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An Alternative Investment Fund (AIF) is a private investment vehicle in India, such as a trust, company, or LLP, that pools funds from domestic and foreign investors. It follows a specific investment policy and is regulated by SEBI under the SEBI (Alternative Investment Funds) Regulations, 2012, unlike traditional mutual funds. AIFs include investments like private equity, venture capital, hedge funds, and real estate.
Eligibility AIFs can raise funds from Indian, foreign, and non-resident investors. Social impact funds can issue social units.
₹20 crore per scheme (₹5 crore for social impact funds).
Minimum Investment ₹1 crore, with lower amounts for certain individuals and accredited investors. Social impact funds: ₹2 lakh.
• For Category I & II AIFs, must invest at least 2.5% of the fund’s corpus or ₹5 crore (whichever is lower).
• For Category III AIFs, 5% or ₹10 crore. (whichever is lower).
Managers/Sponsors must disclose their investments in the AIF.
Each scheme of AIF can onboard maximum 1,000 investors.
Must be done via private placements.
• Category I & II : close-ended, minimum tenure of 3 years.
• Category III : Either open or close-ended.
Tenure can be extended by up to 2 years with approval from two-thirds of unit holders. Extensions beyond this may be allowed for large value funds for accredited investors.
Must be fit and proper persons based on the criteria specified in Schedule II of the SEBI (Intermediaries) Regulations, 2008.
At least one key personnel with relevant certification as specified by the Board from time to time, and at least one key personnel with a professional qualification in finance, accountancy, business management, commerce, economics, capital markets, or banking from a recognized institution, or a CFA charter, or any other qualification specified by the Board.
Manager or Sponsor must have necessary infrastructure and manpower to manage AIF activities.
Invests in socially and economically desirable sectors like start-ups and SMEs, including venture capital and social impact funds, eligible for government incentives.
Comprises private equity and debt funds that do not engage in significant leverage and do not receive specific government incentives, focusing on traditional investment strategies.
Category III AIF Employs complex trading strategies and leverage, allowing investments in a variety of financial instruments, including listed and unlisted derivatives.
| Particulars | AMOUNT (IN ₹) |
| Application fee | 100,000 |
| Registration fee for Category I Alternative Investment Funds other than Angel Funds | 500,000 |
| Registration fee for Category II Alternative Investment Funds other than Angel Funds | 1,000,000 |
| Registration fee for Category III Alternative Investment Funds other than Angel Funds | 1,500,000 |
| Scheme Fee for Alternative Investment Funds other than Angel Funds | 100,000 |
| Category | Taxability | Nature of Income Earned by the Fund | Tax Rate |
| CAT I & CAT II | Passed through – AIF doesn’t pay any tax; unit holder pays tax | Other than business income (e.g., capital gains) | Rates applicable to the unit holder |
| Taxed at AIF; such income is not taxable for unit holders | Business Income | AIF formed as a company or LLP: Taxed at rates applicable to the company or LLP. AIF formed as a Trust: Taxed at Maximum Marginal Rate (MMR) @ 39%. | |
| CAT III | Taxed at the fund level; not taxable for unit holder | Short-term capital gain | 20% |
| Long-term capital gain | 12.5% | ||
| Business income | 30% | ||
| Dividend income | 30% |
Please be advised that regulatory requirements are subject to change. Kindly verify the latest requirements to ensure compliance.
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