Question 1

What are the three categories of AIF under SEBI?

Accepted Answer

Category I AIFs invest in start-ups, SMEs, infrastructure and socially desirable sectors (e.g. VC and angel funds). Category II covers funds that do not fall in I or III and do not use leverage other than for operations (e.g. private equity and debt funds). Category III employs diverse or complex strategies and may use leverage (e.g. hedge and long-short funds).

Question 2

What is the minimum investment and corpus for an AIF?

Accepted Answer

Each investor must commit at least ₹1 crore (₹25 lakh for employees/directors of the AIF or manager), and each scheme must have a minimum corpus of ₹20 crore (₹10 crore for angel funds). An AIF can have a maximum of 1,000 investors per scheme (49 for angel funds).

Question 3

How is income of an AIF taxed?

Accepted Answer

Category I and II AIFs enjoy pass-through status — income (other than business income) is taxed in the investors' hands as if they invested directly. Category III AIFs do not have statutory pass-through and are generally taxed at the fund level. We structure the fund and compute investor-wise tax accordingly.

Question 4

What is a PPM and is its audit mandatory?

Accepted Answer

The Private Placement Memorandum is the fund's offering document filed with SEBI. SEBI requires an annual audit of compliance with the terms of the PPM, conducted by an independent auditor, with the findings reported to SEBI and the trustees — a service our funds practice provides.

Fund concept & structuring

What's included

What you receive

Frequently asked questions

Related services

Need help with fund concept & structuring?