors of the AIF or its Manager can invest ₹25 lakh, and accredited investors have no minimum. (Reg 10(c))
Most investors must invest at least ₹1 crore. Employees and directors of the AIF or its Manager need ₹25 lakh, and accredited investors have no minimum.
An outside investor commits ₹1 crore, which is allowed. An employee of the Manager commits ₹25 lakh, also allowed. An accredited investor commits ₹50 lakh, which is allowed because there is no minimum for them.
Check the investor's category before accepting a smaller ticket. The AIF minimum investment calculator helps.
Is there a lower minimum for social impact funds?
Yes. From 18 April 2026, an individual can invest ₹1,000 in a social impact fund that invests only in securities of not-for-profit organisations registered or listed on a social stock exchange (it was ₹2 lakh). (Reg 10(c), third proviso)
Yes, for one specific kind. In a social impact fund that invests only in not-for-profit organisations registered or listed on a social stock exchange, an individual can invest as little as ₹1,000 (it was ₹2 lakh before 18 April 2026).
A student who wants to support such a fund can invest ₹1,000.
This low minimum applies only to that kind of fund, not to other social impact funds.
How many investors can an AIF scheme have?
Up to 1,000. Accredited investors are not counted towards the limit. (Reg 10(f))
A scheme can have up to 1,000 investors, but accredited investors are not counted towards that limit.
A scheme with 1,000 regular investors and 150 accredited investors is within the limit, because the 150 accredited investors don't count.
Track the regular investors separately from the accredited ones.
What is an Accredited Investors only fund?
A fund or scheme in which every investor, apart from the Manager, Sponsor and the staff and directors of the AIF or the Manager, is an accredited investor. (Reg 2)
A fund or scheme where every investor, apart from the Manager, the Sponsor and the staff and directors of the AIF or the Manager, is an accredited investor.
All outside investors in a fund are accredited, and the Manager's employees also invest. It is still an Accredited Investors only fund.
This status brings relaxations, for example in PPM filing and tenure extension, so keep accreditation evidence up to date.
What is a large value fund for accredited investors?
A fund in which each investor, other than insiders, is an accredited investor investing at least ₹25 crore. The threshold was ₹70 crore earlier. (Reg 2)
A fund where each investor, apart from insiders, is an accredited investor who invests at least ₹25 crore (the threshold was ₹70 crore earlier).
A fund with ten outside investors, each accredited and each investing ₹30 crore, qualifies. If one of them invested only ₹20 crore, it would not.
Large value funds get higher concentration limits, so confirm every investor meets the test.
Fund size and manager 2
What is the minimum size of an AIF scheme?
A corpus of at least ₹20 crore; ₹5 crore for a social impact fund scheme. (Reg 10(b))
Each scheme needs a corpus of at least ₹20 crore, or ₹5 crore for a social impact fund scheme.
A Category II scheme with ₹18 crore committed falls short of the ₹20 crore minimum corpus. A social impact fund scheme with ₹6 crore meets its ₹5 crore minimum.
Plan fund-raising so the corpus meets the minimum.
How much must the Manager or Sponsor invest?
A continuing interest of the lower of 2.5% of corpus or ₹5 crore; for Category III, the lower of 5% or ₹10 crore. It must be an actual investment, not a waiver of management fees, and must be disclosed to investors. (Reg 10(d), (e))
The Manager or Sponsor must keep its own money in the fund, as a real investment, not by giving up management fees, and must disclose this to investors. It is the lower of a percentage of corpus and a fixed amount.
A Category II scheme of ₹100 crore: 2.5% is ₹2.5 crore, lower than ₹5 crore, so ₹2.5 crore. A Category III scheme of ₹300 crore: 5% is ₹15 crore, so the ₹10 crore cap applies.
Budget for the continuing interest. The AIF calculator works it out.
Launch 3
How is an AIF scheme launched?
The placement memorandum is filed with SEBI along with the scheme fee, through a merchant banker, at least 10 working days before launch, with the documents SEBI specifies. SEBI may send comments to the merchant banker or the Manager, who must ensure they are complied with. (Reg 12, as amended in July 2026)
Since July 2026, the placement memorandum and the scheme fee are filed with SEBI through a merchant banker at least 10 working days before launch. Any SEBI comments go to the merchant banker or the Manager, who must make sure they are complied with.
A fund planning to launch a scheme files its placement memorandum through its merchant banker two weeks or more ahead, so the 10 working days are covered even with no holidays, and builds in time to handle any SEBI comments.
Count working days, not calendar days. The SEBI AIF Deadline Calculator does this.
Is a scheme fee payable for the first scheme?
No. Since the Second Amendment, 2026, no scheme fee is payable on the launch of an AIF's first scheme. (Reg 12(1), proviso)
No. Since the Second Amendment, 2026, an AIF's first scheme carries no scheme fee.
A newly registered AIF launches its first scheme without a scheme fee. Its second scheme pays the fee.
This is a saving for new funds, so budget for the fee from the second scheme.
Which funds are outside the filing-and-comments route?
Accredited Investors only funds: Reg 12(2), (3) and (3A) do not apply to them. (Reg 12, proviso)
Accredited Investors only funds. The merchant-banker filing and SEBI comments steps in Reg 12(2), (3) and (3A) don't apply to them.
An Accredited Investors only fund prepares its placement memorandum but does not go through the 10-working-day filing through a merchant banker.
Keep the evidence that every outside investor is accredited, because the exemption depends on it.
Tenure 2
What is the minimum tenure of an AIF?
Category I and II funds are close-ended with a minimum tenure of three years. Category III schemes can be open-ended or close-ended. (Reg 13)
Category I and II funds are close-ended and must run for at least three years. Category III schemes can be open-ended or close-ended.
A Category II fund is set up with a seven-year tenure, which is allowed because it is more than three years. A Category III fund can instead be open-ended.
The tenure in the placement memorandum binds you, so choose it carefully.
Can the tenure be extended?
Up to two years, with the approval of two-thirds of unit holders by value; up to five years for an Accredited Investors only fund. Without that approval, or when the extended tenure ends, the fund or scheme is wound up. (Reg 13(5), (6))
Yes, by up to two years, if two-thirds of unit holders by value agree. An Accredited Investors only fund can extend by up to five years. Without that approval, or once the extended tenure ends, the fund or scheme is wound up.
A seven-year Category II fund needs more time to sell its last investments. With two-thirds approval by value, it extends to nine years.
Seek approval well before the tenure ends.
Investment limits 4
How much can an AIF invest in one company?
Category I and II: up to 25% of investable funds. Category III: up to 10%, or 20% for large value funds, with a separate proviso for listed equity. (Reg 15(1)(c), (d))
There is a cap on how much of the fund can go into a single company, to spread risk. It is 25% for Category I and II funds and 10% for Category III, with higher limits for large value funds.
A Category II scheme with ₹200 crore of investable funds can put at most ₹50 crore into one company.
Check concentration before every investment. The AIF calculator does this.
Can Category I and II AIFs borrow?
Only for temporary funding and day-to-day needs: for up to 30 days, on up to four occasions a year, and up to 10% of investable funds. (Regs 16, 17)
Only to meet temporary funding and day-to-day needs. Each borrowing can last up to 30 days, the fund can borrow up to four times a year, and the amount can be up to 10% of investable funds.
A scheme with ₹100 crore of investable funds can borrow up to ₹10 crore, for no more than 30 days, and no more than four times in a year.
Track the number of occasions; a fifth borrowing in a year breaches the rule.
Can Category III AIFs use leverage?
Yes, with investors' consent and within the maximum limit SEBI specifies, and they must disclose their overall level of leverage. (Reg 18(c))
Yes, with investors' consent, within SEBI's maximum limit and with disclosure of the overall level of leverage.
A Category III fund that uses futures gets investors' consent in its documents, stays within SEBI's leverage cap and discloses its leverage.
The consent and the disclosure must both be in place before using leverage.
Can an AIF invest outside India?
Yes, in securities of companies incorporated outside India, subject to RBI and SEBI conditions (Reg 15(1)(a)). SEBI's allocation of the overseas investment limit is covered in Chapter 5 of the Master Circular.
Yes, in securities of companies incorporated outside India, within RBI and SEBI conditions. SEBI allocates the overseas investment limit, as set out in Chapter 5 of the Master Circular.
An AIF wants to invest in shares of a company incorporated in the US. It checks the RBI and SEBI conditions and its allocated overseas limit before investing.
Overseas limits are allocated, so apply in time.
Special funds 4
Who can invest in an angel fund?
Only accredited investors. (Reg 19D(1))
An angel fund takes money only from accredited investors. If an investor is not accredited, the angel fund cannot accept their money.
A high-net-worth individual who is not accredited cannot invest in an angel fund until they are accredited.
Check accreditation before accepting anyone into an angel fund.
What changed for angel funds in July 2026?
The placement memorandum no longer goes through a merchant banker, and the separate SEBI-comments step for angel funds was removed. (Reg 19D(4), (5), as amended)
The process got simpler. An angel fund's placement memorandum no longer goes through a merchant banker, and the separate SEBI-comments step was removed.
Since July 2026, an angel fund files its placement memorandum with SEBI directly, without a merchant banker.
Update your angel fund launch checklist.
Can angel fund units be listed?
No. Units of angel funds cannot be listed on a recognised stock exchange. (Reg 19H)
No. Angel fund units cannot be listed on a stock exchange.
Investors in an angel fund cannot sell their units on a stock exchange; they stay in until the fund returns money or winds up.
Tell investors at the start that their money is illiquid.
Can a migrated venture capital fund launch new schemes?
No. (Reg 19AE)
No. A venture capital fund that migrated to the AIF Regulations cannot launch new schemes.
A migrated venture capital fund that wants to raise a fresh pool of money cannot do so through a new scheme under its migrated registration.
Plan any new fund-raising with this limit in mind.
Obligations 2
How quickly must investor grievances be resolved?
Promptly, and within 21 calendar days of receipt. (Reg 24A(1))
Promptly, and no later than 21 calendar days after the complaint is received.
A complaint received on 1 March 2027 must be resolved by 22 March 2027.
Log the date each complaint is received and track it against the 21 days.
What records must be kept, and for how long?
Records of assets, valuation policies and practices, investment strategies, investors and their contributions, and the rationale for each investment — for five years after the fund is wound up. (Reg 27)
Keep records of assets, valuation, investment strategy, investors and their contributions, and the reason for each investment, for five years after the fund is wound up.
A fund wound up in 2030 keeps all its records until at least 2035.
Records outlive the fund, so plan who will hold them after winding up.
Winding up 2
How is an AIF wound up?
Within the liquidation period the assets are sold and the proceeds distributed after all liabilities are met, now subject to conditions SEBI may specify. Investments still unsold at the end of a dissolution period are distributed in specie. (Reg 29(7), (10))
During the liquidation period, assets are sold and the money is paid out after all liabilities are met, now subject to conditions SEBI may specify. Anything still unsold at the end of a dissolution period is handed to investors as the investments themselves (in specie).
At the end of the dissolution period, a fund still holds shares in an unlisted company. It distributes those shares to investors in specie instead of selling them.
Plan exits well before the tenure ends so less is left to distribute in specie.
What is an inoperative fund?
Since April 2026, SEBI can tag an AIF as an inoperative fund, in the manner and on the conditions it specifies. (Reg 29(10A))
Since April 2026, SEBI can tag an AIF as inoperative, in the manner and on the conditions it specifies.
An AIF that is no longer active may be tagged as inoperative under SEBI's conditions.
Keep your fund active, or wind it up properly.
2026 changes 2
What changed in the AIF Regulations in 2026?
April 2026: ₹1,000 minimum for individuals in NPO-only social impact funds, conditions on winding-up distributions, and inoperative funds. July 2026: no fee for the first scheme, filing 10 working days before launch, comments to the merchant banker or Manager, the exemption moved to Accredited Investors only funds, and changes for angel funds.
Two amendments in 2026. The April changes covered small-ticket social impact investing, winding-up distributions and inoperative funds. The July changes covered scheme filing and fees, the Accredited Investors only fund exemption and angel funds.
A fund launching its first scheme after July 2026 pays no scheme fee and files through a merchant banker 10 working days before launch.
Check your templates against the amended text. The AIF changes page lists every change.
Where are SEBI's detailed AIF requirements?
In the Master Circular for AIFs (issued 3 June 2026, updated 7 September 2026), in 25 chapters — from registration and PPM filing to accreditation, valuation, reporting and winding up.
The Regulations set the framework, and the Master Circular for AIFs sets out the detailed requirements, in 25 chapters.
For formats such as the placement memorandum template or the reporting requirements, the compliance team checks the relevant chapter of the Master Circular.
Read the Regulations and the Master Circular together; neither is complete on its own.
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These answers are a guide. The notified Regulations, Gazette notifications and the regulators' circulars are the authoritative source.
Meet the expert
CS Prashant Kumar
Company Secretary & Compliance Officer
Global Horizons Capital Advisors (IFSC) Private Limited — an IFSCA-licensed investment banker
Published in The Chartered Accountant (Jun 2025, Jan 2025, Mar 2024) and Chartered Secretary (Aug 2023)
Prashant Kumar is a seasoned Company Secretary and corporate governance strategist with more than 13 years of experience advising large corporates, promoter-led groups and global businesses on compliance, regulatory risk and board governance. In GIFT IFSC, the IFSCA regime is his day job rather than a research topic.