What does a mutual fund distributor do?

An MFD is registered with the Association of Mutual Funds in India (AMFI) and holds an AMFI Registration Number (ARN). To get one, an individual must first pass the NISM Series V-A (Mutual Fund Distributors) certification exam, and the ARN has to be renewed periodically.

Day to day, a distributor typically helps with:

• KYC, account opening and paperwork for new investments
• Setting up SIPs, switches, redemptions and nomination updates
• Shortlisting schemes, from those they distribute, that match your stated risk profile
• Consolidated reporting across fund houses and periodic reviews
• Staying in touch during volatile markets, which many investors find useful for staying disciplined

There is an important limit. Any advice an MFD gives must be incidental to distribution. AMFI describes this as basic guidance on the schemes being recommended, not detailed financial planning or holistic investment advice. An MFD cannot charge you an advisory fee for it.

How is a mutual fund distributor paid?

The distributor is paid by the asset management company (AMC), not by you directly. The payment is a trail commission: a small percentage of the value of your investment, paid for as long as you stay invested. It comes out of the Total Expense Ratio (TER) of the Regular plan, which is why the Regular plan of a scheme has a higher TER than its Direct plan.

A few safeguards apply:

• No upfront commission. Since October 2018, SEBI has required fund houses to follow a full-trail model, with a narrow exception for first-time investors in small SIPs.
• Disclosure. SEBI requires distributors to disclose the commission they earn on the schemes they recommend, and your half-yearly Consolidated Account Statement (CAS) shows the actual commission paid to your distributor in each scheme.
• No separate fee. Because the cost is built into the TER, you do not write a cheque to an MFD.

What is a SEBI-registered Investment Adviser?

An RIA is registered under the SEBI (Investment Advisers) Regulations, 2013. Investment advisers can be individuals or companies, and they must meet SEBI's qualification, certification and net worth requirements. They owe their clients a fiduciary duty, meaning they must act in the client's interest when giving advice.

RIAs are paid by the client, not by the fund house. For individual and HUF clients who are not accredited investors, SEBI caps the fee at either:

• up to 2.5% of assets under advice a year (AUA mode), or
• a fixed fee of up to ₹1,51,000 a year per family of client (fixed fee mode), a limit SEBI revises periodically.

Advisers may also collect fees in advance for up to a year if the client agrees. Because they are paid by you, RIAs generally recommend Direct plans, which carry no distribution commission.

Can an investment adviser also be a distributor for the same client?

No. SEBI requires segregation of advice and distribution at the client level. A client must choose either advisory services or distribution services within the same individual adviser's family or the same corporate group, not both. For an individual client, the "family of client" counts as a single client for this purpose. A company that offers both must run its advisory work through a separately identifiable division at arm's length. The rule is designed to remove the conflict of earning both a fee and a commission from the same person.

How do Regular and Direct plans differ?

Every mutual fund scheme has two plans with the same portfolio and the same fund manager:

• Regular plan: bought through a distributor. Its TER includes the distribution cost, so its NAV is slightly lower over time.
• Direct plan: bought directly from the AMC, through an RIA, or through a platform that does not take commission. Its TER is lower because there is no distribution cost.

The gap in TER is the cost of distribution. Whether that cost is worth paying depends on what you receive for it. Our explainer on what a Direct plan in mutual funds is covers the mechanics, and our guide on choosing between Direct and Regular plans walks through the trade-offs.

MFD vs RIA vs DIY: how do they compare?

Which option suits whom?

• An MFD may suit you if you want someone to handle execution, paperwork, SIP changes and consolidated reporting, and you value periodic reviews and a steadying voice when markets fall, without paying a separate fee.
• An RIA may suit you if you want fee-only advice, prefer Direct plans and are comfortable paying a visible fee in return for advice that is not linked to commission.
• DIY with Direct plans may suit you if you are confident choosing schemes, have the time to track them and can stay disciplined through market swings.

Some investors use more than one route for different goals. Whatever you choose, be clear about what you are paying and what you receive for it.

How do I check whether a distributor or adviser is registered?

• For an MFD: use the ARN search on the AMFI website (amfiindia.com) to confirm the ARN, the holder's name and its validity.
• For an RIA: check the list of registered intermediaries on the SEBI website (sebi.gov.in), under Investment Advisers.

Always match the name and registration number shown on any communication with the official record.

Where can I raise a complaint?

Start with the intermediary or the fund house. If the issue is not resolved, you can lodge a complaint on SEBI SCORES, SEBI's online complaints system. If that does not settle it, the SMART ODR portal offers online conciliation and arbitration for disputes in the securities market.

Where does Sanriya Finvest fit?

To be plain about our own position: Sanriya Finvest Pvt. Ltd. is an AMFI-registered mutual fund distributor (ARN-193359) and an APMI-registered PMS distributor (APRN01056) based in Pune. We are not a SEBI-registered investment adviser. We distribute Regular plans and receive trail commission from fund houses; we charge no separate fee, and any guidance we provide is incidental to distribution. You can read our commission disclosure and our registration details.

If you would like help with execution and servicing, see our mutual fund distribution services or learn more about working with a mutual fund distributor in Pune. You can also ask for a free portfolio review of your existing mutual fund holdings.

Mutual fund investments are subject to market risks. Read all scheme-related documents carefully.

Should I prepay my home loan or invest in a SIP?

Think of a prepayment as an investment that earns exactly your loan rate. Every rupee you prepay stops attracting interest from the next instalment onwards, so the saving is certain. An equity mutual fund SIP may earn more than your loan rate over long periods, but it can also earn less, and the path will be bumpy.

So ask three questions:

1. What does my loan really cost me after tax?
2. What return can I reasonably expect after tax, and how sure am I of it?
3. Do I have the safety net and temperament to live with the uncertainty?

The rest of this guide walks through each one.

What is my home loan's real interest rate after tax?

It depends on which tax regime you choose. For FY 2026-27, the Income Tax Act, 2025 applies from 1 April 2026, and the broad structure of both regimes continues.

• Old regime: interest on a loan for a self-occupied home can be deducted up to ₹2 lakh a year, and principal repayment counts towards the overall ₹1.5 lakh limit for specified investments and payments.
• New regime (the default): neither deduction is available for a self-occupied home. Your effective cost is simply the loan rate.

There is a catch in the old regime that many people miss. The ₹2 lakh cap applies to the whole year's interest. On a ₹50 lakh loan at 8.5%, you pay about ₹4.2 lakh of interest in the first year, so roughly half of it gets no tax relief at all. A prepayment cuts the interest that sits above the cap first, which means each prepaid rupee is saving the full 8.5% until annual interest drops below ₹2 lakh. In our example that does not happen until around year 15.

Only once your annual interest is within the cap does the tax benefit lower your effective rate. At the 30% slab plus 4% cess, 8.5% becomes about 5.8%. Check your own numbers and regime with a tax professional, because the right comparison is the rate you are actually paying at the margin.

Will the bank charge me for prepaying?

Under RBI rules, banks and housing finance companies cannot levy prepayment or foreclosure charges on floating-rate home loans taken by individuals for non-business purposes. Fixed-rate loans can carry charges, so read your sanction letter. Some lenders also set a minimum part-prepayment amount or ask you to choose between a lower EMI and a shorter tenure, which is the next question.

Should I reduce my EMI or my tenure after a part prepayment?

If you can afford the current EMI, reducing tenure saves far more interest. Here is a worked example.

Assumptions: ₹50 lakh loan, 8.5% a year, 20 years, EMI about ₹43,391. Total interest over the full term is about ₹54.1 lakh. After 12 EMIs, the outstanding balance is about ₹49.0 lakh, and you prepay ₹5 lakh, bringing it to about ₹44.0 lakh.

Keeping the EMI and cutting tenure removes 48 instalments, four full years, and saves about ₹16 lakh of interest. Cutting the EMI instead lowers your monthly outgo by about ₹4,427 and saves about ₹5.1 lakh. The lower EMI option still has value if your cash flow is tight. You can test your own loan in our home loan EMI calculator.

What could the same ₹5 lakh grow to if I invest it instead?

As an illustration, not a forecast, suppose the ₹5 lakh goes into an equity mutual fund for the remaining 19 years:

• At an assumed 10% a year, it could grow to about ₹30.6 lakh.
• At an assumed 12% a year, it could grow to about ₹43.1 lakh.

For a fair comparison, remember what prepaying gives you back. In the shorter-tenure option, the loan closes four years early, freeing ₹43,391 a month for the last 48 months of the original term. Invested as a SIP, that could reach about ₹25.3 lakh at 10% or about ₹26.2 lakh at 12% by the end of year 20. At an assumed 8.5%, the two paths end up roughly level, which is the point: investing only comes out ahead if returns beat your loan rate after tax. You can try different rates in the lumpsum calculator and the SIP calculator.

These figures are before tax on capital gains and assume a smooth return every year, which never happens in practice. A weak decade could leave the investment behind the prepayment. Mutual fund investments are subject to market risks, read all scheme related documents carefully.

Does it matter how far into the loan I am?

Yes. EMIs are interest-heavy in the early years: in year one of our example, about ₹4.2 lakh of the ₹5.2 lakh you pay is interest. A prepayment early in the loan removes a large block of future interest. Late in the loan, most of the interest is already paid, so the saving from prepaying is smaller, and the time left to invest is shorter too, which makes equity a less natural fit for that money.

What should I sort out before choosing either?

• Emergency fund first. Keep six to twelve months of expenses, including your EMI, in liquid, low-risk options. Money prepaid into a loan is locked into the house and is hard to get back quickly. Our emergency fund guide covers how much to keep and where.
• Adequate term and health cover, so the loan does not become a burden on your family.
• Costlier debt. Credit card dues or personal loans usually cost more than a home loan, so clear those first.

How do risk comfort and job stability change the answer?

Lean towards prepaying if your income is variable, you are close to retirement, you lose sleep over market falls, or being debt-free matters a great deal to you. Lean towards investing if your job is stable, you have 10 years or more ahead, your loan rate is low after tax, and you can stay invested through falls without stopping your SIP. Neither choice is wrong. They suit different people.

Is splitting the money a sensible middle path?

Often, yes. A split approach lets you lock in a certain saving and keep some upside:

• Keep your regular SIPs running and use annual bonuses for part prepayments.
• Divide each lump sum, for example half to the loan and half to investments.
• Increase your EMI by a small amount each year as your salary rises, which shortens tenure without a large one-time payment.

If you are still planning the purchase, our buying a home goal page helps you plan the down payment, and the real estate vs mutual fund calculator lets you compare the two side by side.

How can Sanriya Finvest help?

Sanriya Finvest Pvt. Ltd. is an AMFI-registered mutual fund distributor (ARN-193359) based in Pune. We can help you set up and review SIPs in Regular plans of mutual funds. We earn a trail commission from the fund house and do not charge you a separate fee; see our commission disclosure. For tax questions, please speak to a qualified tax professional. If you would like a second look at your existing investments before deciding, ask for a free portfolio review. The decision on prepaying or investing remains yours.

Mutual fund investments are subject to market risks, read all scheme related documents carefully.

How are mutual fund capital gains taxed in FY 2026-27?

The tax depends on two things: what the fund invests in, and how long you held each unit before selling it.

Mutual fund capital gains tax rates for resident individuals (FY 2026-27, subject to change)

Health and education cess of 4% applies on top of every rate, and surcharge applies at higher incomes. The 20% and 12.5% rates apply to units sold on or after 23 July 2024.

Which tax category does my mutual fund fall into?

The category is set by the fund's portfolio, not by its name.

• Equity-oriented fund: keeps at least 65% of its money in shares of Indian listed companies. Large cap, mid cap, small cap, flexi cap, ELSS, index funds on Indian indices and arbitrage funds usually qualify, as do aggressive hybrid funds that stay above 65% equity.
• Specified mutual fund: the law now defines this as a fund that invests more than 65% of its money in debt and money market instruments, or a fund of funds that invests 65% or more in such funds. This is the category whose units bought from 1 April 2023 are always taxed at slab rate. Liquid, overnight, gilt, corporate bond and most conservative hybrid funds fall here.
• Everything else: funds that are neither of the above, such as many multi-asset funds, gold and silver funds, and international funds of funds. These follow the 24-month rule.

Before FY 2025-26, a specified mutual fund meant any fund with 35% or less in Indian equity, which caught gold and international funds too. The narrower "more than 65% in debt" test now applies, which is why gold and international funds bought after April 2023 can again qualify for the 12.5% long-term rate. Each fund house states the tax treatment of a scheme in its documents, so check there if a fund's category is unclear.

How is LTCG on equity mutual funds calculated?

Long-term capital gain is the sale value minus the purchase cost of the units sold. Add up all long-term gains on equity-oriented funds, listed shares and listed business trust units for the financial year, subtract ₹1.25 lakh, and tax the rest at 12.5%.

Suppose you redeem equity fund units in FY 2026-27 with a long-term gain of ₹2,00,000 and have no other equity gains. Tax applies to ₹75,000, which is ₹9,375 at 12.5%, or ₹9,750 after 4% cess. The ₹1.25 lakh is one exemption per person per year, not per fund, and any unused part cannot be carried forward.

Two further points matter for older or larger holdings:

• Grandfathering: for equity fund units bought before 1 February 2018, the cost is taken as the higher of what you paid and the NAV on 31 January 2018 (limited to the sale value). Gains up to that date stay untaxed.
• Surcharge: on capital gains taxed at the 20% and 12.5% rates, surcharge is capped at 15%. Gains taxed at slab rate attract the normal surcharge for your income level.

Securities transaction tax (STT) of 0.001% is deducted when you redeem units of an equity-oriented fund. The concessional equity rates depend on STT being paid, which the fund house handles. Budget 2026 raised STT on futures and options, not on mutual fund redemptions.

How are debt funds taxed in 2026?

If you bought debt fund units on or after 1 April 2023, every rupee of gain is added to your income and taxed at your slab rate, whether you sell after one week or ten years. There is no indexation and no long-term category. An investor in the 30% slab pays 31.2% including cess on these gains.

Units bought before 1 April 2023 keep the older treatment: held for more than 24 months (12 months for listed units such as ETFs), the gain is long-term and taxed at 12.5% without indexation. Otherwise it is taxed at slab rate. If you hold both old and new units of the same debt fund, the first-in, first-out rule means the older units are sold first.

How is tax on SIP redemption worked out?

Each SIP instalment is a separate purchase with its own date and NAV. When you redeem, units are treated as sold in the order they were bought, oldest first. So a single redemption from a SIP can contain both long-term and short-term units.

Say you started a monthly SIP in an equity fund in January 2025 and redeem everything in October 2026. Instalments from January 2025 to about October 2025 are more than 12 months old and give long-term gains. The rest are short-term and taxed at 20%. In ELSS, each instalment also has its own three-year lock-in, as explained in our guide to ELSS tax-saving mutual funds.

Systematic withdrawals work the same way: each SWP payment redeems the oldest units first, and only the gain portion of each payment is taxed. You can model withdrawal amounts with the SWP calculator. For a full walk-through of all three systematic routes, see how tax works for SIP, STP and SWP.

Are switches, STPs and IDCW payouts taxed?

Switches are redemptions. Moving money from one scheme to another, from a Regular plan to a Direct plan, or from the Growth option to the IDCW option of the same scheme counts as selling the old units and buying new ones. Capital gains tax applies on the switch, and the holding period of the new units starts afresh. Each transfer in an STP is also a redemption from the source fund.

IDCW is taxed as income. Payouts under the income distribution cum capital withdrawal (IDCW) option are added to your income and taxed at slab rate. The fund house deducts TDS at 10% once IDCW from that fund house crosses ₹10,000 in a financial year. Budget 2026 also withdrew the deduction for interest paid on money borrowed to earn such income, from FY 2026-27. For residents, no TDS is deducted on capital gains from redemptions; you pay that tax yourself through advance tax or when filing your return.

Can tax harvesting reduce LTCG on equity funds?

Tax harvesting uses the yearly ₹1.25 lakh exemption on purpose. Before 31 March, you redeem equity fund units carrying long-term gains up to about ₹1.25 lakh and reinvest the money. The gain is booked tax-free and your purchase cost rises, so future taxable gains are smaller.

Points to weigh before doing it:

• The reinvested units start a new 12-month holding period.
• Exit loads, STT and the days your money is out of the market can reduce or cancel the benefit.
• ELSS units cannot be redeemed until their three-year lock-in ends.
• Short-term capital losses can be set off against both short-term and long-term gains, but long-term losses only against long-term gains.

Whether harvesting makes sense depends on your other gains, income and plans for the money, so it is a mechanism to discuss with a chartered accountant, not a saving anyone can promise.

Where do I get the numbers for my tax return?

The registrars CAMS and KFintech issue a capital gains statement for each financial year listing every redemption, its purchase date, cost and gain, split into short-term and long-term. Our guide on what a capital gains statement is and how to obtain it shows the steps. Match it against your Annual Information Statement before filing.

How Sanriya Finvest can help

Sanriya Finvest Pvt. Ltd. is an AMFI-registered mutual fund distributor (ARN-193359) based in Pune. We help investors choose and track schemes through our mutual fund services, and we can help you pull together redemption history and capital gains statements before you meet your chartered accountant. We distribute Regular plans and receive trail commission from the fund house, with no separate fee charged to you. Details are in our commission disclosure. To see how your current holdings are split by tax category and holding period, ask for a free portfolio review.

Tax depends on your individual circumstances, including your income, residential status and other gains, and the rules can change with each Finance Act. Confirm your own position with a chartered accountant before acting.

Mutual fund investments are subject to market risks, read all scheme related documents carefully.

What is the difference between a corporate FD and a bank FD?

Both lock your money for a fixed tenure at a fixed rate. The difference is who borrows it and what protection sits behind it.

• Bank FD: a deposit with a scheduled commercial bank. Banks are regulated by the Reserve Bank of India (RBI) and deposits are covered by DICGC insurance up to ₹5 lakh per depositor per bank, counting principal and interest together.
• Corporate FD: a deposit with a non-banking finance company (NBFC) such as Shriram Finance, Bajaj Finance or Mahindra Finance, or a housing finance company (HFC) such as PNB Housing Finance, LIC Housing Finance or ICICI Home Finance. These deposits are not covered by DICGC. They are unsecured, which means that if the company fails, depositors rank pari passu (equally) with its other unsecured creditors and there is no specific asset set aside to repay them.

You can browse the issuers Sanriya works with on the corporate and bank fixed deposits page.

How do corporate FD rates compare with bank FD rates in October 2026?

The table shows cumulative rates for regular (non-senior) depositors from each issuer's published rate card.

Cumulative FD rates, % p.a., as of October 2026, subject to change

PNB Housing Finance rates are effective 16 October 2026 and Shriram Finance rates are effective 11 October 2026. Shriram also adds 0.05% for women depositors and 0.15% on renewals. Rates change often, so confirm the current card on the issuer's page before booking: see the PNB Housing Finance FD page, the Shriram Finance FD page, the Bajaj Finance FD page and the HDFC Bank FD page.

To put the gap in rupees, a difference of 1.40 percentage points on ₹5,00,000 is roughly ₹7,000 a year before tax and compounding. You can model exact maturity values with the FD calculator.

Is a company fixed deposit safe without DICGC insurance?

"Safe" here means two different things. A bank FD up to ₹5 lakh is insured, so even if the bank fails, DICGC pays that amount. A corporate FD has no such backstop: repayment depends entirely on the issuing company's financial health.

A deposit with a large, well-capitalised, AAA-rated NBFC has historically carried low default risk, while a deposit with a weaker, lower-rated company carries more. Past repayment records say nothing certain about the future, though, and several NBFCs and HFCs in India have defaulted on deposits in the past. The practical question is not "is it safe?" but "how much would it hurt if this one issuer delayed repayment?"

What does an AAA or AA credit rating on an FD actually mean?

A credit rating is a rating agency's opinion of how likely the issuer is to pay interest and principal on time. It is not a promise of repayment and it can change.

• AAA: the highest rating; the agency considers the risk of default to be the lowest among rated instruments.
• AA: high safety, with risk slightly above AAA.
• A and below: adequate to moderate safety, with risk rising as the rating falls.

The word after the slash is the outlook. "Stable" means the agency does not currently expect the rating to move; "Negative" signals a possible downgrade. As examples, PNB Housing Finance carries CARE AAA/Stable and CRISIL AAA/Stable, Shriram Finance is rated AAA/Stable by CARE, CRISIL, ICRA and India Ratings, and Bajaj Finance carries CRISIL AAA/Stable and ICRA AAA(Stable). Ratings are reviewed during a deposit's life, so it is worth checking them again before you renew.

Who regulates NBFC and housing finance company deposits?

The RBI regulates deposit-taking NBFCs. HFC deposits are governed by the RBI, with the National Housing Bank (NHB) continuing to supervise housing finance companies. A deposit-taking NBFC must hold an investment-grade credit rating to accept public deposits, and NBFC deposits can be taken only for tenures between 12 and 60 months. Regulation sets rules on capital, liquidity and conduct, but it does not insure your deposit.

Which FDs pay the highest rates for senior citizens?

Senior citizens (60 and above) receive an extra rate that varies by issuer. Adding the senior premium to the October 2026 cards gives these three-year cumulative rates:

• Shriram Finance: 7.85% + 0.50% = 8.35%
• Bajaj Finance: 7.75% + 0.40% = 8.15%
• Mahindra Finance: 7.40% + 0.35% = 7.75%
• PNB Housing Finance: 7.25% + 0.25% = 7.50%
• HDFC Bank: 6.45% + 0.50% = 6.95%

HDFC Bank's senior premium is the joint-largest in the table, so the gap with corporate issuers narrows slightly for older depositors.

Can you withdraw a corporate FD before maturity?

Yes, but with tighter rules than most bank FDs. Under RBI directions for NBFC deposits, premature withdrawal is not allowed in the first three months, with three exceptions: for an emergency expense, up to half the principal or ₹5 lakh, whichever is lower, can be repaid without interest; for a critical illness, the whole principal can be repaid without interest; and on the depositor's death the deposit is repaid with interest at the contracted rate. After three months, you can usually withdraw, but the issuer pays a reduced rate set out in its terms, which is lower than the rate for the period the deposit actually ran. Banks also charge a penalty on premature closure, but most allow it from the start. Treat corporate FD money as money you will not need before maturity, and keep your emergency fund somewhere more liquid.

How is FD interest taxed and when is TDS deducted in FY 2026-27?

From 1 April 2026, the Income Tax Act, 2025 applies. For FY 2026-27, interest from both bank and corporate FDs is added to your total income and taxed at your slab rate. On a cumulative FD, interest is taxable as it accrues each year, even though you receive it only at maturity.

The issuer deducts tax at source (TDS) when the interest it pays or credits to you in a financial year crosses a threshold. The threshold is higher for senior citizens, and both the thresholds and the TDS rate are set by the Finance Act, so they change with budgets. TDS is deducted at a higher rate if your PAN is not linked to the deposit. If your total income is below the taxable limit, you can submit Form 15G (below age 60) or Form 15H (60 and above) to the issuer at the start of each financial year so TDS is not deducted.

Cumulative or non-cumulative: which payout option fits?

A cumulative FD reinvests interest and pays everything at maturity, so compounding works in your favour and the effective yield is higher. A non-cumulative FD pays interest monthly, quarterly, half-yearly or annually, which suits someone who uses the interest for household expenses. Non-cumulative rates are usually slightly lower, especially for monthly payouts.

How can you spread money across issuers and tenures?

1. Diversify across issuers. Many investors cap the amount with any one corporate issuer, for example at a set share of their fixed-income savings, and keep money above the ₹5 lakh DICGC limit spread across different banks.
2. Ladder across tenures. Split a sum into deposits maturing at, say, one, two, three and five years. Each year a deposit matures, giving you liquidity and a chance to reinvest at the then-current rate.

If you are also weighing market-linked options for the same money, read how debt funds differ from bank fixed deposits. The choice of issuer, tenure and amount stays with you.

How does Sanriya place corporate FDs and how is it paid?

Sanriya Finvest Pvt. Ltd. is an AMFI-registered mutual fund distributor (ARN-193359) based in Pune that also places corporate fixed deposits with issuers. For FDs, Sanriya is paid brokerage by the issuer; for mutual funds, it receives trail commission from fund houses. You pay no separate fee. Details are in the commission disclosure.

How do you compare a flat with mutual funds fairly?

The only fair test is to put the same money, at the same time, into each option. Buying a ₹1 crore flat with a home loan needs:

• ₹20 lakh down payment (20% of the price)
• ₹6 lakh stamp duty and registration (6%)
• an EMI of ₹69,426 a month for 20 years on an ₹80 lakh loan at 8.5%

So the cash leaving your pocket is ₹26 lakh upfront plus ₹69,426 a month. We then ask what that identical cash flow becomes in three places: the flat (let out, with rent counted after society maintenance and tax), a fixed deposit plus recurring deposit, and mutual funds through a lump sum plus a monthly SIP.

The other assumptions behind the example:

• Property price growth of 6% a year
• Rent of 3% of the property price a year, rising 5% a year
• Income tax slab of 30%
• FD and RD interest of 7%
• Mutual fund return assumed at 12% a year

You can repeat the exercise with your own figures in the real estate vs mutual fund calculator.

What does the 20-year worked example show?

All figures are after tax, after 20 years, using FY 2026-27 tax rules.

Three things stand out. First, at these assumptions the flat edges ahead of fixed deposits, so property is not a poor choice compared with safe savings. Second, the mutual fund figure is more than double the flat's in both cases. Third, the cash case widens the gap, because a lump sum compounding for 20 full years at the assumed 12% grows faster than a property appreciating at 6%.

These are illustrations at assumed rates, not forecasts. Neither property prices nor fund returns move in a straight line. Mutual fund investments are subject to market risks, read all scheme related documents carefully.

Why is the gap so large, and when does it narrow?

The difference comes down to two growth rates. At 6% a year, ₹1 crore of property becomes roughly ₹3.2 crore in 20 years. At 12% a year, money roughly doubles every six years, so the same sum ends up near ₹9.6 crore before tax. Over two decades, a few percentage points of difference compound into a very large gap.

The gap narrows quickly when either assumption changes:

• If equity fund returns come in lower, say in single digits, the mutual fund total falls sharply.
• If the property sits in a fast-growing locality and prices rise 8% to 9% a year, the flat catches up considerably.
• If rent yields are higher than 3%, the flat's income adds up faster.

In some combinations property can come out ahead. Rather than relying on our example, change the sliders in the real estate vs mutual fund calculator to rates you consider realistic for your city and see where the lines cross.

How are property and mutual funds taxed in FY 2026-27?

The Income Tax Act, 2025 applies from 1 April 2026. The rates below are those used in the example for FY 2026-27, and tax rules can change in any Budget.

• Property: long-term capital gains (held more than 24 months) are taxed at 12.5% without indexation.
• Equity mutual funds: long-term capital gains (held more than 12 months) are taxed at 12.5% on gains above ₹1.25 lakh in a financial year. Short-term gains are taxed at 20%.
• Rent: added to your income and taxed at your slab rate, after the standard deduction allowed for let-out property.
• FD and RD interest: taxed at your slab rate every year, even if you do not withdraw it.

Taxing FD interest every year, while equity fund gains are taxed only when you redeem, is one reason deposits trail in the example. Home loan interest deductions depend on the tax regime you choose and whether the home is self-occupied or let out, so check your own position.

What do the numbers leave out?

A spreadsheet cannot capture everything. Before deciding, weigh these practical differences:

• Liquidity: you can redeem part of a mutual fund holding, usually with money credited within a few working days. You cannot sell one room of a flat, and a property sale can take months.
• Concentration: a flat ties a large sum to one building in one city. A diversified fund spreads money across many companies and sectors.
• Transaction costs: stamp duty, registration and brokerage on property can run to several per cent each time you buy or sell. Funds carry an expense ratio and sometimes an exit load, which are smaller but continue every year.
• Leverage: a home loan amplifies gains when prices rise and losses when they do not. The EMI stays the same even if your income falls.
• Vacancy and tenants: months without a tenant, rent defaults and repairs between tenancies reduce real income.
• Maintenance and upkeep: society charges, property tax and repairs rise over time.
• Effort: managing tenants, paperwork and legal matters takes time. A SIP runs largely on its own.
• Volatility: equity funds can fall 30% or more in a bad year, and you need the patience to stay invested. Property prices are not quoted daily, so they feel calmer, but they can also stagnate for years.

Property has real strengths too. The EMI works as forced saving, the asset is tangible, and it can be pledged as collateral.

Should you buy a home to live in or to let out?

Living in a home you own is a different decision from buying a flat to let. A home you live in gives security, freedom from landlord decisions and a place to put down roots. Those are worth something, even if they never show up in a return calculation.

If you are weighing renting against buying, the honest comparison is "rent and invest the difference" against "buy and pay the EMI". Renting only wins financially if you actually invest the difference, month after month, for many years. Our page on planning to buy a home covers saving for a down payment, and the EMI calculator shows what a loan will cost each month.

Are REITs and real-estate funds a middle path?

Yes, for investors who want property exposure without buying a whole flat. Real Estate Investment Trusts (REITs) are listed on stock exchanges, own income-producing commercial property such as office parks, and pass most of their rental income to unit holders. Some mutual funds invest in REITs and real-estate-linked companies. These let you start with small amounts and sell more easily than a flat, though their prices still move with the market. Read more in our guide to real estate mutual funds.

How can you run the numbers for your own situation?

Start with the real estate vs mutual fund calculator and enter your own property price, loan rate, rent and expected returns. The SIP calculator helps you see what a monthly amount could grow to at an assumed rate, and our mutual fund solutions page explains how investing through Sanriya works.

If you already hold investments, a free portfolio review can help you see how they fit alongside any property you own. Sanriya Finvest distributes Regular plans and receives trail commission from the fund house, with no separate fee charged to you; details are on our commission disclosure page. Any guidance we share is incidental to distribution, and the decision always stays with you. Mutual fund investments are subject to market risks, read all scheme related documents carefully.

The family

A couple in Pune, both 34, with a four-year-old. Combined take-home income of ₹1.8 lakh a month; household expenses of ₹1.1 lakh. That leaves ₹70,000 a month to work with. They have ₹2 lakh in a savings account, some EPF, and a handful of SIPs started on tips, none tied to anything.

They have four goals. Written down with dates, they look like this:

The step most people skip is this table. Until a goal has a date and a cost, it cannot have a plan.

Step 1: inflate every cost to its date

A ₹25 lakh course fee today is not ₹25 lakh in 14 years. Education costs have risen faster than general inflation, so we assume 8% a year: ₹25 lakh becomes about ₹73 lakh. The home down payment at 5% a year becomes about ₹27 lakh in six years. Monthly expenses at 6% a year become about ₹5 lakh a month by age 60, which implies a retirement corpus in the region of ₹15 crore (roughly 25 years of expenses), before counting EPF.

The emergency fund is the exception: it is needed at today's prices, so the target stays ₹6.6 lakh, and the gap is ₹4.6 lakh. The inflation calculator does this step for any goal.

Step 2: match the asset mix to the date, not to the market

The date decides how much equity a goal can carry. Money needed within three years cannot afford a bad year in equities; money needed in fourteen can.

The shift towards debt as each date approaches is the glide path; the asset allocation calculator draws it for any horizon. It is why a fall in the market two years before the home purchase does not derail the purchase: by then most of that goal's money is already out of equity.

Step 3: work out the SIP each goal needs

With a target, a date and an assumed return, the monthly SIP is arithmetic:

The first three add up to ₹70,300 a month, which is exactly the family's surplus. The retirement number is far beyond it. This is the moment goal-based investing earns its keep: the plan does not pretend. It sequences.

Step 4: sequence what does not fit

The emergency fund finishes in 18 months. From month 19, its ₹25,500 a month is redirected to retirement and stepped up 10% a year as income grows. Run forward at 12%, that builds roughly ₹9.4 crore by 60, before EPF. With EPF and the step-ups continuing, the family is within reach of the number, and the yearly review tracks the gap rather than guessing at it. Had they started the same ₹25,500 flat with no step-up, it would reach about ₹4.3 crore, which is why the step-up matters more than the starting amount. The SIP calculator shows the difference for any figures.

The old tip-based SIPs are not thrown away; they are assigned. Each existing fund is mapped to the goal whose horizon it fits, overlapping funds are consolidated, and anything with no job is redirected. Our portfolio review checklist is the same exercise for a portfolio that already exists.

Step 5: review once a year, against the goals

A goal-based plan is reviewed against dates, not against the Sensex. Each year the family checks three things per goal: is the SIP running and stepped up, is the goal on track for its target after this year's returns, and has the glide path moved enough money to debt for the goals now within three years. A market fall changes the second answer for a year; it does not change the first or the third. That is what keeps people invested through the years that build the result.

Life changes get the same treatment. A second child, a job change or a larger house re-run the table, not the whole philosophy.

What this example is not

It is not a promise of 12% or 9%; those are assumptions chosen to show the method, and real returns will be higher some years and lower in others, including negative. It is not a recommendation of any scheme. And it is not a plan for your family: your expenses, dates and comfort with risk give different numbers. Mutual fund investments are subject to market risks; read all scheme related documents carefully.

How Sanriya does this with investors

The five steps above are the method behind every plan we build: listen, map, set up, stay close, review. Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359) and APMI-registered PMS distributor (APRN01056). We help you build the goal table, run the numbers, choose the mix and handle the paperwork, then review it with you every year; we distribute Regular plans and are paid trail commission by the fund house, so there is no separate fee, and the decisions stay with you. If you already hold funds and want them mapped to goals, start with a free portfolio review.

Why mutual funds overlap

SEBI's scheme categorisation rules define the universe each category may buy from. A large-cap fund must keep at least 80% of its assets in the top 100 companies by market capitalisation. There are only a hundred such companies, and fund managers tend to agree on the thirty or forty worth owning, so two large-cap funds from different fund houses routinely share most of their top holdings. Index funds and ETFs tracking the Nifty 50 overlap with every large-cap fund by design.

Flexi-cap and multi-cap funds may go anywhere, but their largest positions are usually the same large companies, so a flexi-cap fund often overlaps heavily with the large-cap fund sitting next to it. Even a large & mid-cap fund (at least 35% in each) carries a large-cap core that repeats what you already hold.

Overlap is not a flaw in any one fund. It is a feature of the market: a handful of companies dominate the index, and most equity funds own them.

How to check overlap between two mutual funds

You need each fund's latest factsheet, published monthly on the fund house's website and on AMFI's portal.

1. List the top ten holdings of each fund with their weights.
2. Mark the names that appear in both lists.
3. Add up the smaller weight for each shared name. If Fund A holds 8% in a company and Fund B holds 5%, the overlap from that company is 5%.
4. The total is the top-ten overlap. Two funds sharing six names with a total of 30% are doing largely the same job in their core.

The full-portfolio figure (every holding, not just the top ten) is what free overlap tools on the web compute, and it is usually higher than the top-ten figure. The top-ten check is enough to decide whether a fund has a reason to exist in your portfolio; the exact percentage matters less than the pattern.

While you have the factsheets open, compare two more things: the sector weights (two funds can hold different stocks and still both be 35% in banks) and the benchmark. Funds benchmarked to the same index are overlapping by construction.

How much overlap is too much?

There is no rule in the regulations, so use the question the overlap is answering: does the second fund add anything the first does not?

• Under 30% on the top ten: the funds are doing different jobs. Keep both if each maps to a goal.
• 30% to 50%: the funds are cousins. Keep both only if you can say what the second one adds (a different style, a different market-cap tilt, a manager you want alongside an index fund).
• Over 50%: you are paying two expense ratios for one exposure. Pick one.

The same test applies to a fund and an index: an active large-cap fund whose top ten matches the Nifty 50's top ten is charging an active fee for index exposure.

Overlap is not the same as diversification

Diversification is owning things that behave differently: large and small companies, equity and debt, India and the rest of the world, gold. Adding a fifth equity fund that holds the same thirty companies adds paperwork, not diversification. A simple equity portfolio that is hard to overlap is one broad fund per job: one large-cap or index fund, one mid or small-cap fund if the goal is far enough away, and perhaps one international fund. The asset allocation calculator shows how the equity share itself should fall as a goal approaches, which matters more than the number of funds inside it.

How to fix overlap without a tax surprise

Consolidating means selling one fund and moving the money into another, and selling is a taxable event.

• Check the exit load. Most equity funds charge a load if you sell within a year of each purchase. SIP instalments are each a separate purchase with their own date.
• Check the gain. Long-term capital gains on equity funds are taxed above a yearly exemption; selling a large holding in one go can cross it. Spreading sales across two financial years, or selling the units with the smallest gains first, keeps the bill down. Confirm the current rates and exemption for the financial year before you sell.
• Stop the SIP first, sell later. Redirecting the SIP into the fund you are keeping fixes the overlap going forward at no cost; the existing units can be moved when the load period and the tax year make sense.
• Do not consolidate into the fund that did best last year. Keep the fund that fits the job: the lower cost for an index exposure, the manager with the longer record for an active one.

Read when to consider selling a mutual fund before any sale, and see how to pick an equity mutual fund for choosing the one to keep.

Overlap as part of a yearly review

Overlap is check number three in our mutual fund portfolio review checklist; goal fit and asset mix come first, because a fund that has no goal does not need an overlap test. If you would rather have the whole review done for you, Sanriya's free portfolio review reports overlap, cost drag, risk fit and goal gaps from your consolidated statement. Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359); we distribute Regular plans and are paid trail commission by the fund house, so there is no fee for the review, and the decisions stay with you. Mutual fund investments are subject to market risks; read all scheme related documents carefully.

What you need before you start

• Your Consolidated Account Statement (CAS). It lists every mutual fund folio against your PAN across all fund houses. Request it free from CAMS or KFintech, or through MF Central; it arrives by email as a password-protected PDF. If you have never seen one, here is what a CAS contains.
• A list of your goals with dates. Retirement at 60, a child's college fee in 2034, a house deposit in 2029. If you have not written these down, the goals hub walks through the common ones.
• Your current SIP list with amounts and dates, and any lump sums you plan in the next year.

The 8-point mutual fund portfolio review checklist

1. Does every fund map to a goal?

Go down the CAS and write a goal next to each folio. A fund that has no goal is not automatically a mistake, but it needs a reason to stay. Funds bought for a reason that no longer exists (a tax-saving fund past its lock-in that you no longer need for Section 80C, a thematic fund from a year the theme was in the news) are the first candidates for consolidation.

2. Is the asset mix right for each goal's date?

Money needed within three years should mostly sit in debt or arbitrage funds; money needed in ten or more years can carry more equity. Add up your equity, debt, gold and international holdings per goal, not for the whole portfolio, and compare with where the goal's date puts it. The asset allocation calculator shows how the equity share should fall as a goal gets closer. A goal three years away that is still 80% equity is the most common finding in reviews, and the one worth fixing first.

3. How much do your funds overlap?

Two large-cap funds from different fund houses often hold the same thirty companies. Three flexi-cap funds and an index fund can add up to one large-cap fund with four sets of fees. Check the top ten holdings of each equity fund in its latest factsheet; if two funds share more than half their top holdings, you are paying twice for one exposure. Overlap is why adding funds rarely adds diversification after the fifth or sixth.

4. What are you paying?

Three costs matter. The total expense ratio (TER) is deducted from the NAV every day; compare each fund's TER with its category, and read how the expense ratio works if the term is new. The plan type: a Regular plan carries the distributor's commission inside its TER, a Direct plan does not, and the difference compounds over years. We distribute Regular plans and are paid trail commission by the fund house, so you pay us nothing separately; the trade-off between the two plans is explained plainly in Direct or Regular: which plan is better for me? and in our commission disclosure. The exit load applies if you sell within the load period, usually one year for equity funds, so check it before any switch the review suggests.

5. How has each fund done against its own benchmark?

Look at three-year and five-year returns against the fund's stated benchmark and its category average, not at last year alone and not against a fund from a different category. A fund that has trailed its benchmark over five years, through both rising and falling markets, has earned a question. A fund that trailed for one year while its style was out of favour has not. Past performance does not predict future returns; the point of this check is to spot funds that are consistently behind peers doing the same job, not to chase the one that was ahead last year.

6. How many funds do you hold, and how many matter?

Count the folios, then count the ones that hold more than a few per cent of the portfolio. Eight to ten funds cover most households' goals; beyond that, the extra funds usually add overlap and paperwork rather than safety. Small, forgotten holdings (an old NFO with ₹20,000, a closed SIP with ₹8,000) are easy to consolidate into the fund doing the same job. Before selling anything, read when to consider selling a mutual fund and check the exit load and the tax on the gain.

7. Could you live with the fall?

Look up each equity fund's worst one-year fall in its factsheet, apply that percentage to what you hold in it, and ask whether you would have kept the SIP running through it. If the answer is no, the problem is the allocation, not the fund. An emergency fund of six months' expenses outside the market is what lets the rest of the portfolio ride out a bad year without a forced sale.

8. Housekeeping

The unglamorous checks that cause the most trouble when missed:

• Nominee registered on every folio, and the same nominee you intend.
• KYC status valid across all fund houses, especially after a change of address or a new PAN-Aadhaar link.
• Bank mandate active for every running SIP; a lapsed mandate silently stops the SIP.
• Folios consolidated: several folios in one fund with one fund house can be merged into one.
• SIP step-up: if your income rose this year and the SIP did not, raise it. The SIP calculator shows what a 10% yearly step-up adds over a decade.

When to review a mutual fund portfolio

• Once a year, on a fixed date. Many people use the financial year end or their birthday.
• After a life event: marriage, a child, a new job, a loan taken or repaid, an inheritance, a move abroad.
• When a goal comes within three years, to start moving that goal's money towards debt.
• Not after every market fall. A fall changes prices, not goals. Reviewing a portfolio in the middle of a correction tends to produce the one decision a review should prevent: selling the equity meant for a goal that is still ten years away.

What a portfolio review is not

It is not a search for the best fund; there is no such fund, only funds that fit a job. It is not an instruction to churn: a review that ends with every fund replaced has usually found a new story, not a problem. And it is not a return forecast. Mutual fund investments are subject to market risks; the review makes sure the risk you carry is the risk your goals can afford.

Getting the review done for you

If you would rather have the eight checks run by someone who does them every week, Sanriya Finvest offers a free written portfolio review. You share your CAS and your goal list; we return a short written review covering overlap, cost drag, risk fit and the gap to each goal, and talk it through with you. There is no fee and no obligation to move anything. Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359); the review is part of our distribution service, and the decisions stay with you.

It does not make any product less risky, shorten a lock-in or reduce fees. This guide covers the rules as they stand on 12 October 2026.

What is the SEBI accredited investor framework

SEBI introduced the framework through amendments to the SEBI (Alternative Investment Funds) Regulations, 2012 and the SEBI (Portfolio Managers) Regulations, 2020, notified on 3 August 2021. The working rules followed in a SEBI circular dated 26 August 2021. The definition sits in regulation 2(1)(ab) of the AIF Regulations, and the SEBI (Mutual Funds) Regulations, 2026 borrow the same definition for SIFs.

The framework has been refined several times since:

• A SEBI circular of 18 December 2023 lengthened the validity of a certificate and simplified the documents.
• AIF amendments in September and November 2025 made angel funds and co-investment schemes accredited-only and created "Accredited Investors only funds".
• A SEBI circular of 9 January 2026 let AIF managers sign up an investor while the certificate is pending.

Some investors never need a certificate. The Central and State Governments, their developmental agencies and funds, qualified institutional buyers, Category I foreign portfolio investors, sovereign wealth funds and multilateral agencies are treated as accredited automatically.

Accreditation is still uncommon. A SEBI board memorandum for its 24 September 2026 meeting counted 4,492 accredited investors on 28 August 2026, up from 649 on 29 May 2025.

What are the accredited investor criteria for income and net worth

Individuals, Hindu Undivided Families (HUFs), family trusts and sole proprietorships qualify if they meet any one of three tests:

• Income test: annual income of ₹2 crore or more.
• Net worth test: net worth of ₹7.5 crore or more, of which at least ₹3.75 crore is in financial assets.
• Mix test: annual income of ₹1 crore or more and net worth of ₹5 crore or more, of which at least ₹2.5 crore is in financial assets.

Other entities have their own tests:

• Body corporates, and trusts other than family trusts, need net worth of ₹50 crore or more.
• A partnership firm qualifies only if each partner meets the criteria independently.

For individuals, HUFs and sole proprietors, the primary residence is left out of net worth. For joint holdings of a parent and child, at least one of them must qualify alone; spouses may combine their income or net worth. Foreign investors are tested on the rupee equivalent of their figures.

How the mix test works

Take an individual with annual income of ₹1.2 crore and net worth of ₹6 crore excluding the family home, ₹3 crore of it in financial assets. They miss the income and net worth tests, but pass the mix test because income clears ₹1 crore, net worth clears ₹5 crore and financial assets clear ₹2.5 crore.

How to become an accredited investor in India

1. Work out your route. Check which test you meet on your latest financial year figures. A chartered accountant can confirm the financial asset split.
2. Collect the documents. Individuals, HUFs and sole proprietors need their PAN and an officially valid document; companies and trusts need their PAN, incorporation documents or trust deed, and an authorisation letter. For the financial test you need income tax returns (for individuals, HUFs, family trusts and sole proprietorships), audited financial statements, or a chartered accountant's net worth certificate not older than six months. Since January 2026, the chartered accountant may certify that you cross the threshold without stating the exact figure, and a detailed break-up of net worth is no longer required.
3. Apply to an accreditation agency. SEBI currently recognises two, both subsidiaries of India's depositories. The agency verifies your KYC and financial information.
4. Receive the certificate. It carries a unique accreditation number, the agency's name, your PAN and start and end dates.

How long accreditation lasts

Under the December 2023 circular, a certificate is valid for:

• two years if you met the criteria in the preceding financial year;
• three years if you met them in each of the preceding two financial years;
• two years for a newly incorporated entity that meets the net worth test on the date of application.

Before that circular, the periods were one year and two years.

Using the certificate with a product

When you invest, you give the product provider a copy of the certificate and an undertaking. In it you consent to use the framework, confirm you understand the product and can bear its risks, and accept that it may not carry the same regulatory oversight as products for other investors. The provider checks your status directly with the agency and must disclose the concessions and their conditions before you sign.

Since 9 January 2026, an AIF manager that has assessed your eligibility can sign your contribution agreement while your certificate is pending. Your commitment does not count towards the scheme's corpus, and the fund cannot take your money, until the certificate arrives.

What can an accredited investor invest in

AIF below ₹1 crore

Regulation 10(c) of the AIF Regulations sets the ₹1 crore floor and, since 3 August 2021, says it does not apply to an accredited investor. Since 19 November 2025, accredited investors are also left out when counting the 1,000-investor limit per scheme. The minimum for a Special Situation Fund falls from ₹10 crore to ₹5 crore.

Accreditation is also the entry ticket to products others cannot buy:

• Angel funds: since September 2025, they may raise money only from accredited investors, with no minimum investment. Funds registered on or before 10 September 2025 have until 31 March 2027 to comply.
• Co-investment schemes: since 9 September 2025, Category I and II AIFs may offer a separate co-investment scheme alongside a fund investment, open only to their accredited investors.

Removing the floor does not oblige a fund to accept a small cheque; each placement memorandum sets its own minimum commitment. For how the three categories differ on tenure and tax, see AIF categories explained and Sanriya's AIF page.

Large Value Funds and Accredited Investors only funds

Since 19 November 2025, the AIF Regulations recognise "Accredited Investors only funds": schemes in which every investor, other than the manager, the sponsor, and employees or directors of the fund or of its manager, is accredited. A Large Value Fund for Accredited Investors is one of these in which each such investor commits at least ₹25 crore; until 19 November 2025 the figure was ₹70 crore.

These funds get lighter rules:

• They can launch on filing the placement memorandum with SEBI, without waiting for SEBI's comments.
• They may extend tenure by up to five years with approval of two-thirds of unit holders by value, against two years for other schemes.
• They may give investors different rights instead of pari-passu rights, with disclosure in the placement memorandum and an undertaking from each investor.
• A Category I or II Large Value Fund may put up to 50% of investable funds in one company (25% for other schemes); a Category III one up to 20% (10% otherwise).

Each of these relaxations removes a protection that other schemes give you.

What changes for PMS

Under regulation 23(2) of the SEBI (Portfolio Managers) Regulations, 2020, the ₹50 lakh minimum does not apply to an accredited investor, subject to the disclosure document and the terms agreed with the portfolio manager. A "large value accredited investor", one with an agreement of at least ₹10 crore, gets two further relaxations: the standard contents of the client agreement are not compulsory, and the portfolio manager may invest up to 100% of the portfolio in unlisted securities.

For every other client, a discretionary PMS invests in securities listed or traded on a stock exchange, money market instruments and mutual fund units, and a non-discretionary PMS may put at most 25% of a client's portfolio in unlisted securities. Unlisted securities can be hard to value and to sell.

The SEBI (Portfolio Managers) Regulations, 2026, notified on 7 October 2026 and in force from 1 April 2027, keep both relaxations. Your securities still sit in your own demat account. Sanriya's PMS page covers how PMS works.

The SIF ₹10 lakh exemption

The SEBI circular of 27 February 2025, now carried in regulation 49(1) of the SEBI (Mutual Funds) Regulations, 2026, says a Specialized Investment Fund cannot accept less than ₹10 lakh from an investor across all its strategies, except from an accredited investor. A strategy's Investment Strategy Information Document (ISID) can still set its own minimum for accredited investors, so the ticket size varies by strategy. Our guide to the SIF ₹10 lakh rule covers everyone else.

Does accreditation change risk, lock-in, fees or tax

No. It changes the minimum ticket, not the risks and costs of the product:

• Risk. The strategy, its market risk and its liquidity are the same whatever cheque you write. The certificate itself says the agency checked only your KYC and financial information.
• Lock-in. Category I and II AIFs stay close-ended with a minimum tenure of three years, and an Accredited Investors only fund can extend for longer than other schemes.
• Fees. Management and performance fees are set by the product, and 18% GST still applies to PMS fees.
• Tax. Accreditation is a SEBI status, not a tax status: an AIF, PMS or SIF is taxed as it would be for any other investor.
• Your exit from the framework. You can withdraw consent, but if you used a lower ticket you must top up to the normal minimum within the time your agreement allows. In pooled products launched only for accredited investors with regulatory concessions, you cannot withdraw consent at all.

What did SEBI approve for accredited investors in September 2026

On 24 September 2026, SEBI's board approved changes to widen the framework:

• AIF managers, fund houses offering SIFs and portfolio managers may accredit investors, as an optional route alongside the agencies.
• A new test based on securities market exposure: ₹5 crore for individuals, HUFs, family trusts and sole proprietorships, and ₹20 crore for body corporates and other trusts.
• All persons resident outside India, including foreign portfolio investors, to be treated as accredited automatically.
• Limited liability partnerships to qualify where each partner qualifies.
• A three-year validity under both routes.

These changes take effect only from the date the amended regulations are notified. On 12 October 2026, the AIF Regulations on SEBI's website were last amended on 14 July 2026, so the current tests and validity periods still apply.

Who uses accreditation

Accreditation is used by investors who already hold, or are looking at, alternative products: families spreading an AIF allocation across more than one manager, investors in angel funds or co-investment schemes, and family offices looking at Large Value Funds, where each investor commits at least ₹25 crore.

The ticket changes, not the product: a smaller cheque into a high-risk, illiquid product is still high-risk and illiquid, and whether to use accreditation is your decision.

How Sanriya helps

Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359) and an APMI-registered PMS distributor (APRN01056). We explain how accreditation works for the AIF, PMS or SIF you are considering, help you put together the documents the accreditation agency and the product provider ask for, and service the investment afterwards. We distribute under the Regular plan and receive commission from the product manufacturer, which is built into the product's costs; we do not charge you a separate fee, and the decision to seek accreditation and to invest stays with you. Contact us to talk it through.

For how the categories differ on tenure, leverage and minimums, see our guide to AIF Category I, II and III.

AIF tax at a glance

How Category I and II AIFs are taxed: pass-through

From section 115UB to section 224

Under the Income-tax Act, 1961, Category I and II AIFs were taxed under section 115UB; from 1 April 2026, the provision is section 224 of the Income-tax Act, 2025. The core rule reads almost the same: income from the fund is taxed as if you had made the fund's investments directly.

Section 224 defines an "investment fund" as a trust, company, limited liability partnership or body corporate in India that is registered as a Category I or II AIF under the SEBI (Alternative Investment Funds) Regulations, 2012, or regulated under the IFSCA (Fund Management) Regulations, 2022. Category III funds are outside this definition, which is why they are taxed differently. Category II funds, such as private equity, private credit and real estate funds, get the same pass-through treatment as Category I.

Income keeps its character

The fund's income reaches you with the same nature and in the same proportion as the fund earned it. A ₹10 lakh payout is not one lump of "AIF income". It might be ₹6 lakh of interest, ₹3 lakh of capital gains and ₹1 lakh of dividends, and each part is taxed under its own rules in your return.

For capital gains, the Finance Act, 2025 settled a long-running question with effect from FY 2025-26 (assessment year 2026-27) onwards: securities a Category I or II AIF holds in line with SEBI or IFSCA rules are capital assets. Gains on selling them are capital gains, not business income.

Business income stays at the fund level

The one exception to pass-through is business income, on which the fund itself pays tax. Section 224 sets the rate: the Finance Act rates if the fund is a company or a firm, and the maximum marginal rate in any other case, which includes a fund set up as a trust. That business income is not taxed again when it reaches you.

Income not paid out is still taxed in your hands

If the fund earns income during the year but does not distribute it, section 224 treats your share as credited to you on the last day of the tax year. You pay tax on it for that year, and it is not taxed again when the fund later pays it out.

How AIF capital gains, interest and dividends are taxed in FY 2026-27

Under pass-through, your own rates apply:

• Listed equity sold by the fund: 20% if held 12 months or less; 12.5% if held longer, with the first ₹1.25 lakh of such long-term gains in a year exempt in total.
• Interest, for example from a private credit fund, and dividends: taxed at your slab rate. Under the default regime, the top rate is 30% on income above ₹24 lakh.
• Surcharge and cess: surcharge starts once total income crosses ₹50 lakh and rises in steps, to a top rate of 25% under the default regime and 37% under the old regime. On capital gains from listed equity and on dividends, surcharge is capped at 15%. Health and education cess of 4% applies on tax plus surcharge.

Section 194LBB TDS on AIF payouts, now section 393

The 10% rule

Under the old Act, section 194LBB required the fund to deduct tax when it credited or paid income to you, whichever was earlier: 10% for residents and the rates in force for non-residents. From 1 April 2026, the same rule sits in section 393 of the Income-tax Act, 2025: Table 4(iii) of section 393(1) sets 10% for residents with no threshold, and Table 8 of section 393(2) covers non-residents at the rates in force.

TDS applies only to the taxable part of a payout: the business income portion, already taxed in the fund and exempt in your hands, is left out.

TDS is not your final tax

The 10% is an advance collection, not your final bill. In the 30% slab, interest income needs more tax through advance tax or self-assessment; if your tax is lower than the TDS, you claim a refund. A lower or nil deduction certificate, earlier under section 197, is now applied for under section 395(1) on Form 128.

What Form 64C and Form 78 show for AIF investors

Every Category I and II AIF must give you a statement of the income it paid or credited during the year, broken down by type: business income, long-term and short-term capital gains, dividends and other income.

• Form 78 (earlier Form 64C) goes to you by 30 June after the tax year.
• Form 79 (earlier Form 64D) goes to the Income Tax Department by 15 June, filed electronically and verified by a chartered accountant.

Both sit under Rule 145 of the Income-tax Rules, 2026, which replaced Rule 12CB. Income of FY 2025-26 and earlier is still reported on Forms 64C and 64D; income of FY 2026-27 onwards on Forms 78 and 79. In your return, this income goes into the pass-through income schedule (Schedule PTI in the current forms), using the figures in the form, not the amount that landed in your bank account.

How AIF losses are treated for tax

Losses follow the same split as income:

• Business losses stay inside the fund. The fund carries them forward and sets them off against its own future business income. They never reach you.
• Other losses, such as a capital loss, can pass through to you, but only if you have held the AIF units for at least 12 months.
• Legacy losses, other than business losses, that had built up in the fund as of 31 March 2019 were treated as losses of the investors who held units on that date, for the remaining carry-forward period.

Once a loss reaches you, the normal set-off and carry-forward rules for your own return apply. Form 78 shows the loss figures you can use.

How Category III AIFs are taxed

No pass-through

Category III AIFs are not "investment funds" under section 224, so neither the pass-through rule nor the 10% TDS provision applies to them. Tax is paid by the fund, and what you receive is what remains after that tax and the fund's fees.

Many Category III funds are set up as trusts. Where a trust is taxed at the maximum marginal rate, the effective rate is about 39% including surcharge and cess under the default regime, where surcharge tops out at 25%. Some commentary uses 42.744%, which applies the old regime's 37% surcharge. It can be lower on listed equity gains and dividends, where surcharge is capped at 15%, and depends on the structure and the kind of income. A 2025 Delhi High Court ruling held that not naming investors in an AIF trust's original deed does not, by itself, make the trust "indeterminate", which matters because an indeterminate trust is taxed at the maximum marginal rate, so the position can differ from fund to fund.

What you receive net

Compare Category III returns after fund-level tax, not before. How a gain on redemption is treated in your hands depends on the fund's structure, and specialist commentary calls it unsettled, so read the tax section of the placement memorandum and ask your chartered accountant. For how Category III long-short funds compare with SIFs and PMS on cost and tax, see Category III AIF long-short funds vs SIF vs PMS.

A worked example with round numbers

Assume you are a resident individual in the 30% slab under the default regime, with total income below ₹50 lakh so surcharge does not apply, and you have already used your ₹1.25 lakh long-term gains exemption elsewhere. In FY 2026-27, a Category II AIF credits you ₹10 lakh: ₹6 lakh of interest and ₹4 lakh of long-term capital gains on listed shares it sold.

• TDS at 10%: ₹1,00,000. You receive ₹9 lakh in cash.
• Tax on interest at 30%: ₹1,80,000.
• Tax on long-term capital gains at 12.5%: ₹50,000.
• Total before cess: ₹2,30,000. With 4% cess: ₹2,39,200.
• Less TDS already deducted: ₹1,00,000. Balance you pay: ₹1,39,200.

Now take ₹10 lakh of income attributable to your units in a Category III trust that is taxed at the maximum marginal rate, which is 39% under the default regime (42.744% where the old-regime surcharge is applied). At 39%, the fund pays ₹3,90,000 and ₹6,10,000 stays in the fund for you. These illustrate mechanics only; your figures depend on the fund's income mix, your other income and your tax regime.

How AIF income is taxed for NRIs

For an NRI in a Category I or II AIF, pass-through still applies: your share of income is taxed in India as if you had invested directly. Tax is deducted at the rates in force for non-residents under section 393(2), rather than the 10% resident rate. If India has a tax treaty with your country of residence, a lower treaty rate may apply when you give the fund a Tax Residency Certificate and the declarations it asks for. A lower deduction certificate under section 395(1) is another route. Check how your home country taxes the same income too.

How GIFT City Category III funds are taxed differently

A Category III AIF in the International Financial Services Centre at GIFT City follows a different rule. If its units are held only by non-residents, apart from the sponsor or manager and a limited exception for investors who later become resident, it can qualify as a "specified fund" under Schedule VI of the Income-tax Act, 2025 (section 10(4D) of the old Act). Certain income, such as gains on some transfers on an IFSC stock exchange and income from securities issued by non-residents, is then excluded from the fund's income to the extent it belongs to non-resident unit holders. Schedule VI also excludes the unit holder's income from such a fund or from transfer of its units.

Because the test looks at who holds the units, a fund open to resident investors generally will not qualify, so a resident investing through the Liberalised Remittance Scheme should not assume this exemption applies; the fund's tax disclosures and your chartered accountant can confirm the position. Our GIFT City funds guide covers who can invest and how.

What your chartered accountant needs from you

1. Form 78 from each Category I or II AIF (Form 64C for FY 2025-26 and earlier), with the income split by type and any loss figures.
2. Your tax credit statement from the income-tax portal, to match the fund's TDS.
3. Capital call, distribution and unit statements, with allotment dates, so the 12-month test for losses can be checked.
4. Redemption statements from any Category III fund, with dates and amounts.
5. For NRIs: your Tax Residency Certificate, treaty declarations and any lower deduction certificate.

How Sanriya helps with AIF investments

Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359) and an APMI-registered PMS distributor (APRN01056). On AIFs, we explain how each category is taxed, share the placement memorandum and tax disclosures, handle onboarding and capital call paperwork, and follow up on statements such as Form 78 for your chartered accountant. We work as a distributor: the decision, and your tax position, stay with you and your chartered accountant. Contact us to talk through an AIF you are considering.

Three regulated routes to a long-short fund in India

Category III AIF: India's hedge fund category

The SEBI (Alternative Investment Funds) Regulations, 2012 describe a Category III AIF as one that uses diverse or complex trading strategies and may use leverage, including through listed or unlisted derivatives, and they name hedge funds as an example. Long-short equity sits here alongside long-only, market-neutral and quantitative strategies. A Category III AIF is a pooled vehicle, commonly set up as a trust, and each scheme may be open-ended or close-ended.

SIF long-short strategy: the mutual fund route

SEBI's circular of 27 February 2025, effective 1 April 2025, set out the SIF framework. It now sits in the SEBI (Mutual Funds) Regulations, 2026 and Chapter 21 of SEBI's Master Circular for Mutual Funds dated 20 March 2026. An SIF is run by a mutual fund house under a distinct identity and issues units at a NAV calculated daily. All seven permitted strategies are long-short structures; the three equity-oriented ones are equity long-short, equity ex-top-100 long-short and sector rotation long-short. Our guide to SIF strategies explains each one.

PMS: your own portfolio, usually long-only

A PMS is not pooled. A portfolio manager runs a portfolio of securities held in your own demat account under the SEBI (Portfolio Managers) Regulations, 2020. The manager may use exchange-traded derivatives, including for hedging and portfolio rebalancing, but may not borrow or use leverage on your behalf. Most PMS approaches are therefore long-only, but many investors weigh PMS against the other two. See what a PMS is and how it works.

Category III AIF vs SIF vs PMS at a glance

Leverage and short selling: the biggest difference

The AIF leverage limit under SEBI rules

A Category III AIF may borrow or use leverage only with its investors' consent, under Regulation 18 of the AIF Regulations. SEBI's Master Circular for AIFs, issued on 3 June 2026 and last updated on 7 September 2026, caps leverage at two times NAV. Leverage is measured as total long plus short exposure, after the offsetting allowed for hedges, divided by NAV: a fund with ₹100 crore of NAV can carry exposure of up to ₹200 crore. The fund reports its leverage to its custodian daily; after a breach, it must tell investors before 10 a.m. on the next working day and be back within the cap by the end of that day.

Leverage works in both directions: it enlarges losses as readily as gains.

SIF: limited shorts, no gearing

Under the February 2025 circular, an SIF strategy may take unhedged short exposure of up to 25% of net assets through exchange-traded derivatives, on top of derivatives used for hedging and portfolio rebalancing. Its cumulative gross exposure across equity, debt, derivatives and other permitted assets must not exceed 100% of net assets, so an SIF cannot be geared the way a Category III fund can.

PMS: no borrowing on your behalf

The 2020 regulations bar a portfolio manager from borrowing funds or securities for a client and from leveraging the client's portfolio for derivatives. SEBI's Master Circular for Portfolio Managers dated 16 July 2025 adds that your total derivative exposure should not exceed the funds you have placed with the manager. New SEBI (Portfolio Managers) Regulations, 2026 were notified in October 2026 and take effect from 1 April 2027; SEBI's board has said they will allow exchange-traded derivatives of up to 1.25 times a client's assets, within limits SEBI will specify. Until then, the 2020 rules apply.

Liquidity: when you can get your money out

Category III AIF. An open-ended scheme offers redemption windows set in its private placement memorandum (PPM), often monthly or quarterly, and may add notice periods, exit loads and gates. SEBI lets the manager suspend redemptions in exceptional circumstances, and a partial redemption cannot leave you below the ₹1 crore minimum. A close-ended scheme is built around a fixed term.

SIF. Equity-oriented strategies may offer daily redemption, hybrid strategies at most twice a week and debt strategies at most once a week; a fund house may choose less frequent windows and a notice period of up to 15 working days, all disclosed in the Investment Strategy Information Document (ISID). If your own redemption takes your holding in that SIF below ₹10 lakh, your units are frozen for 30 calendar days for you to top up, and are redeemed if you do not.

PMS. You can withdraw under the terms of your agreement at any time. SEBI caps the exit load at 3% of the amount redeemed in the first year, 2% in the second and 1% in the third, with none after three years.

How a long-short AIF is taxed compared with SIF and PMS

The three structures put the tax bill in different places. Figures are for FY 2026-27 under the Income-tax Act, 2025.

Category III AIF: taxed at the fund level

Category I and II AIFs are pass-through, but Category III AIFs are not, so tax is computed and paid inside the fund before returns reach you. Where a fund is a trust whose income includes business income, the whole income can be taxed at the maximum marginal rate, which practitioners put at up to about 42.744% (30% tax, 37% surcharge and 4% cess) at the highest income levels. Actively traded strategies face more questions about whether gains are capital gains or business income. Our AIF taxation guide covers all three categories.

SIF: mutual fund taxation

The SIF itself pays no tax on its trading gains; you pay when you redeem or switch. An equity long-short strategy that keeps at least 65% in listed shares of domestic companies is taxed as an equity-oriented fund: 20% on units held 12 months or less, and 12.5% on long-term gains above ₹1.25 lakh a year, plus surcharge and 4% cess. Hybrid and debt-oriented strategies are taxed according to their equity share, with debt-oriented units at your slab rate.

PMS: taxed on every sale

Each sale of shares or fund units your manager makes is your own capital gains event in that financial year; gains on any exchange-traded derivatives are generally taxed as business income instead. Listed shares held 12 months or less are taxed at 20%; beyond 12 months, long-term gains above ₹1.25 lakh a year are taxed at 12.5%, plus surcharge and 4% cess. A higher-turnover approach produces more short-term gains.

Tax rules change with each Finance Act, so confirm your own position with a chartered accountant.

How Category III AIF, SIF and PMS report to investors

The widest gap shows up in an AIF vs PMS comparison: a PMS client sees the actual shares.

PMS: every holding sits in your own demat account, and the manager must send you a report at least every three months, with many sending monthly statements. Since SEBI's circular of 16 December 2022, performance is reported against benchmarks prescribed by the Association of Portfolio Managers in India (APMI).

SIF: the fund publishes a daily NAV and discloses each strategy's full portfolio, including derivative positions, as at the end of every alternate month (May, July, September, November, January and March) within 10 days on the websites of the fund house and the Association of Mutual Funds in India (AMFI). Each strategy carries a five-level risk band reviewed monthly, and the ISID includes a scenario analysis of the loss you could face from market moves.

Category III AIF: the fund must disclose NAV at least monthly if open-ended and at least quarterly if close-ended, calculated independently of the fund management team. Investors receive quarterly reports within 60 days of quarter end, covering material risks including leverage, and benchmarking agencies compare AIF performance twice a year, on data as at 30 September and 31 March.

Category III AIF minimum investment and who regulates what

• Category III AIF: ₹1 crore per investor, or ₹25 lakh for employees or directors of the fund or its manager.
• SIF: ₹10 lakh in aggregate across all strategies of one SIF at PAN level; your regular mutual fund holdings do not count towards it.
• PMS: ₹50 lakh per client.

Accredited investors are exempt from all three minimums. An individual qualifies with annual income of ₹2 crore or more, net worth of ₹7.5 crore or more (at least ₹3.75 crore in financial assets), or income of ₹1 crore plus net worth of ₹5 crore (at least ₹2.5 crore in financial assets). SEBI's board approved two more routes in September 2026, securities market exposure of at least ₹5 crore and deemed accreditation for non-residents, effective only once notified.

SEBI regulates all three, under different rulebooks. SIFs also follow AMFI standards, such as the risk band, and PMS distributors register with APMI.

SIF vs AIF vs PMS: which investor each tends to suit

These are broad patterns, not a judgement about your situation.

• SIF long-short strategy: an investor with ₹10 lakh or more who wants a measured long-short sleeve within mutual fund rules: daily NAV, SIP and SWP options, mutual fund taxation, unhedged shorts capped at 25% of net assets and no leverage. SEBI's FAQ describes the SIF investor as relatively informed, aware of market, liquidity and derivatives risk, and able to tolerate loss of capital.
• Category III AIF: an investor with ₹1 crore or more, or an accredited investor, who wants a wider toolkit, including leverage of up to two times NAV, and accepts fund-level tax, periodic exit windows and a PPM to read in full.
• PMS: an investor with ₹50 lakh or more who values owning the securities directly and seeing each trade, and accepts that the approach will usually be long-only and that each sale creates tax.

None of the three removes risk. Shorts lose money when prices rise, derivatives bring basis and counterparty risk, leverage enlarges losses, and less frequent redemption windows can delay your exit.

How Sanriya Finvest works with these products

Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359) and an APMI-registered PMS distributor (APRN01056). We explain how each structure works, share the ISID, PPM or disclosure document, handle the application paperwork and service the investment. We distribute under the Regular plan and are paid commission by the product provider, with no separate fee charged to you. Distribution is our role; the decision stays with you. Read more on our AIF page, or contact us to talk through a Category III AIF, SIF or PMS.

This PMS evaluation checklist walks through the documents and data SEBI already requires managers to publish. If you are new to the product, start with what a PMS is and how it works.

The PMS evaluation checklist at a glance

Step 1: confirm registration and read the disclosure document

Check the SEBI registration

SEBI's website lists every registered portfolio manager, and its investor charter for PMS asks you to check registration before signing up; the number must also appear in the account opening form and the disclosure document. Since SEBI's circular of 2 May 2024, PMS distributors must also be registered with the Association of Portfolio Managers in India (APMI), so check your distributor too.

Read the disclosure document, not just the presentation

Under Regulation 22 of the 2020 regulations, the disclosure document must be given to you before you sign, be certified by an independent chartered accountant and stay on the manager's website at all times. Since SEBI's circular of 9 September 2025, it follows a standard 16-part format in two sections:

• Static: services offered, risk factors, expenses, taxation, the diversification policy, and any penalties, litigation or regulatory findings.
• Dynamic: client numbers and assets, the manager's own finances, its performance, audit observations of the preceding three years, and investments in related parties.

Read the penalties and audit sections first, then the risk factors for your chosen investment approach; SEBI's template warns that an approach's name says nothing about its prospects.

Step 2: read the PMS track record the right way

Time-weighted returns against the APMI benchmark

SEBI's circular of 16 December 2022, in force from 1 April 2023, standardised how PMS performance is shown. Every investment approach is tagged to one of four strategies: equity, debt, hybrid or multi asset. APMI prescribes up to three benchmarks for each strategy and the manager picks one as the primary benchmark; since SEBI's letter of 3 October 2024, it may also show one optional secondary benchmark, from a prescribed list, that fits the approach more closely. Any performance figure must be the time-weighted rate of return (TWRR), shown alongside the benchmark's trailing return. TWRR strips out the effect of when money came in or went out, so it measures the manager, not the timing of clients' cheques.

Managers report these figures to SEBI and APMI every month for periods from 1 month to 5 years and since inception, and APMI publishes them so you can compare approaches within a strategy. Returns must be net of all fees and expenses and include cash holdings. APMI's equity benchmarks are total return indices, which count dividends.

Performance reporting may not use model portfolio returns or the returns of hand-picked clients. If a manager changes an approach's benchmark or strategy, clients must be offered an exit without exit load, and the track record before the change can no longer be used.

Since inception versus rolling returns

A since-inception figure depends heavily on the start date: one strong early year can carry a weak recent record. Read every period, and where rolling returns are shown (every three-year window, say), check how often the approach beat its benchmark, not just by how much.

Check the length of the record too: on data platforms, many approaches show a one-year comparison with their benchmark, but far fewer have a five-year record.

Drawdowns

A drawdown is the fall from a portfolio's peak to its lowest point before it recovers. Ask for the largest drawdown, how long recovery took, and how both compare with the benchmark over the same months. Concentrated mid or small cap approaches can fall much further than the market; ask whether you could stay invested through that.

Dispersion between client portfolios

Your return can differ from the approach's TWRR because of when you invested and any restrictions you set. So the 2022 circular requires your report to show your own XIRR (a return reflecting your actual cash flows) with the minimum, maximum and median XIRR across all investors in that approach. A wide gap means client outcomes have varied a lot.

Step 3: match PMS strategy types to your goal and horizon

Within SEBI's four strategies, investment approaches differ widely. Common styles include:

• Large cap: mostly the largest listed companies.
• Mid and small cap: smaller companies, with sharper price swings and thinner trading.
• Multi cap or flexi cap: across company sizes.
• Thematic or sector: concentrated in one theme or a few sectors.
• Multi asset: a mix of equity, debt, arbitrage and assets such as gold or REITs and InvITs.
• Debt: bonds and money market instruments.

SEBI requires every approach's description to state its objective, securities, selection basis, allocation, benchmark, indicative tenure and risks. If that tenure is longer than you can leave the money invested, the approach does not fit your goal, however its record looks.

Step 4: how many stocks a PMS holds and why concentration matters

SEBI's rules do not fix how many stocks an equity PMS must hold. Instead, the disclosure document sets out the manager's diversification policy, and its standard risk factors warn that portfolios concentrated in a few stocks, sectors or company sizes carry extra risk. Ask how many stocks the approach usually holds, the maximum weight in one stock and one sector, and the share of the ten largest holdings. Also check the disclosure on investments in the manager's associates or related parties: these need your consent and are subject to SEBI's prudential limits.

Step 5: how PMS portfolio churn affects your tax

Churn is how often the manager buys and sells. Each approach's portfolio turnover ratio (the higher of purchases or sales divided by average assets) is reported monthly, and APMI publishes a turnover report.

Turnover matters more in a PMS than in a mutual fund because the shares are yours: every sale is taxable in your hands, even if you withdraw nothing. For FY 2026-27, under the Income-tax Act, 2025, gains on listed equity held 12 months or less are taxed at 20%, and longer-held gains at 12.5% above ₹1.25 lakh a year, plus surcharge and 4% cess. On ₹5 lakh of gains, short-term tax is ₹1 lakh before surcharge and cess. Held for more than 12 months, the same gains are taxed at 12.5% on ₹3.75 lakh, or ₹46,875 before surcharge and cess, if the ₹1.25 lakh a year has not already been used against other long-term equity gains. Brokerage is also charged at actuals, so a high-churn approach must earn more just to stand still after costs and tax.

Step 6: how PMS fees are charged and how to read the fee illustration

PMS fees follow three models: fixed (a percentage of assets), performance (a share of gains above a hurdle, charged only above the high-water mark) and hybrid. SEBI bans upfront fees and caps operating expenses other than brokerage at 0.50% a year of average daily assets; 18% GST applies on fees.

The client agreement must carry a fee annexure showing all charges on a sample ₹50 lakh portfolio when its value rises 20%, falls 20% or stays flat. For clients onboarded from 1 October 2024, the manager must share a fee calculator in advance, and where a performance fee applies the annexure must add multi-year illustrations. You sign this annexure separately, with a note that you understand it, and nothing outside it can be charged. Compare the illustrated cost, not the headline percentage. Our guide to PMS fees, hurdles and the high-water mark works through the arithmetic.

Step 7: how to exit a PMS and what it costs

A PMS has no lock-in, but leaving early can cost money: SEBI caps exit loads at 3% of the amount redeemed in the first year, 2% in the second and 1% in the third, with none after three years; large-value accredited investors negotiate their own terms. Check how quickly withdrawals are settled, whether you can take securities instead of cash, and how long a concentrated small cap holding might take to sell. On closure, funds and securities must be transferred to your verified bank and demat accounts, and anything sold triggers capital gains tax. The steps are covered in how to open, run and exit a PMS account.

Step 8: what a PMS client report should show

Regulation 31 of the 2020 regulations requires a report at least every three months showing holdings and values, every trade, dividends and interest, expenses, risks, any debt defaults and the commission paid to the distributor for your account. In practice most managers send monthly statements. You also receive the annual audit certificate on the manager's portfolio accounts, and may appoint your own chartered accountant to audit your account. Ask for a sample report before you sign: it should show your XIRR, the approach's TWRR, the benchmark and the client XIRR range together.

Questions to ask a portfolio manager

• Who runs this approach day to day, for how long, and who takes over if they leave?
• Which benchmark do you use, and has it ever changed?
• What was the largest drawdown and recovery time, against the benchmark?
• In your fee illustration, what is my all-in cost if returns are flat or negative?
• How are withdrawals settled, and what exactly does the power of attorney let you do?

PMS red flags

• Promised returns. Regulation 22 of the 2020 regulations bars managers from promising any return, directly or indirectly, and the PMS distributors' code of conduct bars distributors too.
• Mixing up clients' money. A discretionary manager must manage each client's portfolio individually, may not use one client's funds for another and may not market "schemes" like a mutual fund.
• Cash or third-party payments. Money should move only from your own verified bank account, and client funds must sit in a separate account at a scheduled commercial bank.
• Pressure to decide. You must receive the disclosure document before signing and sign the fee annexure separately; anyone hurrying you past these steps is a warning sign.
• Model or hand-picked returns, or charges outside the annexure. SEBI bars all of these.

What changes from April 2027

SEBI notified the SEBI (Portfolio Managers) Regulations, 2026 in October 2026; they replace the 2020 regulations from 1 April 2027. The ₹50 lakh minimum, the three-month reporting ceiling and the bar on promising returns continue, and the disclosure document becomes digital.

How Sanriya supports your PMS comparison

Sanriya Finvest Pvt. Ltd., Pune, is an APMI-registered PMS distributor (APRN01056) and an AMFI-registered mutual fund distributor (ARN-193359). We gather the disclosure documents, fee illustrations and APMI data for the approaches you want to compare, explain them line by line, handle the onboarding paperwork and service the account. The portfolio manager pays us a trail commission out of its fee, which must be disclosed to you; we charge you no separate fee, and SEBI also lets you join a PMS directly. The choice of manager stays with you. See our PMS page or contact us to collect and walk through the documents for the approaches you are considering.

Who can invest in a SIF

SEBI has not limited SIFs to any investor category, but its investor FAQs describe them as meant for relatively informed investors who understand market, liquidity and derivatives risks and can accept a loss of capital. Resident individuals, Hindu Undivided Families (HUFs), trusts, associations of persons and companies can all apply, provided they complete KYC and meet the minimum.

Non-resident Indians (NRIs) can invest where the fund house accepts them. Under foreign exchange rules, an NRI can buy SIF units on a repatriable basis (from an NRE or FCNR account, or by inward remittance) or on a non-repatriable basis (from an NRO account). Several fund houses do not accept NRIs living in the US or Canada, so check the ISID and SAI first.

For a joint holding, eligibility and the minimum are checked against the PAN of the first holder, under SEBI's SIF investor FAQs of 22 September 2026. You do not need a demat account: units are held in statement of account form by default, or in demat if you choose. There is no lock-in common to all SIFs.

What is the ₹10 lakh minimum for a SIF and who is exempt

SEBI's circular of 27 February 2025, now part of SEBI's Master Circular for Mutual Funds of 20 March 2026 under the SEBI (Mutual Funds) Regulations, 2026, requires your aggregate investment across all strategies of one SIF to be at least ₹10 lakh at the PAN level. Your regular mutual fund holdings with the same fund house do not count. Same-day transactions under one PAN can be added together to reach it, provided the money is credited before the cut-off.

Accredited investors, who hold a certificate from a SEBI-designated accreditation agency based on their income or net worth, are exempt.

Two breach rules apply once you are invested:

• Active breach. If a redemption, sale or transfer of your units takes the total below ₹10 lakh, all your units in that SIF are frozen for debit and you get 30 calendar days to restore the balance. If you do not, the units are redeemed at the NAV of the next business day after the 30th day. If your units are held in statement of account form, a redemption that would take you below ₹10 lakh may simply be rejected instead.
• Passive breach. If the value falls below ₹10 lakh only because the NAV fell, nothing is forced. You can keep holding, but you may redeem only the entire remaining balance.

Our guide to the SIF ₹10 lakh minimum works through these cases.

Step 1: Check your SIF KYC

SIF KYC is mutual fund KYC. SEBI's FAQs apply the same KYC, PAN, bank account validation, nomination and FATCA/CRS rules to SIF investors. If you already hold mutual funds, your record with a KYC Registration Agency (KRA) is reused.

Check your status on any KRA website using your PAN:

• KYC Validated: you can invest with any fund house without submitting documents again.
• KYC Registered: fund houses you already use accept it, but a new one will ask for your documents afresh.
• On Hold: transactions are blocked until you fix the record, usually by validating your mobile number and email.

Step 2: Choose a strategy by horizon and risk band

SEBI permits seven strategies in three groups (three equity, two debt and two hybrid), and each SIF may launch only one strategy of each type. The SIF strategies guide explains how each one works.

Two filters narrow the field. The first is horizon: equity strategies are generally meant for holding periods of five years or more and hybrid strategies for three years or more, so check how the ISID describes the horizon. The second is the risk band, which every strategy carries on a five-level scale from level 1 (lowest risk) to level 5 (highest risk). In October 2026 most live equity long-short strategies sat at band 5, while hybrid long-short strategies spanned bands 1 to 5, so the band tells you more than the strategy's name.

Step 3: Read the ISID, KIM and SAI

The Investment Strategy Information Document (ISID) is the SIF version of a mutual fund's scheme document, in a format SEBI prescribed by circular on 11 April 2025. Read it together with the Key Information Memorandum (KIM) and the Statement of Additional Information (SAI). SEBI asks investors to look closely at:

• the investment objective and asset allocation;
• derivatives exposure, including unhedged short positions of up to 25% of net assets;
• the scenario analysis, which shows the loss you could face if markets move against the strategy;
• subscription and redemption frequency, and any notice period;
• fees, expenses and exit load.

Shorting does not remove risk: a short position loses money when the price rises.

Step 4: Lump sum, SIP, STP or SWP

SEBI's 2025 circular lets fund houses offer SIP, STP and SWP in SIF strategies, as long as the ₹10 lakh minimum holds.

Lump sum

The first investment is usually a lump sum of at least ₹10 lakh, which opens the account. Once you meet the threshold, live ISIDs in October 2026 set minimum additional purchases of ₹1,000 to ₹1 lakh, depending on the fund house.

SIP

A SIF SIP runs only after the ₹10 lakh aggregate is in place, unless you are an accredited investor. Minimum monthly instalments in live ISIDs in October 2026 ranged from ₹1,000 to ₹20,000, usually with at least six instalments.

STP and switches

Live ISIDs allow switches and STPs into a SIF only from strategies of the same SIF. An STP from a regular mutual fund scheme, such as a liquid fund, is therefore not available, even at the same fund house. After every transfer your SIF balance must stay at or above ₹10 lakh.

SWP

An SWP can create a regular cash flow, but each withdrawal must leave at least ₹10 lakh across the SIF. Withdrawals within the exit load period can attract the load.

Tax on withdrawals and switches

Each SWP instalment, STP or switch is a redemption for tax. For FY 2026-27, under the Income-tax Act, 2025, gains on equity-oriented strategies (65% or more in listed Indian equity) are taxed at 20% if held 12 months or less and 12.5% beyond, with ₹1.25 lakh of long-term gains a year exempt. Gains on debt-oriented strategies (more than 65% in debt and money market instruments) are taxed at your slab rate. A strategy that is neither, which can include a hybrid strategy with 35% to 65% in equity, is taxed at your slab rate on short-term gains and at 12.5% on long-term gains; long term means more than 24 months, or more than 12 months if the units are listed. Surcharge where it applies and 4% cess come on top. The tax class follows the strategy's portfolio, not its name, so check it in the ISID. For NRIs, tax is deducted at source on gains.

Step 5: Learn the SIF redemption rules

SEBI caps how often each group of strategies may redeem:

• Equity strategies: daily, or less often if the fund house chooses.
• Debt strategies: at most once a week.
• Hybrid strategies: at most twice a week, usually on two fixed weekdays.

Any strategy that subscribes or redeems less often than daily is an interval strategy, and units of all interval and close-ended strategies must be listed on a stock exchange as an exit route. A close-ended strategy redeems only at maturity, so before then the exchange listing is your exit. Selling on the exchange needs the units in a demat account, trading can be thin and the price may be below NAV.

A fund house may also set a notice period of up to 15 working days. You submit the request inside the stated window and receive the NAV at the end of the notice period; requests outside the window may be rejected.

Exit loads on live strategies in October 2026 ranged from nil to 2%, applying to units redeemed within 15 days to one year of allotment. The SIF offer documents we read commit to paying redemption proceeds within three working days of processing the request, with interest at 15% a year for any delay.

Step 6: Regular plan vs Direct plan

Each SIF strategy has two plans with one common portfolio. In the Direct plan you invest straight with the fund house and no distributor commission is paid, so the expense ratio is lower. In the Regular plan you invest through a distributor, and the fund house pays the distributor's commission from within the expense ratio.

Using expense ratios published in early October 2026, the Regular plan of live SIF strategies cost 0.44 to 2.02 percentage points a year more than the Direct plan. Your CAS for each half-year ending September and March shows the actual commission paid on your holding, in rupees, and the strategy's average expense ratio.

If you use a distributor, check that they may sell SIFs. SEBI's 2025 circular required SIF distributors to hold the NISM Series XIII common derivatives certificate in addition to the mutual fund certification. Its circular of 21 July 2026 replaced that with NISM Series V-D; distributors who obtained Series XIII on or before 21 September 2026 can continue until it expires, as long as they also hold NISM Series V-A.

Step 7: Buy SIF units

You can buy SIF units online or offline: through the SIF's own website, app or offices, its registrar's service centres and investor portals, the industry's shared transaction utility, or distributor platforms, including the stock exchanges' mutual fund platforms.

Pay from your own bank account; third-party payments are not accepted. A first lump sum moves from decision to allotment like this:

How do you track a SIF after you invest

SEBI confirms that SIF holdings and transactions appear in your Consolidated Account Statement (CAS). You receive it monthly if you transacted during the month and half-yearly otherwise.

Disclosure rules let you follow the strategy between statements:

• NAV is calculated every business day.
• Portfolio holdings, including derivatives, are disclosed as on the last day of May, July, September, November, January and March, within 10 days, on the fund house's and AMFI's websites.
• Risk band is reviewed every month and published within 10 days of month end. Any change is sent to you by email or SMS and published as a notice cum addendum.

Our guide to SIF risk bands and disclosures shows how to read these.

When should you review your SIF holding

Review it when a risk band change notice arrives; when the half-yearly CAS arrives in April and October, to look at costs and commission alongside value; before any partial redemption or SWP change, to confirm the ₹10 lakh aggregate will hold; and when your goal, horizon or residency changes.

How Sanriya helps with SIF investments

Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359). We distribute SIF strategies under the Regular plan and receive commission from the fund house; we do not charge you a separate fee. We explain how each strategy works, handle the paperwork, from the KYC check to the application, and service the holding afterwards: statements, risk band notices, redemption windows and the ₹10 lakh balance. We are a distributor, so the choice of strategy and amount stays with you. Contact us to begin.

The rules below come from the SEBI (Portfolio Managers) Regulations, 2020 and SEBI's Master Circular for Portfolio Managers of 16 July 2025. New to the product? Start with what a PMS is and how it works.

Who can open a PMS account

Resident individuals, HUFs, companies, partnership firms and trusts can open a PMS account, as can NRIs, OCI cardholders and foreign portfolio investors, whom Regulation 25 permits.

The entry ticket is ₹50 lakh under Regulation 23(2), in funds, securities or a mix. SEBI's master circular adds that the first investment must be a single lump sum of at least ₹50 lakh, so you cannot build up to it in instalments. A manager can set a higher minimum for a strategy. Accredited investors may agree a lower amount with the manager under the same regulation, where the disclosure document provides for it.

How NRIs open a PMS account

For money you want to take back overseas, listed shares are bought on a repatriation basis through a bank branch designated for the Portfolio Investment Scheme (PIS), using an NRE (PIS) account, under Schedule III of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. Money from an NRO account follows the non-repatriable route, and NRO balances can be sent abroad within the RBI limit of USD 1 million a financial year.

The manager usually arranges the PIS bank account, an NRI demat account and a trading account together. SEBI's KYC rules ask NRIs for a passport or OCI card and overseas address proof.

Step 1: KYC and the PMS documents required

PAN is mandatory for every securities market account, and you also need a separate officially valid document for identity and address. The usual set:

• Individuals: PAN; a passport, driving licence, Aadhaar or voter ID as the officially valid document; a photograph; and bank proof, verified by a penny-drop test or a signed cancelled cheque.
• HUFs: the HUF's PAN and bank proof, the karta's KYC, a deed of declaration and a list of coparceners.
• Companies: board resolution, certificate of incorporation, memorandum and articles, PAN, address proof, authorised signatories and details of any beneficial owner holding more than 10%.
• Trusts: trust deed, list of trustees and authorised signatories, and KYC for each.

Everyone also signs a FATCA declaration, answers a risk-profile questionnaire and may give the manager a negative list of securities not to buy.

Step 2: the disclosure document, PMS agreement and fee annexure

Regulation 22(3) requires the manager to give you its disclosure document before you sign. It sets out every fee, the portfolio risks, related-party dealings, three years of performance and the manager's audited accounts. SEBI does not approve or certify it, so read it alongside our checklist for evaluating a PMS before investing.

Regulation 22 and Schedule IV require the PMS agreement to cover the investment approach and your restrictions, the contract period, early withdrawal terms, how the account is settled on maturity or early termination, custody, fees and, for a discretionary account, a cap on your liability at the amount invested. You also choose the type of service: discretionary, where the manager decides, or non-discretionary, where you approve each trade.

The master circular adds three safeguards to the paperwork:

• A fee annexure showing all charges on a sample ₹50 lakh portfolio over one year if it rises 20%, falls 20% or stays flat. You sign it separately and add a note, handwritten or typed, that you have understood it.
• A Most Important Terms and Conditions (MITC) document, which you acknowledge.
• No upfront fees, disclosure of the trail commission your distributor earns, and an option to join directly without a distributor.

Any clause saying the manager's decisions can never be questioned must still let you challenge decisions made in bad faith or involving fraud, a conflict of interest or gross negligence. Fee models are covered in PMS fees and charges: fixed, performance, hybrid and high-water mark.

Step 3: the PMS demat account, bank account and power of attorney

The PMS demat account

A new demat account is opened in your name and mapped to the manager's custodian, which Regulation 26 requires every portfolio manager handling client assets to appoint. The manager may not hold your securities in its own name and must keep each client's holdings separate, under Regulations 23(4) and 24(15). Because the account sits with one manager's custodian, moving to another manager usually means opening a fresh one.

Where the cash sits

Some managers open a bank account in your name and operate it under a power of attorney. Others hold it in a pooled client account at a scheduled commercial bank, which Regulation 23(5) allows, with client-wise records reconciled daily and a statement of your cash at least monthly.

What the PMS power of attorney does and does not allow

The power of attorney lets the manager place orders, settle trades and run the account for the strategy you signed up for. It does not let the manager:

• move your shares off-market, except to settle your own trades, provide margin for your own positions, deal in unlisted securities within the rules, or with your specific consent for each transfer, as Regulation 24(13) provides;
• lend your securities without your written authorisation, or borrow money or securities on your behalf;
• pay your money to anyone else: on termination, funds and securities go only to your verified bank and demat accounts.

At signing, the manager must explain which transactions the power of attorney covers.

Step 4: funding the account and the deployment period

You fund the account from your own verified bank account by cheque or electronic transfer, by moving shares from your verified demat account, or both. Shares you bring in count towards the ₹50 lakh at their value. The manager may keep them or sell those that do not fit the strategy, and any such sale is a capital gains event in your hands, so keep the original purchase dates and costs ready.

SEBI does not fix a deployment period. Some managers invest the full amount at once; others stagger it over time. While cash waits, the manager may park it in liquid mutual funds for cash management.

How long does it take to open a PMS account

These are maximums, not typical times, and day counts are clear working days. Account-opening times run from receipt of complete and accurate documents; the other day counts run from account opening or from your request, as shown.

What reports does a PMS send you and how often

Regulation 31 requires a report at least every three months, and whenever you ask. It covers holdings and values, every purchase and sale, dividends, expenses, risks, any debt default or downgrade, and the commission paid to your distributor. Most managers send it monthly.

SEBI's format shows your own portfolio's return as an XIRR, an annualised return that allows for when money went in and came out, along with the lowest, highest and median XIRR across all clients in the same investment approach. It also shows the investment approach's time-weighted return, which strips out the effect of money moving in and out, against an APMI-prescribed benchmark, under SEBI's circular of 16 December 2022. An independent chartered accountant audits your portfolio account every year, and you receive a copy of the certificate.

Can you add money to a PMS account later

Once the ₹50 lakh base is in place, you can add money on the terms in your agreement. SEBI sets no separate top-up minimum; managers set their own, commonly ₹1 lakh to ₹5 lakh, and many accept a monthly SIP of ₹1 lakh to ₹2 lakh.

Can you withdraw part of your money from a PMS

Partial withdrawals are allowed as your agreement provides, but SEBI's FAQ of 28 October 2020 says the portfolio left behind must not fall below the ₹50 lakh minimum. If a market fall alone takes the value below ₹50 lakh, you do not have to top up.

A withdrawal usually means the manager sells shares to raise cash, so gains are taxed in your hands that year. For FY 2026-27, under the Income-tax Act, 2025, listed shares held 12 months or less are taxed at 20%, and longer holdings at 12.5% on gains above ₹1.25 lakh a year, plus surcharge and 4% cess.

What exit load can a PMS charge

A portfolio manager cannot impose a lock-in, but it may charge an exit load on a part or full redemption, within the caps in paragraph 6.1.4 of the master circular:

• first year from the date of investment: up to 3% of the amount redeemed;
• second year: up to 2%;
• third year: up to 1%;
• after three years: nil.

These are ceilings, and a manager's own schedule in its disclosure document can be lower.

PMS exit process: getting your shares or cash back

Either side can end the agreement, and you can also take your money out early if SEBI suspends or cancels the manager's registration or the manager goes bankrupt, as Regulation 24(2) provides. A typical exit runs like this:

1. Send a written request in the form your agreement specifies, stating whether you want cash, your shares transferred, or a mix.
2. The manager stops investing, sells what has to be sold, and works out fees up to the exit date, any exit load and 18% GST on fees.
3. Regulation 31(3) entitles you to a detailed statement of accounts.
4. Securities move to your verified demat account and cash to your verified bank account.
5. The PMS account is closed; ask for written confirmation that nothing is outstanding, and a final tax statement.

SEBI sets no settlement deadline; the procedure and timing are whatever your agreement says. Taking shares back in kind avoids a forced sale at exit, while a cash exit crystallises gains in that financial year.

What changes from 1 April 2027

SEBI notified the SEBI (Portfolio Managers) Regulations, 2026 on 7 October 2026, replacing the 2020 rules from 1 April 2027. The ₹50 lakh minimum stays. The disclosure document becomes digital, with a free physical copy on request, and a separate route for portfolios that invest only in mutual fund units will have a lower minimum of ₹25 lakh.

SEBI's board said in September 2026 that a standardised investment management agreement will carry the authority to operate your demat and trading account, while a power of attorney for the bank account continues where RBI requires it. The agreement format, and the date it takes effect, had not been published as of October 2026.

How Sanriya helps with PMS onboarding

Sanriya Finvest Pvt. Ltd., Pune, is an APMI-registered PMS distributor (APRN01056) and an AMFI-registered mutual fund distributor (ARN-193359). We explain how each strategy and its documents work, help you assemble KYC, check forms before they reach the manager, and stay with you for top-ups, withdrawals and exit. The portfolio manager pays us a trail commission out of its own fee and must disclose it to you; we charge you nothing separately, and the decision stays with you. See our PMS page or contact us to start the paperwork.

Why an AIF cannot be judged like a mutual fund

A mutual fund invests your money on day one and publishes a daily NAV, so a one-year or three-year return describes your experience. A close-ended AIF works differently. You sign a commitment, say ₹1 crore, and the manager calls that money in instalments as it finds investments. It returns money when it sells holdings, not when you ask.

So the manager controls when your money goes in and when it comes back. Two terms matter. Committed capital is the total you agreed to invest; uncalled money stays with you until the fund asks for it. Drawn (paid-in) capital is what you have actually paid so far, and SEBI's benchmarking rules measure a scheme's assets as the total capital drawn down, not the commitment.

Commitments, drawdowns and exits are covered in how to invest in an AIF. Category III AIFs, which disclose NAV at least monthly if open-ended and quarterly if close-ended, suit fixed-period returns better.

Why AIF returns dip early: the J-curve

A typical private equity or venture fund's cumulative return dips before it rises, like the letter J. The J-curve in private equity has three causes. Management fees and set-up costs are charged from the start, before capital is deployed. New investments are often carried at or near cost until a sale or fresh funding round sets a price. And gains arrive late, when holdings are sold.

A negative IRR in the first two or three years is common and, on its own, says little about the final outcome. But the J-curve is a pattern, not a promise: some funds never climb out, and an early loss can be a real loss.

What IRR, DPI, RVPI and TVPI mean

IRR: the rate that accounts for timing

The internal rate of return (IRR) is the annual rate at which all your cash flows net to zero: capital calls count as money out, distributions as money in, and the current value of what is left as a final inflow. Because it accounts for timing, IRR rewards a manager who returns money quickly.

Check whether a figure is gross IRR (before fees, expenses and carried interest) or net IRR (after them, which is what investors earned). A gross figure on its own flatters the result.

DPI, RVPI and TVPI: the money multiples

• DPI (distributions to paid-in capital) is cash returned to you divided by what you paid in. A DPI of 1.0x means you have received back, in cash, as much as you put in. It is the one ratio that does not depend on a valuation.
• RVPI (residual value to paid-in capital) is the current valuation of investments still held, divided by what you paid in. It is an estimate.
• TVPI (total value to paid-in capital) is DPI plus RVPI: cash received plus the estimated value of what remains.

A worked example

These numbers are hypothetical, chosen only to show the arithmetic; they are not any fund's figures and do not indicate what any AIF will return. An investor commits ₹1 crore. The fund calls ₹20 lakh, ₹30 lakh, ₹20 lakh and ₹10 lakh in years 0 to 3, so ₹80 lakh is paid in and ₹20 lakh is never called. It distributes ₹16 lakh in year 4, ₹32 lakh in year 5 and ₹40 lakh in year 6. Values are after fees and expenses but before carried interest and tax.

At year 2 the TVPI is below 1.0x and the IRR is negative: that is the J-curve. By year 6 the investor has more cash back than was paid in, and of the 1.60x TVPI, 1.10x is cash while 0.50x is still an estimate.

IRR vs TVPI: why you need both

Take two hypothetical cases. ₹1 crore that becomes ₹2 crore in three years is a TVPI of 2.0x and an IRR of about 26%. ₹1 crore that becomes ₹2.5 crore in eight years is a TVPI of 2.5x but an IRR of about 12%. The first has the higher IRR; the second leaves you with ₹50 lakh more. IRR measures speed, the multiple measures money, and DPI tells you how much of either is real cash. Read all three together.

What is an AIF's vintage year

One Indian benchmarking agency defines the vintage year as the financial year in which the scheme declared its first close, so a first close between 1 April 2019 and 31 March 2020 makes it an FY 2019-20 vintage. Another report labels vintages simply as years, such as 2013, so check the report's own definition.

Funds of the same vintage invest and exit in similar markets and sit at the same point on the J-curve. A ten-year-old fund at 1.5x TVPI and a three-year-old fund at 1.2x are at different stages; the younger fund's figure is mostly unrealised value. Benchmark reports therefore group schemes by category and vintage, often with quartile and median figures, so you can see where a scheme sits among peers.

How SEBI benchmarks AIF performance

SEBI made performance benchmarking mandatory through its circular of 5 February 2020, clarified by a circular of 12 June 2020. The framework now sits in Chapter 22 of SEBI's Master Circular for AIFs dated 3 June 2026 (last updated 7 September 2026):

• An industry association representing at least 33% of AIFs by number notifies benchmarking agencies, and every AIF signs up with them.
• Every scheme that has completed one year from first close reports valuation and cash flow data, half-yearly, as at 30 September and 31 March. September data is due within 45 days; March data must be audited and is due within seven months, by 31 October.
• Agencies publish benchmarks for Category I, II and III separately for each year since 2012, in rupees and dollars, on pre-tax NAV. Angel Funds also report from FY 2025-26, under SEBI's circular of 10 September 2025.
• Any private placement memorandum (PPM) or marketing material that mentions past performance must include the agency's performance versus benchmark report, as must any investor report that compares the scheme with a benchmark.

One agency's published method measures returns after expenses but before carried interest and tax.

How AIF investments are valued

RVPI, TVPI and interim IRR all rest on valuations. Under Regulation 23 of the SEBI (Alternative Investment Funds) Regulations, 2012, Category I and II AIFs must have their investments valued at least once every six months by an independent valuer, or once a year with the approval of 75% of investors by value.

SEBI's standardised approach (circular of 21 June 2023, now Chapter 18 of the master circular) adds:

• Listed, traded securities follow mutual fund valuation norms; unlisted, non-traded and thinly traded ones follow the International Private Equity and Venture Capital Valuation (IPEV) Guidelines, as endorsed by an industry association.
• The valuer cannot be an associate of the manager, sponsor or trustee and needs three years of experience valuing unlisted securities. It must be a valuer registered with the Insolvency and Bankruptcy Board of India and holding a recognised professional membership, or a holding company or subsidiary of a SEBI-registered credit rating agency.
• If a holding's value moves more than 20% between two consecutive valuations, or more than 33% in a financial year, the manager must explain why to investors.

Since SEBI's circular of 6 February 2026, AIFs must also upload unit NAVs to the depositories within 30 days of each valuation, shown there as indicative NAV.

How fees and carry reduce AIF returns

A management fee of 1% to 2.5% a year is common, and the PPM states whether it is charged on committed capital, invested capital or NAV. Carried interest in an AIF, commonly 15% to 20% of profits, is usually paid to the manager only after investors clear a hurdle return, sometimes with a catch-up that then gives the manager its full share. Carry may be calculated fund-wide or deal by deal, and a clawback clause can recover carry paid too early. Every PPM must include a tabular example of how fees and the distribution waterfall apply to you.

In the worked example, the ₹48 lakh gain (₹1.28 crore of cash and value against ₹80 lakh paid in) is before carry. If 20% carry applied to the whole gain, ₹9.6 lakh would go to the manager, TVPI would fall from 1.60x to 1.48x and IRR from about 12% to under 10%. Tax then reduces what you keep; AIF taxation by category explains how.

How distributions arrive

Distributions are lumpy: they come when the fund sells a holding or receives interest or dividends, and are shared in proportion to commitment, subject to carried interest. For resident investors in Category I and II funds, 10% TDS is deducted on the income portion under section 393(1) of the Income-tax Act, 2025 (section 194LBB of the 1961 Act), so the cash you receive is less than the gross figure.

Near the end of a fund's life, holdings that cannot be sold may be distributed in-specie, as the securities themselves. With the consent of 75% of investors by value, the manager must arrange a bid for at least 25% of their value, and for the manager's track record and benchmark reporting the holdings count at the bid value, or at ₹1 if no such bid is arranged. If that consent is not obtained, the holdings are distributed in-specie anyway and counted at ₹1, and holdings an investor declines to take are written off.

What your quarterly or half-yearly report should show

SEBI's investor charter for AIFs sets the minimum: Category I and II valuations at least half-yearly, and financial information on investee companies and material risks within 180 days of the year end (60 days of the quarter end for Category III). Whatever the frequency, a clear report shows:

• your commitment, capital called and uncalled balance;
• each distribution, split into capital, income and TDS;
• NAV per unit, the valuation date and the valuer used;
• DPI, RVPI, TVPI and net IRR since inception;
• fees and expenses charged in the period;
• holdings, with reasons for any large change in value.

What to ask an AIF manager

To evaluate an AIF, ask for the numbers behind the headline:

1. Is this IRR gross or net of fees, expenses and carry?
2. How much of the TVPI is DPI, meaning cash already returned?
3. What is the vintage year, and where does the scheme sit in its agency benchmark?
4. Who is the independent valuer, and which valuation method applies?
5. How are the hurdle, catch-up and carry calculated, and is there a clawback?
6. How have the manager's earlier schemes done against their vintage benchmarks?

How Sanriya helps

Sanriya Finvest works as a distributor. For AIFs, we explain how performance is reported, walk you through the PPM, fee illustration and benchmark report, handle the commitment and drawdown paperwork, and service the investment through calls, distributions and statements. Sanriya is paid a commission by the manager and does not charge you a separate fee; this distribution fee is disclosed to you at onboarding. Every AIF scheme must also offer a Direct Plan with no distribution fee, and the decision to invest stays with you. To make sense of an AIF report you hold or are considering, contact us or see our AIF page.

Below is each charge, the SEBI rule behind it and how to read the fee pages of a PMS agreement, under the rules in force in October 2026: the SEBI (Portfolio Managers) Regulations, 2020 and SEBI's Master Circular for Portfolio Managers dated 16 July 2025. If you are new to the product, start with what a PMS is and how it works.

PMS fees and charges at a glance

• Management fee: a fixed percentage of your assets each year.
• Performance fee: a share of gains above the high-water mark, and above a hurdle where the agreement sets one.
• GST: 18% on the management and performance fees.
• Brokerage: charged at actuals on every trade.
• Operating expenses: custody, fund accounting, depository and similar costs, capped at 0.50% a year of your average daily assets under management (AUM).
• Exit load: at most 3%, 2% and 1% of the amount withdrawn in years one, two and three, and nil after that.

Under Regulation 22(11) of the 2020 regulations, the agreed fee may be "a fixed fee or a return based fee or a combination of both", and the manager may not promise any return.

PMS fixed fee: the management fee

A fixed fee is a set percentage of the portfolio's value, charged whether markets rise or fall. SEBI requires every fee and charge to be levied on the actual amount of your AUM, so the rupee amount moves with the portfolio. Your agreement states how often you are billed, whether the fee is collected in advance and whether it is deducted from the portfolio.

Take ₹50 lakh at a 1.5% annual fee. If the value stays near ₹50 lakh, the fee is about ₹75,000 for the year; GST at 18% adds ₹13,500, so you pay ₹88,500, or 1.77% of the portfolio. In market practice, fixed fees commonly run from about 0.25% to 2.5% a year.

PMS performance fee: hurdle rate and high-water mark

A performance fee, also called profit sharing, gives the manager a percentage of the gain. Two clauses decide how much of the gain counts.

Hurdle rate

The hurdle is the return the portfolio must clear before any profit share is due. Its level is set in your agreement, not by SEBI. SEBI's own sample fee annexure assumes a 10% hurdle and a 20% share of profits above it, and market practice commonly runs from 10% to 20% of gains above hurdles of 8% to 10%.

Read the clause closely. Some agreements charge the share only on the return above the hurdle; others carry a catch-up clause that lets the manager share in the gain below the hurdle once it is crossed. Two offers with the same headline percentage can cost very different amounts.

High-water mark

SEBI requires performance fees to follow the high-water mark principle over the life of your investment. The high-water mark is the highest value your portfolio has reached, taken on the dates performance fees are charged, and the manager may charge a performance fee only on the increase above that earlier peak. You do not pay twice for the same gain. The master circular adds three rules:

• Performance fees cannot be charged more often than once a quarter.
• The principle applies to both discretionary and non-discretionary PMS.
• If you add or withdraw money midway, the high-water mark is adjusted proportionately before any fee is charged.

Worked example: hurdle and high-water mark together

Assume ₹50 lakh, a 20% share of gains above a 10% yearly hurdle, fees worked out once a year, and the hurdle measured from the high-water mark, as in SEBI's FAQ illustration. To keep the arithmetic simple, values are taken before fees, as in SEBI's own high-water mark example.

In year 1 the value is ₹5 lakh above the hurdle level, so the fee is ₹1 lakh plus ₹18,000 GST. In year 2 the portfolio is below its peak, so no performance fee is due. In year 3 it rises ₹10 lakh but ends only ₹5 lakh, or 8.3%, above the old ₹60 lakh peak, short of the 10% hurdle, so the fee is nil and ₹65 lakh becomes the new high-water mark. In year 4 the value is ₹6.5 lakh above the ₹71.5 lakh hurdle level, so the fee is ₹1.3 lakh plus ₹23,400 GST.

SEBI's own illustration, which has no hurdle, follows the same path: in year 3 the fee applies only to the ₹5 lakh above the ₹60 lakh peak, not to the full ₹10 lakh rise from ₹55 lakh.

PMS hybrid fee: fixed fee plus profit share

A hybrid charges a lower fixed fee plus a performance share; market practice is a fixed part of about 1% to 2% with a profit share on top. In the example above, a hybrid client would pay the fixed part in all four years and the profit share only in years 1 and 4.

A fixed fee is charged at the same rate in good and bad years, though the rupee amount moves with the portfolio's value. A performance fee costs nothing in flat or falling years but takes a share of strong ones. A hybrid sits between the two. To compare options, SEBI requires every manager to give clients a fee calculation tool that shows its fee options over several years and applies the high-water mark; for clients onboarded from 1 October 2024, the link must be shared in advance.

GST on PMS fees

GST at 18% applies to the management fee and the performance fee, charged as 9% CGST plus 9% SGST, or as 18% IGST across states. Brokerage and custody services carry GST too. A quoted 2% management fee therefore costs 2.36% of the portfolio once GST is added. Individuals investing personal money generally cannot claim this GST back as input tax credit. How fees are treated for income tax is a separate question, covered in how PMS gains are taxed.

Brokerage, custody, audit and other operating costs

Brokerage is charged to you at actual cost, so a strategy that trades often will cost more than a low-turnover one with the same management fee. Everything else the manager passes on apart from its fee and brokerage, such as custody, fund accounting, depository and audit charges, is an operating expense, and SEBI caps these at 0.50% a year of your average daily AUM. On ₹50 lakh, that is at most ₹25,000 a year.

SEBI also limits business with group firms. Broking, demat, custody and similar services bought from the manager itself or an associate are capped at 20% of the value of each service per associate in a financial year, at rates no higher than unrelated providers charge.

PMS exit load: SEBI's caps

A portfolio manager cannot impose a lock-in, but it may charge an exit load when you withdraw part or all of your portfolio early, within SEBI's limits: up to 3% of the amount redeemed in the first year, 2% in the second, 1% in the third and nothing after three years.

These are ceilings, so check the actual schedule in your agreement. Withdrawing ₹20 lakh in month eight could cost up to ₹60,000. Large value accredited investors, who agree to invest at least ₹10 crore, negotiate exit terms with the manager instead.

No upfront fee and no unlisted charges

Under Regulation 22(11) of the 2020 regulations, in force since January 2020 and restated in SEBI's circular of 13 February 2020, a portfolio manager cannot charge an upfront fee, directly or indirectly. SEBI also bars any fee or charge that is not listed in the fee annexure of your agreement.

The rules themselves are changing. SEBI notified the SEBI (Portfolio Managers) Regulations, 2026 in October 2026, to replace the 2020 regulations from 1 April 2027; they keep the choice of fixed, return-based or combined fees and the ban on upfront fees. SEBI's board has also approved leaving statutory levies out of the 0.50% operating expense cap, a change whose start date SEBI has yet to announce; until then the cap works as described above.

How fees are disclosed: disclosure document and fee illustration

Before you sign, the manager must give you its disclosure document, which sets out the range of fees charged under each head and the nature of expenses such as custody fees and brokerage. The agreement must carry a separate annexure listing every fee and charge, with an illustration on a sample ₹50 lakh portfolio over one year in three scenarios: the value rises 20%, falls 20% or stays flat.

SEBI's model annexure uses round sample figures (2% brokerage and similar charges, a 2% management fee and 20% of profits above a 10% hurdle, before GST):

• Up 20%: charges of ₹3 lakh leave ₹57 lakh, a 14% gain.
• Down 20%: charges of ₹2 lakh leave ₹38 lakh, a 24% loss.
• Flat: charges of ₹2 lakh leave ₹48 lakh, a 4% loss.

Since 1 October 2024, where a performance fee applies, new clients also get one-year and multi-year illustrations that apply the high-water mark, in standard formats set by APMI with SEBI. You sign the fee annexure separately with a note, handwritten or typed, that you have understood it, and you receive a Most Important Terms and Conditions document. Each quarterly report carries an annexure showing how your fee was calculated, and any performance the manager reports must be net of all fees and expenses.

PMS direct vs distributor: onboarding and how distributors are paid

SEBI requires every portfolio manager to offer direct onboarding without a distributor, to disclose that option prominently in its disclosure document, marketing material and website, and, at the time of onboarding a client directly, to levy no charges other than statutory ones. The agreed management and performance fees still apply to direct clients.

Through a distributor, three rules apply. The distributor must be registered with APMI. The manager may pay the distributor only as a trail commission, and only out of the fees the manager itself receives, so the commission is not billed to you as an extra charge. And before you sign, you must be told what the distributor will earn for the strategy you choose; your quarterly report also shows the commission paid on your account. The distributor code of conduct adds that commission must never be the reason a PMS is put before you.

PMS has no separate Direct and Regular plans of the kind mutual funds have, so ask the manager whether it quotes the same fee to direct clients and compare the annexures. Before signing, also check the fee base and billing frequency, the hurdle and any catch-up, how often the performance fee is charged, expected brokerage and the exit load schedule. Our checklist for evaluating a PMS covers the wider questions.

How Sanriya helps with PMS fees

Sanriya Finvest Pvt. Ltd., Pune, is an APMI-registered PMS distributor (APRN01056) and an AMFI-registered mutual fund distributor (ARN-193359). We explain the fee annexure, the fee options and the exit load schedule of the strategies you are considering, handle the onboarding paperwork and service the account after you invest. Our trail commission is paid by the portfolio manager out of its own fee; we do not charge you a separate fee. We distribute, and the decision stays with you. See our PMS page or contact us to go through a fee annexure together.

Why a PMS is taxed differently from a mutual fund

A mutual fund pools money and issues you units. When the fund manager sells shares inside the scheme, the scheme books the gain, not you; you pay tax only when you redeem or switch units.

A PMS works the other way round. Regulation 24 of the SEBI (Portfolio Managers) Regulations, 2020 requires a portfolio manager to keep each client's securities segregated and bars it from holding them in its own name on the client's behalf. SEBI has notified new SEBI (Portfolio Managers) Regulations, 2026, which replace the 2020 Regulations from 1 April 2027 and carry over these rules on segregation, annual audit and reporting at least every three months. The shares sit in your demat account, so each purchase and sale is your own transaction. That single fact drives most of PMS tax in India. Our guide to what a PMS is and how it works covers the structure.

Turnover matters, because a strategy that churns its holdings books more short-term gains each year. And each security keeps its own purchase date and cost, so one year can bring short-term gains, long-term gains, losses and dividends together.

The 2025 Act uses a single "tax year" in place of the old previous year and assessment year. Tax year 2026-27 runs from 1 April 2026 to 31 March 2027, the same twelve months as FY 2026-27, so this guide uses the two labels interchangeably.

PMS capital gains tax on listed shares (FY 2026-27)

Under the 2025 Act, a share listed on a recognised Indian stock exchange is short term if held for 12 months or less and long term if held for more than 12 months. Where securities transaction tax (STT) has been paid, as on normal stock exchange trades, the FY 2026-27 rates are:

• Short-term gains: 20% under section 196 (section 111A of the 1961 Act).
• Long-term gains: 12.5% under section 198 (section 112A of the 1961 Act) on the amount above ₹1.25 lakh a year.

The ₹1.25 lakh is one allowance per person per year across your PMS, equity mutual funds and directly held shares, not one per account.

Surcharge and cess

For FY 2026-27, surcharge is 10% on total income above ₹50 lakh up to ₹1 crore, 15% above ₹1 crore up to ₹2 crore, 25% above ₹2 crore up to ₹5 crore and 37% above ₹5 crore under the old regime, with the new regime stopping at 25%. Under the Finance Act, 2026, surcharge on dividends and on gains taxed under sections 196, 197 and 198 is capped at 15%. A 4% cess applies on the tax plus surcharge. At the highest incomes, short-term equity gains therefore cost up to 23.92% and long-term gains up to 14.95%.

A worked example

Suppose a resident investor in the 30% slab has a PMS that, in tax year 2026-27, books ₹3 lakh of short-term gains, ₹4 lakh of long-term gains and ₹60,000 of dividends. Assume no other equity gains, no losses and no surcharge:

• Short-term gains: ₹3 lakh at 20% = ₹60,000
• Long-term gains: (₹4 lakh minus ₹1.25 lakh) at 12.5% = ₹34,375
• Dividends: ₹60,000 at 30% = ₹18,000
• Total: ₹1,12,375, plus 4% cess of ₹4,495 = ₹1,16,870

That tax is due for 2026-27 even if no money left the PMS. Inside an equity mutual fund (growth option), the same trades would create no tax for the investor until redemption.

Capital gains or business income

Most PMS investors report these gains as capital gains, but very frequent trading can invite the argument that the activity is a business. A CBDT circular of 29 February 2016, issued under the 1961 Act, says that if you choose to treat listed shares held for more than 12 months as capital assets, the Assessing Officer will not dispute it, but you must keep the same stand in later years. Settle the approach with your chartered accountant before the first return.

How dividends, interest and bonds in a PMS are taxed

Dividends

Dividends from shares in your PMS are taxed at your slab rate. Under section 393 of the 2025 Act, a company deducts 10% TDS from a resident individual's dividends once they exceed ₹10,000 in the tax year, or 20% if your PAN is missing or invalid under section 397. TDS is a credit against your final tax.

As enacted, section 93 of the 2025 Act allowed only one deduction against dividend income: interest on money borrowed to earn it, capped at 20% of the dividend. The Finance Act, 2026 removed even that, so for tax year 2026-27 nothing, including a PMS management fee, can be deducted from dividend income.

From tax year 2026-27, the Finance Act, 2026 treats a company's buyback of shares in your portfolio as a sale: the amount you receive over your cost is taxed as a capital gain, not the whole amount as dividend.

Bonds, debentures and debt funds

If your PMS holds bonds, the interest is taxed at your slab rate. Listed bonds held for more than 12 months are taxed at 12.5% on the gain when sold, and at your slab rate if held for 12 months or less. Section 76 of the 2025 Act treats gains on unlisted bonds and debentures (transferred or redeemed on or after 23 July 2024), market-linked debentures and debt-oriented mutual fund units bought on or after 1 April 2023 as short term whatever the holding period, so slab rates apply.

PMS advance tax: gains cannot wait until March

For residents, the portfolio manager does not deduct tax on capital gains: paying it is your job. If the tax you owe for the year, after TDS, comes to ₹10,000 or more, the 2025 Act requires advance tax in four instalments: at least 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March. A resident individual aged 60 or more with no business or professional income is exempt from advance tax under section 403.

Because PMS gains are hard to forecast, section 425 of the 2025 Act charges no interest on a shortfall caused by capital gains or dividends you could not estimate, provided you pay the tax on them in the remaining instalments or by 31 March. In practice, ask your manager for a realised gains report before each instalment date. Non-resident investors are handled differently: tax is generally deducted at source when gains are realised.

PMS fees: tax deductible or not

This is the most contested point in PMS taxation. Section 72 of the 2025 Act, like section 48 before it, allows only two deductions from the sale price: the cost of acquiring (and any cost of improving) the asset, and expenditure incurred wholly and exclusively in connection with the transfer. STT is expressly not deductible.

The Income Tax Appellate Tribunal has split on whether a PMS fee fits:

• Against: a 2011 Mumbai bench held that a fee charged on portfolio value is payable whether or not any share is sold, so it is not tied to any sale. Several later Mumbai rulings followed it.
• For: Pune and Delhi benches, and some Mumbai benches, including one reported in September 2026, have allowed PMS fees as an expense of earning the gains.

When one of the rulings allowing the fee went to the Bombay High Court, the appeal was admitted only on whether the gains were capital gains or business income, so the fee question remains unsettled. The conservative view is to deduct brokerage and exchange charges tied to specific purchases and sales (but not STT), and to treat management and performance fees, and the 18% GST on them, as not deductible. Your chartered accountant should claim them only knowing the claim may be challenged. For how the fees themselves are charged, see PMS fees explained: fixed, performance and hybrid.

Set-off and carry-forward of losses

PMS losses are your own capital losses, so they can be set against gains elsewhere in your return, such as mutual fund redemptions:

• A short-term capital loss can be set off against short-term or long-term gains.
• A long-term capital loss can be set off only against long-term gains.
• A capital loss cannot be set off against salary, interest or any other head of income (section 109).
• Unabsorbed capital losses carry forward for eight tax years (section 111), but only if you file your return by the due date.

The PMS tax statements your manager issues

Between SEBI's portfolio manager regulations and market practice, you receive:

• Periodic report: at least once every three months under Regulation 31 of the 2020 Regulations (Regulation 24 of the 2026 Regulations from 1 April 2027), and monthly with many managers. It shows holdings, every purchase and sale, dividends and interest received, expenses and any commission paid to your distributor.
• Capital gains statement: after the year ends, a scrip-wise statement of realised gains and losses, with purchase dates and costs.
• Audited statement: Regulation 30 (Regulation 23 from 1 April 2027) requires your portfolio account to be audited every year by an independent chartered accountant, with a copy of the certificate given to you. You may also appoint your own chartered accountant to audit it.
• Closing statement: a detailed statement of accounts when the agreement ends.

How a chartered accountant uses them

Your chartered accountant ties the capital gains statement to the transaction list and the audited statement, reports the gains in your return, and matches dividends, interest and TDS against your Annual Information Statement (AIS). PMS gains are combined with your mutual fund and direct share gains so the ₹1.25 lakh allowance is applied once, losses brought forward are set off and new ones recorded, the fee statement settles what, if anything, is deducted, and interim realised gains reports feed the advance tax instalments.

PMS vs mutual fund tax: side by side

A low-turnover PMS that holds most stocks beyond 12 months pays capital gains tax at the same rates as a mutual fund held as long, although its dividends are still taxed at your slab rate every year and its fees are not clearly deductible, while a high-turnover strategy pays tax sooner and more of it at the short-term rate. Our mutual fund vs PMS vs AIF comparison sets tax alongside minimums, liquidity and fees.

How Sanriya helps with a PMS

Sanriya Finvest Pvt. Ltd., Pune, is an APMI-registered PMS distributor (APRN01056) and an AMFI-registered mutual fund distributor (ARN-193359). We explain how a PMS works and how it is taxed, handle the account opening paperwork and service the account afterwards, including getting the statements your chartered accountant needs. We are a distributor, paid commission by the product manufacturer rather than a fee by you, and not a tax practitioner; the decision to invest stays with you. See our PMS page or contact us to talk it through.

Where does the ₹10 lakh SIF minimum come from

The rule sits in three places. Regulation 49(1) of the SEBI (Mutual Funds) Regulations, 2026, in force from 1 April 2026, says a SIF shall not accept an investment of less than ₹10 lakh from any investor other than an accredited investor, across all its investment strategies.

The working detail comes from SEBI's circular of 27 February 2025, effective 1 April 2025, as clarified on 9 April 2025 and supplemented on 29 July 2025. All of it is now consolidated in paragraph 21.4 of SEBI's Master Circular for Mutual Funds dated 20 March 2026. SEBI's FAQs for SIF investors, issued on 22 September 2026, explain how fund houses apply it.

Aggregate across strategies, not per strategy

The fund house must ensure your total across all strategies offered by the SIF is at least ₹10 lakh. You do not need ₹10 lakh in each strategy: ₹4 lakh in one and ₹6 lakh in another meets the rule. SEBI's consultation paper of 16 July 2024 proposed counting the ₹10 lakh across all the strategies of a fund house's SIF and asked whether it should instead apply to each strategy; the final rule kept the aggregate.

One SIF, one PAN

Each SIF is tested on its own, so a second fund house's SIF needs its own ₹10 lakh. Holdings in ordinary mutual fund schemes, in either the Regular or the Direct plan and even those of the same fund house, do not count.

For a joint folio, SEBI's investor FAQs say the test runs against the PAN of the first holder. Your spouse's folio in their own name counts towards their total, not yours.

When is the ₹10 lakh SIF threshold tested

Your holding need not be worth ₹10 lakh every day. The threshold is tested when money comes in and when you take money out.

On the way in

Your first investment in a SIF must bring your aggregate to at least ₹10 lakh. You can get there through several transactions under the same PAN on the same day, provided each is submitted before the cut-off time and the money is credited. If one payment fails and the total stays below ₹10 lakh, SEBI's FAQs say the linked transactions may be rejected.

On the way out: active breach

SEBI's circular of 29 July 2025 defines an active breach as a fall in the aggregate value of your SIF investment below ₹10 lakh because of a transaction you initiated: a redemption, sale, transfer or off-market transfer. The test uses the value of your units at that point, not the amount you first invested. If it happens:

1. all your units across every strategy of that SIF are frozen for debit, meaning none can be redeemed, sold or transferred;
2. you receive a notice giving you 30 calendar days to bring the total back to ₹10 lakh;
3. if you do, the units are unfrozen;
4. if you do not, the fund house redeems all the frozen units automatically at the NAV (net asset value, the price per unit) of the next business day after the 30th calendar day.

Where units are held in statement of account mode, that is, in the fund house's records rather than in a demat account, the fund house may instead reject a redemption that would take you below the line.

When the market takes you below: passive breach

A fall caused only by market movement or a lower NAV is a passive breach, not a violation: no freeze, no compulsory redemption and no requirement to top up. The catch, set out in the February 2025 circular and repeated in the Master Circular and SEBI's FAQs: while your total stays below ₹10 lakh, you may redeem only the entire remaining investment from that SIF. Partial redemptions resume only once the total is back at ₹10 lakh, through a recovery in values or a fresh purchase.

Can you invest in a SIF through a SIP, STP or SWP

Fund houses may offer a SIP, a systematic transfer plan (STP) and a systematic withdrawal plan (SWP) in SIF strategies, subject to the threshold. Each strategy's Investment Strategy Information Document (ISID) lists the facilities, frequencies and amounts.

SIP: on top of ₹10 lakh, not a route to it

Because a SIF cannot accept a first investment below ₹10 lakh, a monthly SIP cannot build up to the threshold from zero. In the ISIDs we reviewed, SIP and additional purchase amounts (₹1,000 or ₹10,000 upwards) apply to investors who already meet the ₹10 lakh aggregate, so in practice a SIP adds to an existing SIF holding rather than serving as the entry route. Our guide on how to invest in a SIF step by step covers the application itself.

SWP and STP

Each SWP instalment is a redemption you initiated, so it is tested like any other. If your total is ₹10.6 lakh, an SWP has ₹60,000 of headroom before an instalment would cross the line, less any fall in values in the meantime. An STP between two strategies of the same SIF leaves the total unchanged apart from any exit load, while any leg that takes money out of the SIF is tested like a redemption.

Switching between strategies

A switch within the same SIF is a redemption from one strategy and a purchase into another, so your aggregate changes only by any exit load deducted on the switch-out, which matters if you sit close to ₹10 lakh. A switch is also a redemption for tax, so a capital gain can arise on the units switched out.

Who is exempt from the SIF minimum investment

The threshold does not apply to an accredited investor. The 2026 regulations borrow the definition from the SEBI (Alternative Investment Funds) Regulations, 2012: a person holding a certificate of accreditation from an accreditation agency, which is a subsidiary of a stock exchange or a depository. For an individual, Hindu undivided family, family trust or sole proprietorship, the criteria are:

• annual income of at least ₹2 crore; or
• net worth of at least ₹7.5 crore, with at least ₹3.75 crore in financial assets; or
• annual income of at least ₹1 crore and net worth of at least ₹5 crore, with at least ₹2.5 crore in financial assets.

A body corporate needs a net worth of at least ₹50 crore. SEBI sets no floor for accredited investors, but fund houses can set their own: several ISIDs put it at ₹1 lakh. We cover the certificate in accredited investors and lower minimums across AIF, PMS and SIF.

One other exemption is narrow. SEBI's circular of 9 April 2025 excludes mandatory investments that fund houses make for designated employees under SEBI's skin-in-the-game rules.

Can NRIs invest in a SIF

Yes. NRIs, PIOs and OCIs can invest in SIFs on a repatriation or non-repatriation basis, as they can in mutual funds, and the same ₹10 lakh aggregate applies at PAN level. SEBI's FAQs confirm that the KYC, PAN, bank validation, nomination and FATCA/CRS rules for mutual fund investors also apply. Each ISID lists who may not invest: some exclude residents of Canada and accept US persons only on restricted terms, such as transacting in physical form while present in India.

Worked example: three strategies, one SIF

Take a hypothetical resident investor, Meera, investing in one SIF. The numbers below are chosen only to show the arithmetic; they are not a projection.

Day one. On the same day, before the cut-off, she invests ₹4 lakh in its equity long-short strategy, ₹3.5 lakh in sector rotation long-short and ₹2.5 lakh in equity ex-top 100 long-short. No single strategy holds ₹10 lakh, but her aggregate is exactly ₹10 lakh, so all three are accepted. Had the ₹2.5 lakh payment failed, the other two could have been rejected as well.

Scenario one: values rise. Later her three holdings are worth ₹4.4 lakh, ₹3.6 lakh and ₹2.6 lakh, a total of ₹10.6 lakh. She can redeem up to ₹60,000 across the three, on the dealing days each strategy's ISID sets. Not every strategy deals daily: a hybrid long-short strategy, for example, is an interval strategy that redeems at most twice a week and may set a notice period of up to 15 working days. A request for ₹1 lakh would leave ₹9.6 lakh, an active breach. In statement of account mode it may be rejected, and if it goes through, all her units in the SIF are frozen for debit and she has 30 calendar days to add at least ₹40,000, more if values slip meanwhile. Otherwise every frozen unit is redeemed.

Scenario two: values fall. Instead, her holdings are worth ₹3.7 lakh, ₹3.4 lakh and ₹2.2 lakh, a total of ₹9.3 lakh. This is a passive breach: nothing is frozen and she need not top up. But she cannot take out, say, ₹50,000: her choices are to hold, to exit all three strategies fully, or to add money and restore the ₹10 lakh total, after which partial redemptions down to ₹10 lakh are possible again.

A switch. Moving ₹1 lakh from the equity long-short to the sector rotation long-short strategy keeps her money inside the SIF, though it is a taxable redemption and any exit load comes off the amount moved, so her total falls by the amount of the load.

Why did SEBI set the SIF minimum at ₹10 lakh

SEBI regulates products on a sliding scale: the larger the minimum ticket and the more sophisticated the target investor, the more freedom a product has in what it invests in and how. Mutual funds have no regulatory floor; portfolio management services (PMS) need ₹50 lakh under the SEBI (Portfolio Managers) Regulations, 2020; an alternative investment fund (AIF) needs ₹1 crore under the SEBI (Alternative Investment Funds) Regulations, 2012.

SEBI's consultation paper of 16 July 2024 explained the SIF figure. It said a SIF would get relaxations a mutual fund does not, such as using derivatives for purposes other than hedging, and that a higher minimum investment would contain the risk of these relaxations by keeping retail investors out; the minimum does not make a SIF strategy itself any less risky. The final framework, set by SEBI's circular of 27 February 2025, caps unhedged short exposure through derivatives at 25% of net assets.

The paper also aimed to attract investors with ₹10 lakh to ₹50 lakh who, it said, were being drawn to unregistered portfolio management providers promising unrealistically high returns.

How Sanriya helps with SIF investments

Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359) and an APMI-registered PMS distributor (APRN01056). For SIFs, we explain how the ₹10 lakh aggregate works on your PAN and folios, go through the ISID's minimums and transaction rules with you, handle the application, SIP, SWP and switch paperwork, and check your SIF total before a redemption request goes in. We distribute under the Regular plan and receive commission from the fund house; you pay us no separate fee. Whether to invest, and how much, stays your decision. Contact us to talk it through.

What is the SIF risk band

SEBI requires the risk of every SIF investment strategy to be shown on a pictorial meter called the risk band. The rule was first set by its circular of 27 February 2025, in force from 1 April 2025, and now sits in paragraph 21.12 of the Master Circular for Mutual Funds of 20 March 2026. The band has five levels: level 1 is the lowest risk and level 5 the highest. The wider SIF framework is part of the SEBI (Mutual Funds) Regulations, 2026, in force from 1 April 2026.

What each risk level signals

SEBI defines only the two ends of the scale. Fund documents describe the range as running from low to very high.

Read the band as a comparison between SIF strategies, not as an absolute measure of risk. A level 1 strategy can still lose capital and still carries derivative and liquidity risk. The band also reflects the portfolio at the last month end; it is not a forecast.

Strategies of the same type, run by different fund houses, can sit far apart. In early October 2026, most live equity long-short strategies were at level 5 and the rest at level 3, while hybrid long-short strategies ranged from level 1, where most sat, to level 5. Check the band of the specific strategy, not the category.

How the band is set and reviewed

The fund house assigns a level at the new fund offer, based on the strategy's characteristics or a model portfolio. ISIDs point out that this first label can change once real money is invested.

After launch, the band is evaluated every month on the actual portfolio, using standards AMFI issued in consultation with SEBI. It is published on the fund house's SIF website and on AMFI's website within 10 days of each month end. A change must be announced through a notice cum addendum and an email or SMS to that strategy's unitholders. Once a year, each SIF also discloses the level as on 31 March and the number of times it changed during the year.

Changes can be sharp. In May 2026, one fund house moved a hybrid long-short strategy from level 3 straight to level 5 after evaluating its April portfolio. The benchmark's band can change too.

Where the risk band is displayed

You will find it in the product label on the front page of the ISID, the Key Information Memorandum (KIM) and the application form, printed beside the risk band of the strategy's benchmark. It also appears beside published performance figures, and AMFI's risk-o-meter page carries the monthly SIF disclosures.

SIF risk band versus the mutual fund riskometer

Mutual fund schemes use the riskometer (SEBI spells it risk-o-meter) set by SEBI's circular of 5 October 2020. It has six levels, from Low to Very High, and scores equity holdings on market capitalisation, volatility and impact cost, and debt holdings on credit, interest-rate and liquidity risk. The review cycle matches the SIF band: monthly, disclosed within 10 days, with changes notified by addendum.

The SIF risk band is a separate five-level scale for strategies that can short, use derivatives and concentrate in sectors. Level 3 on a SIF does not mean "Moderate" on a mutual fund, and a SIF at level 1 is not the same as a low-risk mutual fund. Compare a SIF's band with other SIF strategies and with the benchmark band printed next to it.

The ISID: what SEBI requires it to disclose

The ISID is the SIF's equivalent of a mutual fund's scheme information document. You read it with the KIM and the Statement of Additional Information (SAI), and all three must be publicly available on the SIF's website and AMFI's website.

SEBI's rules, carried over from the February 2025 circular into paragraph 21.11 of the Master Circular for Mutual Funds of 20 March 2026, list what the offer documents must disclose: subscription and redemption frequency; any notice period; how often the portfolio is disclosed; a scenario analysis for derivative positions; derivative use, including the maximum limit on exposure taken for purposes other than hedging and rebalancing; and liquidity risk management tools with their applicability. Beyond these, the ISID carries the risk factors, asset allocation, investment restrictions, benchmark, expenses and exit load. Where a document says a notice period or liquidity tool is "not applicable", that is a disclosure in itself.

Scenario analysis

SEBI requires the ISID to include a scenario analysis showing the expected loss to an investor from market movements, in a model format prescribed by AMFI. In the ISIDs we have read, it takes a hypothetical ₹10 crore portfolio and shows the gain or loss if the market rises or falls 10%, first with no unhedged shorts and then with short positions in particular sectors.

The lesson is in the comparison. A short in a sector that falls adds to returns; a short in a sector that rises eats into them. The tables are illustrations, not projections of what the strategy will earn.

Derivatives risk disclosures

The ISID explains how derivative exposure is counted, following SEBI's method: futures at price, options bought at the premium paid and options sold at the market price of the underlying, in each case multiplied by lot size and number of contracts. Total gross exposure across cash securities, derivatives, REITs, InvITs and other permitted assets cannot exceed 100% of net assets, so shorts cannot lever the portfolio beyond that.

How short selling changes SIF risk

Under SEBI's SIF rules, a strategy may take unhedged short exposure through exchange-traded derivatives of up to 25% of net assets, in addition to derivatives used for hedging and rebalancing. A mutual fund scheme cannot. A short gains when the shorted stock or sector falls, which can cushion losses on the fund's long holdings, but it brings risks of its own:

• A short loses money when the price rises, and there is no ceiling on how far a price can rise.
• The long and short sides can lose together, for example when the stocks held fall and the stocks shorted rise.
• Derivatives bring basis risk (the future and the underlying moving differently) and counterparty risk, which SEBI's investor FAQs list among the key SIF risks alongside short-position risk. They also need margin to be posted as prices move.

Concentration limits apply on both sides. SEBI caps a strategy's investment in the equity of any one company at 10% of NAV, and its worked example applies the same 10% limit to an unhedged short in a single stock, within the 25% overall cap. The sector rotation strategy keeps at least 80% in equity of at most four sectors, and when it shorts a sector it must short every stock of that sector it holds; the sectoral debt strategy follows the same rule for bonds.

In debt, a strategy may hold up to 20% of NAV in one AAA-rated issuer, 16% in an AA issuer and 12% in an issuer rated A or below (each extendable by up to 5% with trustee and AMC board approval), and up to 25% in one sector.

The plain conclusion: a long-short SIF is not a lower-risk mutual fund. Shorting changes the shape of the risk; it does not remove it.

SIF liquidity: redemption frequency and notice periods

SEBI sets the most frequent redemption each strategy group may offer:

A fund house may choose a less frequent cycle, such as fortnightly or monthly, and subscription and redemption frequencies can differ. Any strategy that does not offer both daily subscription and daily redemption is classed as an interval strategy, and units of interval and close-ended strategies must be listed on a stock exchange to give an exit route. An exchange price can differ from NAV and depends on a buyer being available.

SIF notice period

A fund house may also set a redemption notice period of up to 15 working days, based on the strategy's structure and liquidity risk. You then receive the NAV at the end of the notice period, and SEBI's FAQs say requests made outside the stated window may be rejected. There is no uniform lock-in; any lock-in and exit load are in the ISID.

The ₹10 lakh minimum, which applies per investor (PAN) in aggregate across all strategies of one SIF, with accredited investors exempt, affects liquidity as well. If a fall in NAV takes your holding below ₹10 lakh, you may keep it, but you can only redeem all of it, not part. If your own redemption, sale or transfer takes it below ₹10 lakh, your units across that SIF are frozen and you get 30 calendar days to restore the balance before they are automatically redeemed. For units held in statement-of-account form, a redemption request that would cause this may simply be rejected.

NAV is published daily, but the full portfolio, including derivative positions, only as at the end of every alternate month (May, July, September, November, January and March), within 10 days. Between those dates, the monthly risk band is the most frequent public signal of a change in the portfolio's risk.

Where to find a SIF's ISID and risk band disclosures

SEBI requires a SIF to have an identity distinct from its fund house's mutual fund: its own brand name and logo, and a separate website or a dedicated webpage. In practice, the ISID, KIM, monthly risk bands and portfolio files sit on the SIF's own website or SIF section, and on AMFI's website.

Every SIF advertisement must carry SEBI's fixed warning that SIF investments involve relatively higher risk, including potential loss of capital, liquidity risk and market volatility. SIF holdings are also kept separately from your mutual fund schemes, though both appear in your Consolidated Account Statement.

Who a SIF is meant for: SEBI's description

SEBI's investor FAQs, issued on 22 September 2026, describe a SIF as potentially suitable for relatively informed investors who understand market, liquidity and derivative risks, can tolerate a loss of capital and are comfortable with the redemption terms. The ₹10 lakh minimum filters by amount, not by understanding.

Before investing, ask yourself whether you could wait through a notice period or a twice-weekly window, whether you would hold a level 5 strategy through a poor year, and whether you understand how the strategy can lose money on its shorts. To see how the seven strategies differ, read SIF strategies explained.

A checklist for reading SIF disclosures

1. Risk band: the current level, the benchmark's level, and the 31 March history with the number of changes.
2. Structure: open-ended or interval, redemption days and cut-off time.
3. Notice period: its length and the window in which requests are accepted.
4. Derivatives: the short exposure limit and the maximum non-hedging exposure in the asset allocation.
5. Scenario analysis: how the illustrative portfolio behaves when a short goes the wrong way.
6. Risk factors and limits: concentration, single-stock and sector rules, and credit limits for debt.
7. Liquidity tools: which apply and when.
8. Costs: expense ratio and exit load.
9. Portfolio: the latest alternate-month portfolio file and its date.

For the application itself, see how to invest in a SIF step by step.

How Sanriya helps with SIFs

Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359). We distribute SIFs under the Regular plan: we explain the ISID, the risk band and the liquidity terms, handle the KYC and application paperwork, and service the investment afterwards, including tracking risk band notices with you. We are paid commission by the fund house and do not charge you a separate fee. Our role is distribution; the decision to invest stays with you. See our SIF page or contact us to go through a strategy's documents together.

If you are new to the product, start with what a Specialized Investment Fund is.

Why SIF taxation follows mutual fund rules

SEBI introduced SIFs through its circular of 27 February 2025, effective 1 April 2025, as a framework inside the mutual fund regulations. It now sits in the SEBI (Mutual Funds) Regulations, 2026. Each SIF strategy is run by a SEBI-registered mutual fund, so for income tax its units are mutual fund units.

The mutual fund itself is exempt from income tax. Under the Income-tax Act, 1961 the exemption was section 10(23D); under the Income-tax Act, 2025 a SEBI-registered mutual fund is listed in Schedule VII, which lists persons exempt from tax.

Derivatives inside the fund are not your tax events

A SIF may hold unhedged short positions through derivatives of up to 25% of net assets, and it can also hedge and run arbitrage. None of these trades creates a tax bill for you. Gains, losses, dividends and interest inside the strategy stay in the NAV. You are taxed only on these events:

• a redemption of units, including each SWP instalment
• a switch to another strategy, including each STP instalment
• a sale or transfer of units, including a sale of listed units on a stock exchange
• an IDCW payout

How SIF capital gains are taxed: equity, debt and in between

SIF capital gains fall into three tax buckets, set by what the strategy actually holds over the year, not by its name.

Equity-oriented. At least 65% of the fund's total proceeds is invested in equity shares of domestic companies listed on a recognised stock exchange. The percentage is the annual average of the monthly averages of opening and closing figures, under section 198 of the Income-tax Act, 2025 (the successor to section 112A).

Debt-oriented, which the Act calls a specified mutual fund. More than 65% of total proceeds is invested in debt and money market instruments, measured on the annual average of daily closing figures. This debt test replaced the older "not more than 35% in equity" test from FY 2025-26, through the Finance (No. 2) Act, 2024. Units bought on or after 1 April 2023 are always short term, and since SIFs exist only from 1 April 2025, that covers every debt-oriented SIF unit.

In between. A strategy that meets neither test. Its gains are short term if the units are held up to 24 months and long term after that, or after 12 months if the units are listed on a stock exchange. This matters for SIFs: SEBI requires the units of every close-ended and interval strategy to be listed, and treats any strategy whose subscription or redemption is not daily as an interval strategy.

The equity rates apply where the transfer carries securities transaction tax; a redemption of equity-oriented units attracts STT of 0.001%. The ₹1.25 lakh exemption is a single yearly allowance across all your long-term gains on listed shares and equity-oriented fund units, not one per scheme. If those gains total ₹1.5 lakh in FY 2026-27, ₹25,000 is taxed at 12.5%, which is ₹3,125 before surcharge and cess.

Surcharge and cess

A 4% health and education cess applies on top of every rate. Surcharge starts once income passes ₹50 lakh. On equity-oriented gains and on long-term gains, surcharge is capped at 15%. Slab-rate income, which includes debt-oriented SIF gains, short-term gains in the in-between bucket and IDCW, can attract surcharge of up to 25% under the new regime and 37% under the old one.

SIF tax by strategy: equity, debt and hybrid long-short

SEBI permits seven SIF strategies in three groups. The group name is a starting point; the tax bucket is decided by the portfolio.

Equity long-short, ex-top-100 and sector rotation

Equity long-short and sector rotation long-short must keep at least 80% in equity and equity-related instruments, and equity ex-top-100 long-short at least 65% in stocks outside the 100 largest. Such strategies are generally treated as equity-oriented, and the short book inside the fund does not change your rate. Check the Investment Strategy Information Document (ISID), though: "equity-related instruments" is wider than the listed domestic equity shares the tax test counts.

Debt long-short and sectoral debt long-short

These strategies invest mainly in debt, so they would be specified mutual funds, with every gain taxed at your slab rate. As of October 2026, no debt long-short or sectoral debt long-short strategy had launched, though at least one had been filed with SEBI in draft.

Hybrid long-short: the case that needs a close reading

The hybrid long-short strategy must hold at least 25% in equity and at least 25% in debt, with unhedged shorts of up to 25% of net assets. SEBI classes it as an interval strategy, with set redemption windows rather than daily dealing, so its units are listed. Within those limits it can land in any bucket:

• Equity-oriented. Some hybrid long-short strategies set an equity range of 65% to 75%, part or all of which may be hedged through arbitrage, with 25% to 35% in debt and money market instruments, and state that they aim for equity taxation.
• In between. Others describe a market-neutral design with at least 35% in hedged arbitrage and up to 65% in debt and money market instruments. While equity stays below 65% and debt does not exceed 65%, that meets neither test: slab rate within 12 months, 12.5% after 12 months because the units are listed.
• Debt-oriented. A strategy that averaged more than 65% in debt and money market instruments over the year would be a specified mutual fund, taxed at your slab rate however long you hold it.

Because the tests use annual averages, a strategy near a threshold can change bucket between years, so check the ISID's asset allocation and the fund house's tax reckoner each year.

Active asset allocator long-short

This strategy has no fixed floor and can move across equity, debt, REITs, InvITs and commodity derivatives. It is also an interval strategy with listed units, and its bucket follows its actual allocation each year.

SIF STP, SWP, SIP and switch tax

SEBI allows SIP, STP and SWP in SIF strategies as long as your total across the SIF's strategies stays at ₹10 lakh or more.

SIP instalments and FIFO

Each SIP instalment is a separate purchase with its own date and NAV, and units are redeemed first in, first out (FIFO). Suppose you invested a lump sum in an equity-oriented strategy in October 2025 and added SIP instalments from June 2026. A redemption in December 2026 uses the October 2025 units first, which are long term, and reaches the 2026 instalments, which are short term, only after those run out. You cannot pick which lots to redeem.

STP and SWP

Each STP instalment is a redemption from the source scheme, taxed on the gain in the units redeemed, followed by a fresh purchase in the target. An SWP works the same way: each withdrawal redeems units, and only the gain in those units is taxed, not the whole amount. FIFO applies to both, so a long-running SWP draws on the oldest units first. Resident investors generally face no TDS on these redemptions; you pay the tax through advance tax and your return.

Switching between strategies

A switch from one strategy to another, even within the same SIF, is a redemption from the first and a purchase in the second. Tax is due on the gain in the units switched out, the holding period restarts in the new strategy, and an exit load may apply. A switch from an equity long-short to a hybrid long-short strategy, for example, can turn units held for more than a year into a fresh short-term holding.

IDCW: how SIF payouts are taxed

Under the income distribution cum capital withdrawal (IDCW) option, each payout is income in your hands, taxed at your slab rate in the year you receive it, whatever bucket the strategy is in. For residents the fund house deducts 10% TDS under section 393 of the Income-tax Act, 2025 (formerly section 194K) once payouts from that mutual fund exceed ₹10,000 in a financial year. For NRIs the deduction is 20% plus surcharge and cess. Under the growth option, nothing is taxed until you redeem.

NRIs: TDS on SIF redemptions

NRIs are taxed under the same rules, but the fund house deducts tax at source on every redemption, switch and SWP instalment before the money reaches them. For FY 2026-27 the rates, before surcharge and the 4% cess, are 20% on short-term and 12.5% on long-term gains for equity-oriented strategies, 30% on short-term and 12.5% on long-term gains for in-between strategies, and 30% on all gains for debt-oriented ones.

A lower treaty rate needs a tax residency certificate and Form 41, the self-declaration that replaced Form 10F from 1 April 2026. Without a PAN, section 397 can raise the deduction to the higher of the normal rate and 20%. Fund houses differ on whether a treaty rate can reduce the deduction on IDCW, so check with yours.

SIF vs PMS tax, and AIF Category III

The equity rates are the same; where and when the tax is triggered is what differs.

• PMS. Securities sit in your own demat account, so every sale the portfolio manager makes is your taxable transaction, at 20% or 12.5% for listed shares depending on each holding's period, and dividends are taxed in your hands. High turnover means tax every year, even if you withdraw nothing. See how PMS gains are taxed.
• SIF. The manager's buying, selling and shorting happen inside the fund, and you pay only when you redeem, switch or receive IDCW. The structural difference is deferral, not a lower rate.
• AIF Category III. It does not get pass-through status, so tax is generally paid at the fund level, where the maximum marginal rate can mean about 42.744% including surcharge and cess, and you receive returns after that tax.

Each structure also differs in minimum (₹10 lakh for a SIF, ₹50 lakh for a PMS, ₹1 crore for an AIF), costs, liquidity and risk, so tax is one factor among several. Our comparison of SIF vs PMS vs AIF covers the rest.

What to check before you redeem SIF units

• which bucket the strategy fell into for the year, from the ISID and the fund house's tax reckoner
• the holding period of each lot, from your capital gains statement
• whether a redemption, switch or SWP would take your SIF total below ₹10 lakh
• for NRIs, your residency status and treaty documents

Rates can change with each Finance Act and your position depends on your income and residency, so confirm the treatment with a chartered accountant before you act.

How Sanriya helps with SIF investments

Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359). We distribute SIF strategies under the Regular plan and receive commission from the fund house; we do not charge you a separate fee. We explain how each strategy is built and taxed, share the ISID and tax reckoner, handle the paperwork for applications, SIPs, STPs, SWPs and switches, and help you obtain capital gains statements for your chartered accountant. The investment decision stays with you. See our SIF page or contact us to talk it through.

New to SIFs? Start with what a Specialized Investment Fund is and how it works.

SIF vs PMS vs AIF at a glance

Minimum ticket: SIF ₹10 lakh vs PMS ₹50 lakh vs AIF ₹1 crore

SIF. SEBI's SIF rules, introduced by its circular of 27 February 2025 and now carried under the SEBI (Mutual Funds) Regulations, 2026, require at least ₹10 lakh per investor, counted at PAN level across all strategies of one SIF. Your ordinary mutual fund holdings with the same fund house do not count. SIP, STP and SWP are allowed while the total stays at or above ₹10 lakh. If a market fall alone takes you below it, that is not a breach, but you may then only redeem the whole remaining amount.

PMS. The SEBI (Portfolio Managers) Regulations, 2020 bar a manager from accepting less than ₹50 lakh in funds, securities or both from a client.

AIF. The SEBI (Alternative Investment Funds) Regulations, 2012 set ₹1 crore per investor, or ₹25 lakh for employees and directors of the fund or its manager.

Until 31 March 2027, then, a SIF is the only one of the three open to most investors below ₹50 lakh, which is why it is often weighed as an alternative to PMS.

Accredited investors

All three rulebooks waive the minimum for an accredited investor; for a PMS, subject to disclosures and agreed terms. An individual qualifies through a certificate from an accreditation agency, for example with annual income of ₹2 crore or more, or net worth of ₹7.5 crore or more with at least ₹3.75 crore in financial assets.

Structure: pooled units, your own securities or a private pool

A SIF is run by a mutual fund house under a separate brand. You hold units bought and redeemed at NAV, not the shares behind them.

A PMS builds a separate portfolio for you. The securities sit in a demat account in your name, never the manager's. A discretionary manager decides what to buy and sell; a non-discretionary manager acts on your directions, so you approve each trade.

An AIF is a privately pooled vehicle, set up as a trust, company or LLP, that issues you units. In Category I and II funds you usually commit a sum that the manager draws in instalments as it finds investments.

What each may do: shorts, derivatives and leverage

SIF. A strategy may take unhedged short exposure through exchange-traded derivatives of up to 25% of net assets. Gross exposure may not exceed 100% of net assets, so a SIF cannot use leverage to magnify its bets. SEBI permits seven strategies; on 9 October 2026, all 34 live SIF strategies were equity or hybrid.

PMS. A manager may use exchange-traded derivatives on terms in your agreement, but your derivative exposure may not exceed the money you placed, and the manager may not borrow on your behalf. In practice, PMS strategies are typically long-only portfolios of listed shares.

AIF. A Category III fund may use leverage, including through derivatives, of up to 2 times NAV after offsetting hedges, a limit set by SEBI's circular of 29 July 2013. Category I and II funds may not borrow except for temporary funding needs.

Our comparison of Category III long-short AIFs, SIFs and PMS goes deeper.

SIF liquidity vs AIF and PMS: how you get out

SIF. SEBI's SIF framework sets redemption at daily for equity strategies, twice a week for hybrid and once a week for debt, or less often if the fund house so decides; each strategy's documents set its actual frequency. Hybrid and debt strategies are interval structures with exchange-listed units. A notice period of up to 15 working days is allowed. SEBI sets no lock-in period, but the redemption frequency, notice period and any exit load in the strategy's documents decide how quickly you can get out.

PMS. You can withdraw part or all of your portfolio. SEBI caps the exit load at 3% of the amount redeemed in the first year, 2% in the second and 1% in the third, and nil after that.

AIF. Category I and II funds are close-ended with a minimum tenure of three years, extendable by up to two years with two-thirds approval of unit holders by value. Close-ended units may be listed, but only in lots of at least ₹1 crore, so leaving early is rarely simple. Category III funds may be open-ended or close-ended; an open-ended one redeems at the intervals its placement memorandum sets.

How are SIF, PMS and AIF taxed in FY 2026-27?

The Income-tax Act, 2025 has applied since 1 April 2026. The rates below are for FY 2026-27, with surcharge and 4% cess on top.

SIF: taxed like mutual fund units

Trades inside the fund are not your taxable events; you pay when you redeem, switch or transfer units. For an equity-oriented strategy (at least 65% in listed domestic equity), gains within 12 months are taxed at 20%, and longer-held gains at 12.5% on the amount above ₹1.25 lakh a year. A debt-oriented strategy (more than 65% in debt and money market instruments) is taxed at your slab rate however long you hold. See SIF taxation for equity, debt and hybrid strategies for the cases in between.

PMS: taxed on every sale

Every sale the manager makes in your demat account is your capital gain, at the same listed-equity rates of 20% and 12.5%; dividends are taxed at your slab rate. A high-turnover strategy can create a tax bill in a year you withdraw nothing.

AIF: pass-through or fund level

Category I and II funds are pass-through: income other than business income is taxed in your hands with its original character, under the pass-through rules for investment funds (Section 115UB of the 1961 Act, carried into the Income-tax Act, 2025), in the year the fund earns it, even if nothing is paid out. The fund deducts 10% TDS on income distributed to resident investors (Section 194LBB of the 1961 Act, now Section 393). Category III funds are taxed at the fund level, at rates that depend on the type of income, such as capital gains or business income, and on how the fund is set up, and you receive returns after that tax.

Confirm your own position with a chartered accountant.

How often do SIF, PMS and AIF report to you?

SIF. A NAV every business day; the full portfolio, derivatives included, every alternate month, within 10 days; a five-level risk band reviewed monthly; and an Investment Strategy Information Document (ISID) with a scenario analysis of possible losses.

PMS. The most direct view, because every holding sits in your own demat account. The regulations require a full report at least every three months, and SEBI's master circular a statement of your funds account at least monthly. Performance is reported against a benchmark chosen from those APMI prescribes under SEBI's circular of 16 December 2022.

AIF. Fund-level reporting under the private placement memorandum. A Category III fund discloses NAV at least monthly if open-ended or quarterly if close-ended, and reports to investors quarterly. Category I and II funds are valued independently at least every six months and report at least annually.

Who regulates SIF, PMS and AIF?

SEBI regulates all three under the rulebooks named above. The SIF framework, introduced by its circular of 27 February 2025 and effective 1 April 2025, has sat in the SEBI (Mutual Funds) Regulations, 2026 since 1 April 2026. In October 2026 SEBI notified the SEBI (Portfolio Managers) Regulations, 2026, effective 1 April 2027, which keep the ₹50 lakh minimum and add PRIM, a PMS route investing only in direct plans of mutual funds, including SIFs, from ₹25 lakh. The AIF regulations were last amended on 14 July 2026.

Check any manager's registration on SEBI's website; APMI also publishes portfolio manager data.

What do SIF, PMS and AIF cost?

SIF. One total expense ratio is taken out of the NAV, as with a mutual fund, in Direct and Regular plans.

PMS. The fee can be fixed, performance-linked or a mix, with no upfront fee allowed. A performance fee applies above a hurdle rate and only on gains above the previous high-water mark, charged no more often than quarterly. Other operating expenses, excluding brokerage, are capped at 0.50% a year of average daily assets, and 18% GST applies to the fees.

AIF. A management fee and, in many funds, carried interest above a hurdle, set out in the placement memorandum, with 18% GST on management fees.

SIF, PMS or AIF: how do you tell which fits?

None of the three is better in general; each fits a different job, and the choice stays with you.

• A SIF can fit someone with at least ₹10 lakh who wants a pooled strategy that may short within limits, is comfortable with the strategy's redemption schedule and with tax only on redemption, and accepts that a long-short strategy can lose money, including on its short positions.
• A PMS can fit someone with ₹50 lakh or more who wants to own and see each stock, and accepts tax on every sale and fees that carry 18% GST.
• An AIF can fit someone with ₹1 crore or more who wants private equity, private credit or real estate through Category I or II and can leave money untouched for years, or a leveraged long-short strategy through Category III.

Not rungs on a ladder

SEBI's own SIF circular describes the rulebooks as progressively more flexible from mutual funds to PMS to AIFs. That describes regulation, not a path you must climb: an investor may hold mutual funds and a SIF and never need the others. What matters is each rupee's job, how soon you may need it and how much strategy risk you will carry. Shorting does not remove risk from a SIF; it changes its shape.

How Sanriya works with SIF investors

Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359) and an APMI-registered PMS distributor (APRN01056). For a SIF we explain how the strategy, its redemption frequency and its risk band work, handle the KYC and application paperwork, and service the investment afterwards, including SIPs, switches and redemptions. The decision stays with you. We distribute under the Regular plan and are paid commission by the fund house, so you pay us no separate fee. To see how a SIF works and what the paperwork involves, read our SIF page or contact us.

AIF meaning: how SEBI defines it

The 2012 regulations, as amended up to 14 July 2026, define an AIF as a fund established or incorporated in India as a trust, a company, a limited liability partnership (LLP) or a body corporate that:

• pools money from investors, Indian or foreign, to invest under a defined investment policy for their benefit; and
• is not already covered by SEBI's mutual fund or collective investment scheme regulations, or any other SEBI regulation for fund management.

An AIF must hold a SEBI certificate of registration, may raise money only by private placement, and its founding document must bar public invitations to subscribe.

What is not an AIF

The definition excludes:

• mutual funds and collective investment schemes;
• family trusts set up for relatives, ESOP trusts, and employee welfare or gratuity trusts;
• holding companies, and special purpose vehicles not set up by fund managers, such as securitisation trusts;
• funds managed by asset reconstruction or securitisation companies registered with the RBI;
• any pool directly regulated by another Indian regulator.

A PMS is not an AIF either, because it is not pooled: under the SEBI (Portfolio Managers) Regulations, 2020, each client's securities sit in their own demat account.

How an AIF is structured: sponsor, manager and trustee

In practice most AIFs are trusts, and each trust deed must be registered under the Registration Act, 1908. Three parties matter:

• Sponsor: the person or persons who set up the AIF; the promoter for a company, the designated partner for an LLP.
• Manager: the entity appointed to manage the investments; it may be the same as the sponsor.
• Trustee: in a trust-form AIF, the trustee holds the fund for investors and approves, jointly with the manager, the policies that keep decisions within the regulations and the placement memorandum. In an Accredited Investors only fund, the manager carries out the trustee's duties.

The sponsor or manager must keep its own money in the fund: under regulation 10(d), at least 2.5% of the corpus or ₹5 crore, whichever is lower, and for Category III at least 5% or ₹10 crore, whichever is lower; this stake cannot be met by waiving management fees. The sponsor and manager act in a fiduciary capacity and must disclose conflicts of interest, and a SEBI-registered custodian must be appointed before the first investment. SEBI also bars the AIF, manager, trustee and sponsor from promising returns to investors.

What is a private placement memorandum (PPM)

The private placement memorandum is the AIF's offer document. It must cover the manager and key investment team, target investors, all fees and expenses, tenure, redemption conditions, strategy, risk management, conflicts of interest, disciplinary history and how the fund will be wound up. It must also show a worked example of fees and the distribution waterfall.

Except for Accredited Investors only funds and angel funds, the PPM is filed with SEBI through a SEBI-registered merchant banker at least 10 working days before launch (regulation 12(2), cut from 30 days by the Second Amendment Regulations, 2026, effective 14 July 2026). SEBI does not approve the PPM, and every PPM must say so. The manager must give you the PPM before you commit and take your acknowledgement, and the contribution agreement you sign cannot go beyond its terms.

AIF units, classes and your rights

You hold units, which represent your beneficial interest in the fund or scheme and must be issued in dematerialised form. A partly paid unit represents the share of your commitment already invested.

Every investor's rights in each investment and its proceeds are pro rata to their commitment, except where an investor was excused or excluded from a deal, defaulted on a drawdown, or shares profit with the manager as carried interest. Junior classes of units, which take lower returns or bear losses first, can be held only by the manager or sponsor, development finance institutions, State Industrial Development Corporations and government-owned entities. Other investors may receive differential rights only if they do not hurt other investors and are disclosed in the PPM.

Who can invest in an AIF: the ₹1 crore minimum and limits

SEBI's rules set these entry limits:

• ₹1 crore minimum per investor.
• ₹25 lakh for employees or directors of the AIF or its manager.
• Accredited investors are exempt from the ₹1 crore minimum. An individual qualifies through income or net worth tests, such as annual income of at least ₹2 crore, or net worth of at least ₹7.5 crore with ₹3.75 crore in financial assets. See accredited investors and lower minimums.
• Joint investment: you and your spouse, parent or child may invest jointly, at most two people, against a single ₹1 crore.
• Angel funds: since the September 2025 amendment they raise money only from accredited investors and the key personnel of the fund or its manager, with no minimum ticket; older angel funds have until 31 March 2027 to complete the switch.
• Scheme size: each scheme needs a corpus of at least ₹20 crore and may have at most 1,000 investors; since 19 November 2025 accredited investors are not counted towards that cap.

A Special Situation Fund needs at least ₹10 crore from each investor (₹5 crore for accredited investors), and a Large Value Fund, open only to accredited investors, needs at least ₹25 crore from each investor (reduced from ₹70 crore in November 2025).

What are the three AIF categories

Every AIF falls into one of three categories:

• Category I invests in start-ups, early-stage and social ventures, SMEs, infrastructure and other areas the government treats as socially or economically desirable. Sub-categories are venture capital, SME, angel, social impact, infrastructure and special situation funds.
• Category II is everything not in I or III, such as private equity and debt funds. Category I and II may borrow only for temporary funding or day-to-day operational needs: up to 30 days, on no more than four occasions a year, and within 10% of investable funds (regulations 16 and 17).
• Category III uses diverse or complex trading strategies and may use leverage, including derivatives, up to two times NAV under SEBI's circular of 29 July 2013.

Category I and II have pass-through tax status: income from their investments is taxed in your hands, while any business income is taxed at the fund level. Category III is taxed at the fund level. The detail is in AIF Category I, II and III compared.

Close-ended versus open-ended AIFs

Category I and II AIFs must be close-ended. You commit at the start, and money comes back as the fund sells investments, not when you ask. Category III schemes may be open-ended or close-ended. In an open-ended Category III scheme, your first lump sum must meet the minimum, NAV is disclosed monthly, and you redeem only on the PPM's terms; a close-ended Category III scheme discloses NAV quarterly.

How AIF commitments and drawdowns work

When you sign the contribution agreement, you commit an amount, say ₹1 crore. The fund's corpus is the total of all such commitments. The manager does not take your money on day one; it issues drawdown notices, also called capital calls, as investments come up, and your units stay partly paid until the commitment is fully called.

Points to note, which our guide to investing in an AIF covers step by step:

• Before the first close you may withdraw or reduce your commitment; after it, the contribution agreement binds you.
• If you miss a drawdown, the PPM sets out the consequences; SEBI's filing checklist expects it to say that a defaulting investor cannot take part in later investments until the default is cured.
• You may be excused from a specific investment if joining it would breach a law or an internal policy you disclosed upfront.

In practice, the uncalled part of your commitment has to stay available at short notice.

How long an AIF lasts and how it winds up

Category I and II schemes need a minimum tenure of three years (regulation 13(2)), and since SEBI's circular of 17 November 2022 tenure runs from the date of first close, which must come within 12 months of the scheme becoming eligible to launch. Tenure can be extended by up to two years with approval of two-thirds of unit holders by value (regulation 13(5)); an Accredited Investors only fund can extend by up to five years.

When tenure ends, the scheme gets a liquidation period of one year to sell what remains, after which it is wound up.

What happens to unsold investments at the end of an AIF

Most distributions are cash from exits. If some investments are still unsold during the liquidation period, investors can approve one of two routes. The first is distribution in kind (in specie): you receive the securities themselves, with approval of at least 75% of investors by value (regulation 29). The second is a dissolution period: extra time to sell, with no management fee. Either way, the manager must seek a bid for at least 25% of the unsold investments' value, which investors who voted against can use to exit in full. If investors approve neither route, the unsold investments are distributed in kind compulsorily, and if you decline them they are written off. This is a real risk: you may end up holding unlisted shares you cannot easily sell.

SEBI's investor charter for AIFs

Since 1 January 2022 every new PPM must carry SEBI's investor charter for AIFs, and since 10 February 2025 AIFs must comply with it. The charter commits the AIF to:

• seek your consent for a change in sponsor, manager or their control, material PPM changes such as strategy, and winding up before tenure ends;
• value Category I and II portfolios at least every six months (yearly with 75% approval by value);
• disclose material risks, fees and conflicts of interest;
• respond to your complaints within 21 days, with SEBI's SCORES platform and mediation, conciliation or arbitration available beyond that.

In return, you are expected to read the PPM and contribution agreement, keep KYC current, honour the agreement and keep confidential fund information private.

AIF vs mutual fund

Who an AIF is designed for

The rules point to one kind of investor: someone who can commit a large sum they will not need for many years, answer capital calls on time, and live with infrequent valuations. Category I and II funds can put up to 25% of investable funds in a single company (regulation 15(1)(c)), and capital can be lost in part or in full. Risks the charter asks AIFs to disclose include concentration, foreign exchange, leverage, realisation and strategy risk. AIFs do not suit emergency money or investors who need regular access to their capital.

How Sanriya Finvest works with AIF investors

Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359) and an APMI-registered PMS distributor (APRN01056). On AIFs we explain the structure, PPM, drawdowns and exit, handle KYC, contribution agreement and capital-call paperwork, and service the investment through its life. Our role is distribution, and the decision stays with you. The commission we receive for distributing an AIF is disclosed to you at onboarding, as SEBI requires, and we do not charge you a separate fee. AIF schemes are also required to offer a Direct Plan, which carries no distribution fee. Contact us to go through an AIF's documents together.

What is PMS? The meaning under SEBI's rules

Under the 2020 regulations, a portfolio manager is a body corporate, such as a company or an LLP, that, under a contract with a client, manages or administers that client's portfolio of securities or funds, and it must be registered with SEBI. SEBI's public list of registered portfolio managers showed 538 entries on 12 October 2026, each with a registration number beginning "INP".

Two rules shape the product. A discretionary portfolio manager must manage each client's money individually, in a way that does not take on the character of a mutual fund. And SEBI's Master Circular for Portfolio Managers of 16 July 2025 bars managers from marketing their portfolios as "schemes". Instead, you choose an investment approach: a documented philosophy that states its objective, securities, benchmark, indicative horizon and risks.

SEBI notified the SEBI (Portfolio Managers) Regulations, 2026 on 7 October 2026, and they replace the 2020 rules from 1 April 2027. They keep the ₹50 lakh minimum, the custodian rule and reports at least every three months, and let managers buy shares in IPOs. Sanriya's PMS page summarises the product.

What is the minimum investment for a PMS in India

Regulation 23(2) says a portfolio manager may not accept funds or securities worth less than ₹50 lakh from a client. The master circular adds that the first lump sum, in cash or securities, must itself be at least ₹50 lakh, so you cannot start smaller and build up. SEBI doubled the figure from ₹25 lakh when it rewrote the rules in 2020.

SEBI's investor education site says the minimum targets high net worth investors. The logic is simple:

• A PMS portfolio is often concentrated, so one holding can move your result far more than in a broadly diversified fund.
• Fees are usually higher than in mutual funds, and you see every price swing in your own account.
• A separately managed account only works if there is enough money to buy each holding in its intended proportion.

Two exceptions matter for most investors, one today and one from 1 April 2027. Accredited investors, who meet SEBI's eligibility criteria and hold a certificate of accreditation, can invest below ₹50 lakh if the disclosure document and agreement allow it. And the 2026 regulations add a mutual-fund-only PMS route, which they call PRIM (Portfolio Management Service Route for Investment in Mutual Fund units), with a ₹25 lakh minimum; under it the manager may buy only direct plans of mutual funds, index funds, ETFs and Specialized Investment Funds.

How a PMS works: the accounts in your name

For the step-by-step process, see how to open a PMS account.

Your own demat account and the custodian

The securities sit in a demat account opened in your name. The regulations forbid the manager from holding clients' securities in its own name, and allow off-market transfers out of your account only in limited cases, such as settling your trades or with your consent for each transfer. Every portfolio manager, except one offering only the suggestion-only service described below, must appoint an independent custodian to hold the securities, and your demat account is mapped to it.

The agreement and power of attorney

Before money moves, you sign an agreement that sets the investment objective, the investment approach, any companies or industries you want excluded, fees, custody, reporting and how you can withdraw. You also sign a power of attorney so the manager can operate your account and place trades. Read its scope: it should cover trading within the mandate, not moving your cash or securities elsewhere. Under the new framework, SEBI's board said on 24 September 2026, a standard agreement will carry this authority for demat and trading accounts, with a power of attorney only for the bank account, as RBI requires.

The bank account

Cash is held at a scheduled commercial bank. Depending on the manager, it sits either in a bank account in your name operated under the power of attorney, or in a pooled client account kept by the manager. In the pooled model SEBI requires client-wise records, daily reconciliation, no use of one client's money for another, and a statement to you at least monthly.

Discretionary, non-discretionary and suggestion-only PMS

SEBI recognises three types:

• Discretionary PMS: the manager decides what to buy and sell, and when, within the agreed approach, and executes the trades.
• Non-discretionary PMS: the manager proposes trades and handles execution and record-keeping, but every decision is yours; nothing is bought or sold without your approval.
• Suggestion-only service: the manager only suggests what to buy or sell. You place and settle the trades yourself, and the manager takes no responsibility for execution, custody or accounting.

The type also changes what can be held. Under the 2020 rules a discretionary manager may invest only in listed or exchange-traded securities, money market instruments, mutual fund units and other securities SEBI specifies, while non-discretionary and suggestion-only arrangements may also put up to 25% of the client's assets in unlisted securities. Your account opening form must state which type you are opening and, for a discretionary account, what powers the manager can exercise.

How is your money invested in a PMS

You can fund a PMS with cash, with shares, bonds or fund units you already own, or both. If you transfer securities, the manager may sell those that do not fit the approach, and each sale is taxable in your hands.

From there:

• The manager buys for each client separately, or combines orders and allocates them pro rata at the day's weighted average price.
• Cash waiting to be invested may be parked in liquid mutual funds, and only through direct plans.
• Some managers stagger entry with a systematic transfer from a liquid holding into equity.
• The manager may not borrow money or securities on your behalf, or leverage your portfolio for derivatives.

Because clients join on different dates, your portfolio and returns can differ from another client's in the same approach.

How a PMS is reported to you

Regulation 31 requires a report at least once every three months, and whenever you ask. In practice most managers send a monthly statement and offer online access. It must show your holdings and their values, cash, every trade, dividends and interest, expenses, the risks the manager foresees, any default on debt holdings, or a downgrade of one to default rating, and the commission paid to a distributor for your account.

Performance reporting follows SEBI's circular of 16 December 2022. Each investment approach is tagged to one of four strategies (equity, debt, hybrid or multi asset), and the manager picks its benchmark from up to three that APMI prescribes for that strategy. Your report shows your own annualised return, allowing for the dates you added or took out money (XIRR); the lowest, highest and median XIRR across all clients in that approach; the approach's time-weighted return, which removes the effect of client cash flows; and the benchmark's return, all net of fees and expenses.

An independent chartered accountant audits the portfolio accounts every year and you receive the certificate; you may also appoint your own. Managers file monthly reports with APMI, which publishes comparable data on its website, so you can check a manager's figures there and its registration on SEBI's list.

What is the PMS disclosure document

The disclosure document is the manager's formal description of itself and its service. You must receive it, with a certificate in Form C, before you sign the agreement. It must cover:

• fees for each activity, and the range of fees under each head;
• risks, including those specific to each investment approach;
• related-party transactions, conflicts of interest and investments in associates;
• the manager's diversification policy;
• performance for the preceding three years, calculated on a time-weighted basis for discretionary portfolios;
• audited financial statements for the preceding three years;
• the option to sign up directly with the manager, without a distributor.

An independent chartered accountant certifies it, it is filed with SEBI and kept on the manager's website, and a material change must be filed within 7 working days. From 1 April 2027 it becomes digital, is refreshed within six months of each financial year end, and material changes go out as an addendum within 15 calendar days.

Read the fee section closely. Managers charge a fixed fee, a performance fee (usually above a hurdle rate and subject to a high-water mark) or both. No upfront fee is allowed and 18% GST applies. Operating expenses other than brokerage are capped at 0.50% a year of your average daily assets, and exit loads at 3% in the first year, 2% in the second and 1% in the third, with none after that. PMS fees and charges explained works through the numbers.

Who typically uses a PMS, and when it may not fit

A PMS tends to suit investors who:

• have investable wealth well above ₹50 lakh, so the PMS is one part of a wider portfolio;
• want to see and own each holding, and perhaps exclude particular companies or sectors;
• can stay invested three years or more and accept larger swings than in a diversified fund.

Individuals, companies and other entities, and non-residents can all open an account; SEBI counted 2.19 lakh PMS clients on 31 May 2026.

It is likely a poor fit if:

• ₹50 lakh is most of what you have, which ties your wealth to one manager's choices;
• you may need the money within three years, when exit loads can apply;
• you prefer to pay tax only when you exit, as with mutual funds and SIFs;
• low cost and simplicity matter more to you than a portfolio in your own name.

The main risks are the ones SEBI's investor site lists: market, concentration, liquidity and manager risk. A PMS can lose money, and an approach's past returns say nothing certain about its future.

PMS vs mutual fund vs SIF at a glance

Every sale the manager makes is your own transfer. For FY 2026-27, under the Income-tax Act, 2025, gains on listed shares held 12 months or less are taxed at 20%, and longer-held gains at 12.5% above ₹1.25 lakh a year, plus surcharge and 4% cess. In a mutual fund or SIF, trades inside the fund create no tax for you until you redeem. How PMS gains are taxed covers the detail.

How Sanriya helps with a PMS

Sanriya Finvest Pvt. Ltd., Pune, is an APMI-registered PMS distributor (APRN01056) and an AMFI-registered mutual fund distributor (ARN-193359). We explain how a PMS works and what each document says, handle the paperwork and service the account afterwards. The choice of manager and approach stays with you: as a distributor, we do not make investment decisions for clients. We do not charge you a separate fee; the portfolio manager pays us a trail commission out of its own fee, which must be disclosed to you, and you can always sign up with a manager directly. Contact us to go through a manager's disclosure document and the account-opening paperwork with you.

SIF meaning and the SEBI framework

SEBI amended the mutual fund regulations and issued a circular dated 27 February 2025, effective 1 April 2025, to close the flexibility gap between long-only mutual funds and PMS, which needs ₹50 lakh under the SEBI (PMS) Regulations, 2020.

An SIF works like a mutual fund scheme: pooled money, units at a daily NAV, run by a fund house under a separate brand. What changes is what the manager may do:

• Up to 25% of net assets in unhedged short exposure through exchange-traded derivatives; a mutual fund may only hedge.
• Gross exposure capped at 100% of net assets, so an SIF cannot lever up as some AIFs can.
• A ₹10 lakh minimum, aggregated across one SIF's strategies at the PAN level.

See Sanriya's SIF solutions page.

The seven SIF strategies SEBI allows

SEBI permits three groups and one scheme per strategy per fund house. These are SEBI's floors and caps; a scheme's Investment Strategy Information Document (ISID) can be tighter.

In October 2026, 34 SIF schemes were live in India, all equity or hybrid; no debt SIF had launched.

SIF minimum investment: how the ₹10 lakh rule works

The SEBI circular of 27 February 2025 requires at least ₹10 lakh per investor at the PAN level across all strategies of one SIF:

• It is a combined figure: ₹4 lakh in one strategy plus ₹6 lakh in a second one meets it.
• Regular mutual fund holdings with the same fund house do not count.
• SIP, STP and SWP are allowed as long as the aggregate stays at or above ₹10 lakh.
• SEBI-accredited investors are exempt.
• If a redemption or transfer takes you below ₹10 lakh, the fund house freezes your units and gives you 30 calendar days to restore the balance; if you do not, it redeems them at the next business day's NAV. A drop caused purely by market movement is not a breach.

Who can invest in an SIF

SEBI has not restricted SIFs to any investor category: any KYC-compliant investor who can meet the ₹10 lakh aggregate can invest, including resident individuals, NRIs, HUFs, trusts and companies. No demat account is needed and there is no lock-in, though each strategy sets its redemption frequency and exit load.

The higher bar is on the fund house: SEBI's track-record test (three years and ₹10,000 crore average assets) or its dedicated-team test.

SIF vs mutual fund

A mutual fund has no regulatory minimum, uses derivatives only for hedging and redeems daily if open-ended. An SIF needs ₹10 lakh, may run up to 25% unhedged shorts, redeems daily, twice a week or weekly by strategy, and shows a separate five-level risk band; taxation is identical. Sanriya's mutual fund page covers the regular route.

For the fuller comparison, read SIF vs mutual fund: what changes for a mutual fund investor.

SIF vs PMS

Sanriya distributes both; see the PMS page. The AIF page covers the ₹1 crore route and its three categories; NRIs can look at the GIFT City page.

SIF taxation

SIFs are taxed like mutual fund units: the fund pays no tax (Section 10(23D) of the Income-tax Act, 1961, carried into the Income-tax Act, 2025 from 1 April 2026). You pay tax when you redeem, switch between strategies, transfer units or receive an IDCW payout, at Finance (No. 2) Act, 2024 rates:

• Equity-oriented SIF (65% or more in equity): 20% if held 12 months or less; 12.5% beyond 12 months, with ₹1.25 lakh of long-term gains exempt per financial year.
• Hybrid SIF with 35% to 65% equity: 12.5% after 24 months, or after 12 months where the units are listed on an exchange; short-term gains at your slab rate.
• Debt-oriented or hybrid SIF below 35% equity: all gains at your slab rate.
• IDCW: taxed at your slab, with 10% TDS where it exceeds ₹10,000 in a financial year.

The Union Budget 2026 left these rates unchanged for FY 2026-27; they depend on the strategy's actual allocation and can change with each Finance Act, so confirm your position with a chartered accountant.

SIF risk bands and the main risks

SEBI requires every SIF strategy to display a five-level risk band, separate from the mutual fund riskometer: level 1 is the lowest risk and level 5 the highest, reviewed monthly and published on the fund house's and AMFI's websites within 10 days of month end. In October 2026 most live equity long-short schemes sat at band 5 while hybrid long-short schemes spanned bands 1 to 5: two schemes under one strategy can differ widely.

The ISID must spell out market risk, short-selling and derivative risk (a short position loses money when the price rises), liquidity risk and its liquidity-management tools, and concentration risk (one stock is capped at 10% of the strategy; debt has issuer and sector limits). Shorting does not make an SIF safer than a mutual fund; it changes the shape of the risk.

Direct and Regular plans exist; total expense ratios observed in October 2026 ranged from 0.82% (Direct) to 5.78% (Regular) a year, so check the ISID.

How to invest in an SIF through a distributor

1. Complete KYC; mutual fund KYC applies.
2. Match the strategy group to your horizon: equity strategies are generally positioned for five years or more, hybrid strategies for three years or more.
3. Read the ISID and check the scheme's current risk band.
4. Choose a lump sum or SIP, keeping the ₹10 lakh aggregate in mind.
5. Apply through your distributor under the Regular plan. Since SEBI's circular of 21 July 2026, SIF distributors need the NISM Series V-D certification; those who held Series XIII on or before 21 September 2026 may continue with it, alongside Series V-A, until it expires.

Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359) and an APMI-registered PMS distributor (APRN01056). We explain the product, handle the paperwork and service the investment; the decision stays with you. Contact us to discuss whether an SIF fits alongside your mutual funds or PMS.

Frequently asked questions

What does SIF stand for? Specialized Investment Fund, a category SEBI created in 2025 under the SEBI (Mutual Funds) Regulations, 1996 to sit between mutual funds and PMS.

What is the minimum investment in an SIF? ₹10 lakh in aggregate across all strategies of one SIF at the PAN level, under the SEBI circular dated 27 February 2025; accredited investors are exempt.

How is an SIF different from a PMS? An SIF is pooled, issues units at NAV and needs ₹10 lakh. A PMS holds securities in your own name, needs ₹50 lakh under the SEBI (PMS) Regulations, 2020, and is taxed on each sale.

How is an SIF taxed? Like a mutual fund: equity-oriented SIFs pay 20% within 12 months and 12.5% beyond (₹1.25 lakh exempt a year), rates unchanged for FY 2026-27; debt-oriented SIFs are taxed at slab rate. Confirm with a chartered accountant.

Can I invest in an SIF through a SIP? Yes. SEBI allows SIP, STP and SWP in SIF strategies as long as your aggregate holding stays at or above ₹10 lakh.

SIF vs mutual fund: what stays the same

SEBI introduced the SIF by amending the SEBI (Mutual Funds) Regulations, 1996, and set out its framework in a circular dated 27 February 2025, effective 1 April 2025. Three things from mutual funds carry across unchanged.

• Same regulator and wrapper. Money is pooled, units are issued at NAV, the NAV is published by 11 PM on the same business day, and direct and regular plans exist.
• Same tax rules. The fund itself is exempt (under Section 10(23D) of the Income-tax Act, 1961, which the Income-tax Act, 2025 replaces from 1 April 2026); you pay on redemption, switch or transfer. For an equity-oriented strategy (65% or more in equity) the rates are 20% short-term capital gains tax under 12 months and 12.5% long-term capital gains tax above ₹1.25 lakh a year, rates introduced by the Finance (No. 2) Act, 2024 and unchanged for FY 2026-27. Debt-oriented strategies are taxed at slab rate. Confirm your own position with a chartered accountant.
• Same systematic options. SIP, STP and SWP are permitted, and there is no lock-in.

What changes: shorting, concentration and the ₹10 lakh minimum

Shorting is allowed. A regular mutual fund may use derivatives only to hedge. A SIF may hold unhedged short exposure through exchange-traded derivatives of up to 25% of net assets, with gross exposure (long plus short) capped at 100% of net assets.

Concentration is built into some strategies. Of SEBI's seven strategies, three concentrate by design:

• Sector Rotation Long-Short: at least 80% in equity across a maximum of four sectors, with shorts applied at sector level.
• Equity Ex-Top 100 Long-Short: at least 65% in stocks ranked 101st and below by market capitalisation.
• Sectoral Debt Long-Short: debt of at least two sectors, with no more than 75% in any one.

The ₹10 lakh minimum must be maintained. It applies in aggregate across all SIF strategies of one AMC at PAN level, and your mutual fund holdings with that AMC do not count. If a redemption or transfer you initiate takes the aggregate below ₹10 lakh, all your SIF units are frozen for debits and you get 30 calendar days to top up; if you do not, the AMC redeems them at the NAV of the business day after the notice period. A drop caused only by market movement does not count as a breach.

Redemption is not always daily. SEBI's minimum redemption frequency is daily for equity strategies, once a week for debt and two times a week for hybrid, or less often if the AMC decides. Each strategy also has its own Investment Strategy Information Document (ISID).

SIF risk bands vs the mutual fund riskometer

SEBI gave SIF strategies a five-level risk band, from level 1 (lowest risk) to level 5 (highest), evaluated monthly and published on the AMC's and AMFI's websites within 10 days of month end.

The spread is wide. Of the 34 strategies live on 9 October 2026, 10 of the 12 equity long-short strategies sat in band 5, while 7 of the 11 hybrid long-short strategies sat in band 1. The words "long-short" tell you little on their own; the band and the ISID tell you more, including derivative, short selling, liquidity and concentration risk (single issuer capped at 10% of NAV).

Which SIF strategy sits next to which mutual fund category

Each strategy maps to its nearest mutual fund categories:

• Equity Long-Short: large cap and aggressive hybrid funds
• Equity Ex-Top 100 Long-Short: mid cap, small cap, flexi cap and multi cap funds
• Sector Rotation Long-Short: thematic and business cycle funds
• Hybrid Long-Short: balanced advantage, equity savings and income plus arbitrage funds
• Active Asset Allocator Long-Short: multi asset funds
• Debt Long-Short and Sectoral Debt Long-Short: short term, corporate and dynamic debt funds, and performing credit offerings

No debt strategy had launched by 10 October 2026.

When a SIF makes sense as a satellite to a mutual fund core

This is not an either-or decision: the mutual fund is the long-only core and the SIF a satellite sleeve. The core still does the heavy lifting when SIP access from ₹100, daily liquidity and growth without derivative-based strategy risk matter. A SIF satellite fits when:

• your aggregate SIF investment with one AMC will be ₹10 lakh or more at PAN level;
• your core portfolio is already in place and you want a defined long-short, sector rotation or active allocation sleeve;
• you accept that short positions lose money when the market moves against them, and you will read the ISID before you invest.

Between ₹10 lakh and ₹50 lakh, the SIF is the regulated long-short route at that ticket size; PMS starts at ₹50 lakh under the SEBI (Portfolio Managers) Regulations, 2020, and an AIF at ₹1 crore under the SEBI (AIF) Regulations, 2012. NRIs can invest through NRE or NRO accounts subject to FEMA; GIFT City funds are a separate route.

What to check before moving money from a mutual fund to a SIF

• Which of the seven strategies it is, its limits on equity, debt, sectors and short exposure, and its current risk band.
• Redemption frequency and exit load; observed exit loads run from nil to 1% within 12 months.
• Total expense ratio. Live strategies in October 2026 showed direct-plan TERs between 0.82% and 4.62% and regular-plan TERs between 1.26% and 5.78%.
• Tax on switching. A switch between SIF strategies is a deemed redemption and a fresh purchase, so capital gains tax applies.
• Track record and horizon. SIFs began in April 2025, so there is no meaningful long-term performance history; so look at the manager's record in similar strategies elsewhere; equity strategies are generally positioned for five years or more, hybrid strategies for three years or more.

Frequently asked questions

Is a SIF taxed like a mutual fund? Yes. A SIF is governed by SEBI's mutual fund regulations (the 1996 regulations, replaced by the SEBI (Mutual Funds) Regulations, 2026 from 1 April 2026), so the fund itself is exempt (under Section 10(23D) of the Income-tax Act, 1961, replaced by the Income-tax Act, 2025 from 1 April 2026) and you are taxed only on redemption, switch or transfer. For an equity-oriented strategy the rates are 20% short-term and 12.5% long-term capital gains tax above ₹1.25 lakh a year, unchanged for FY 2026-27; debt-oriented strategies are taxed at slab rate. Confirm your position with a chartered accountant.

What is the minimum investment in a SIF, and does my mutual fund holding count? SEBI's circular of 27 February 2025 sets ₹10 lakh in aggregate across all SIF strategies of one AMC at PAN level, effective 1 April 2025. Regular mutual fund schemes with the same AMC are excluded from the count. SEBI-accredited investors are exempt.

Can a mutual fund take short positions like a SIF? No. A regular mutual fund may use derivatives only for hedging. A SIF may hold unhedged short positions through exchange-traded derivatives of up to 25% of net assets, with gross exposure capped at 100% of net assets.

Can I start a SIP in a SIF? Yes. SEBI permits SIP, STP and SWP in SIF strategies, provided your aggregate holding across the AMC's SIF strategies stays at or above ₹10 lakh.

Is there a lock-in in a SIF? No. What differs from an open-ended mutual fund is the minimum redemption frequency: daily for equity strategies, once a week for debt and two times a week for hybrid, or less often if the AMC decides.

The seven SIF strategies at a glance

The framework was introduced under the SEBI (Mutual Funds) Regulations, 1996 and now sits inside the SEBI (Mutual Funds) Regulations, 2026 (in force 1 April 2026); a fund house may launch only one strategy under each type. The figures are regulatory floors and caps, not live holdings.

An AMC may set a less frequent redemption window than the reference, so read the strategy's Investment Strategy Information Document (ISID).

Equity long-short fund: the diversified core

An equity long-short fund keeps at least 80% of net assets in equity and equity-related instruments, with no market cap or sector restriction. The manager can short stocks or indices through derivatives, up to 25% of net assets unhedged, while gross exposure (long plus short) stays within 100%. A short position gains if the shorted stock falls and loses if it rises, so the short book adds risk as well as a cushion.

• Structure: open-ended or interval; horizon five years or more
• Risk: high; ten of the 12 live strategies in October 2026 carried SEBI risk band 5
• Closest mutual fund categories: large cap and aggressive hybrid funds

Equity ex-top 100 long-short fund: mid and small cap focus

The ex-top 100 long-short strategy invests at least 65% of net assets in companies ranked 101st and below by market capitalisation, that is, mid and small caps under SEBI's definitions. The short book, capped at 25% unhedged, is also directed outside the top 100. These stocks generally carry higher volatility and liquidity risk than large caps.

• Structure: open-ended or interval; horizon five years or more
• Risk: very high; six of the seven live strategies in October 2026 sat in risk band 5
• Closest mutual fund categories: mid cap, small cap, flexi cap or multi cap funds

Sector rotation long-short fund: concentrated sector calls

A sector rotation long-short fund holds at least 80% of net assets in equity across a maximum of four sectors, rotating between them as the manager's outlook changes. The 25% unhedged short cap applies at sector level: a shorted sector covers every stock of that sector held in the portfolio. If the chosen sectors lag, the strategy can trail a diversified equity fund.

• Structure: open-ended or interval; horizon five years or more
• Risk: very high
• Closest mutual fund categories: thematic and business cycle funds

Hybrid long-short SIF: balanced with a short book

The hybrid long-short SIF must hold a minimum of 25% of net assets in equity and a minimum of 25% in debt throughout. The rest can move between equity, debt, REITs, InvITs and commodity derivatives as its ISID permits; shorts through equity and debt derivatives are capped at 25% unhedged, combined.

• Structure: interval under SEBI's framework (redemption up to twice a week, or less often if the fund house sets it); horizon three years or more
• Risk: strategy-dependent; in October 2026 live strategies ranged from risk band 1 to band 5, so check the specific strategy's band
• Closest mutual fund categories: balanced advantage, equity savings and income plus arbitrage funds

Active asset allocator SIF: no fixed floors

The active asset allocator SIF is the most flexible of the seven. It has no minimum allocation to any asset class and can shift across equity, debt, derivatives, REITs, InvITs, foreign securities and commodity derivatives within its ISID. Combined unhedged shorts are capped at 25% of net assets. It is an interval strategy, and its risk profile can look very different from one month to the next.

• Structure: interval; horizon three years or more
• Risk: strategy-dependent; the three live strategies in October 2026 all sat in risk band 2
• Closest mutual fund category: multi asset allocation funds

Debt long-short SIF and sectoral debt long-short fund

The debt long-short SIF invests in debt instruments across duration and may take unhedged short exposure through exchange-traded debt derivatives, capped at 25% of net assets. The sectoral debt long-short fund holds debt of at least two sectors with no more than 75% in any one, and a short applies across a whole sector: being short on one sector means all of that sector's debt instruments in the portfolio are held as short positions.

Both are interval strategies with a reference redemption frequency of once a week. As of October 2026 no debt SIF had been launched; the risks to understand are interest rate, credit and reinvestment risk. Closest mutual fund categories: short term, corporate bond and dynamic bond funds; the sectoral version sits closer to performing credit or direct debt offerings.

Rules that apply to every SIF strategy

• Minimum investment: ₹10 lakh in aggregate across all SIF strategies of one fund house at PAN level, effective 1 April 2025. Regular mutual fund holdings do not count and SEBI-accredited investors are exempt. This places SIF between mutual funds, PMS at ₹50 lakh and AIF at ₹1 crore; GIFT City funds are a separate offshore structure under IFSCA rules.
• Exposure: unhedged shorts up to 25% of net assets and gross exposure within 100%; a SIF is not leveraged the way a Category III AIF can be.
• Risk band: a five-level SEBI risk band, evaluated monthly and published within ten days of month end.
• Tax: SIF units follow mutual fund taxation: no tax at fund level (the Section 10(23D) exemption of the Income-tax Act, 1961, replaced by the Income-tax Act, 2025 from 1 April 2026) and capital gains tax on redemption. At the Finance (No. 2) Act, 2024 rates, still in force for FY 2026-27, equity-oriented strategies (at least 65% equity) pay 20% short-term and 12.5% long-term capital gains tax; debt-oriented strategies are taxed at your slab rate; hybrid strategies depend on equity share and holding period. Confirm your position with a chartered accountant.

How Sanriya helps

Sanriya Finvest Pvt. Ltd., Pune, is an AMFI-registered mutual fund distributor (ARN-193359) and an APMI-registered PMS distributor (APRN01056). As a distributor, we help you compare each SIF strategy's SEBI parameters, read the ISID and risk band, plan the ₹10 lakh aggregate and complete the paperwork. Contact us to talk through the seven SIF categories.

Frequently asked questions

What are the seven SIF strategies permitted by SEBI? Three equity strategies (equity long-short, equity ex-top 100 long-short, sector rotation long-short), two debt strategies (debt long-short, sectoral debt long-short) and two hybrid strategies (hybrid long-short, active asset allocator long-short), under SEBI's circular of 27 February 2025.

What is the difference between an equity long-short fund and an ex-top 100 long-short fund? An equity long-short fund holds at least 80% in equity with no market cap restriction. An ex-top 100 long-short fund holds at least 65% in companies ranked 101st and below by market capitalisation, with its short book also outside the top 100. Both cap unhedged shorts at 25%.

Can I split the ₹10 lakh minimum across more than one SIF strategy? Yes. The ₹10 lakh minimum is an aggregate across all SIF strategies of one fund house at PAN level, effective 1 April 2025, so ₹4 lakh in one strategy and ₹6 lakh in another meets the rule. SEBI-accredited investors are exempt.

Are debt long-short SIFs available in India yet? No. As of October 2026 all 34 live SIF strategies were equity or hybrid. SEBI's framework defines both debt strategies as interval strategies with a reference redemption frequency of once a week.

Mutual fund vs PMS vs AIF: minimum investment

• Mutual funds have no regulatory minimum; most schemes accept SIPs from ₹100.
• PMS minimum investment is ₹50 lakh under the SEBI (Portfolio Managers) Regulations, 2020. A SIP into a PMS, typically ₹1 lakh to ₹2 lakh a month, is allowed only once that base is in place.
• AIF minimum investment is ₹1 crore per investor under the SEBI (Alternative Investment Funds) Regulations, 2012, with a ₹25 lakh floor for employees and directors of the fund or its manager, and lower entry for accredited investors. In Category I and II funds it is a commitment, usually called in tranches over 12 to 24 months.

Between the two sits the Specialised Investment Fund, introduced by SEBI circular dated 27 February 2025 with a ₹10 lakh minimum at PAN level per AMC. SEBI has since notified the SEBI (Portfolio Managers) Regulations, 2026, on 7 October 2026: from 1 April 2027 they add a mutual-fund-only PMS route at ₹25 lakh and keep the ₹50 lakh floor for a standard PMS.

Regulation and disclosure

A mutual fund publishes a daily NAV, a monthly portfolio and half-yearly performance; its distributor must hold an AMFI registration number (ARN). A PMS keeps the securities in a demat account in your name, segregated from the manager's assets, under a power of attorney limited to trading; SEBI requires a report at least every three months (most managers send one monthly) and an audited annual statement, and since 1 January 2025 every PMS distributor must hold an APMI registration (APRN). An AIF reports at fund level: a private placement memorandum, NAV disclosures that are usually quarterly (SEBI fixes at least quarterly for close-ended and at least monthly for open-ended Category III schemes) and quarterly reports, so you do not see every trade; SEBI's April 2023 circular also requires a direct plan option, which carries no distribution commission.

Liquidity: how fast you can get out

Open-ended mutual funds redeem daily, settling in one to three working days. A PMS has no regulatory lock-in; most providers work on 7 to 30 days' notice and may charge an exit load in the first one to three years. Category I and II AIFs must be close-ended for at least three years and commonly run 7 to 10, extendable by two years with approval of two-thirds of unit holders by value; early exit means finding a buyer for your units, usually at a discount. Category III AIFs may offer monthly or quarterly windows with notice periods and gates, so "open-ended" never means daily.

Fees: one number versus several

A mutual fund charges one total expense ratio within SEBI's AUM-based slab limits. A PMS bills separately: a fixed fee of roughly 0.25% to 2.5% a year, or a 10% to 20% profit share above an 8% to 10% hurdle, or a hybrid, plus brokerage, custody and 18% GST on service fees. On ₹1 crore with a 1.5% fee, a 15% gross return, an 8% hurdle and a 20% share, the year's charges come to about ₹3.40 lakh before GST; a high-water mark should stop you paying twice on the same gain. An AIF charges a 1% to 2.5% management fee and 15% to 20% carried interest above a hurdle that is commonly set between 8% and 12%. Check the fee base: on a ₹5 crore commitment with ₹2 crore drawn, a 2% fee is ₹4 lakh on invested capital and ₹10 lakh on committed capital.

Taxation: fund level versus investor level (FY 2026-27)

• Mutual funds tax you only when you redeem units; trades inside the scheme are not your events. For equity-oriented schemes, gains on units held under 12 months are taxed at 20% and longer-held gains at 12.5% above ₹1.25 lakh a year, rates set in Budget 2024 and unchanged in Budget 2026. Debt schemes are taxed at your slab.
• PMS is taxed in your hands on every sale the manager makes, at the same equity rates, with dividends at slab. A high-turnover strategy can create tax in a year you withdraw nothing. The manager does not settle your tax, so a resident with sizeable realised gains usually pays advance tax, and whether management fees are deductible is still unsettled in the courts.
• Category I and II AIFs are pass-through: income keeps its character and is taxed in your hands under Section 115UB of the Income-tax Act, 1961, renumbered as Section 224 of the Income-tax Act, 2025 with effect from 1 April 2026. Residents see 10% TDS deducted by the fund, which issues Form 78 for you to report through Schedule PTI.
• Category III AIFs pay tax at fund level at the maximum marginal rate, about 42.744% with surcharge and cess, and you receive post-tax returns.

These figures apply to FY 2026-27; confirm your own position with a chartered accountant.

How returns are reported: NAV, TWRR and XIRR

A mutual fund reports NAV daily; published returns up to one year are absolute, beyond that annualised, and your SIP return is an XIRR. A PMS must report a Time-Weighted Rate of Return under the 2020 regulations, against benchmarks set by SEBI's circular of 16 December 2022, so your personal XIRR will differ from the strategy's TWRR. An AIF reports XIRR on invested capital because money moves in stages; ask whether it is on committed or invested capital. Never compare a PMS TWRR with an AIF XIRR directly.

Accredited investor India: what the certificate changes

SEBI's framework dates from August 2021. You qualify with annual income of ₹2 crore or more, net worth of ₹7.5 crore or more with at least half in financial assets, or income of ₹1 crore plus net worth of ₹5 crore on the same test. Accreditation agencies recognised by SEBI, both subsidiaries of the depositories, issue the certificate. It waives the ₹10 lakh SIF minimum, opens AIF schemes reserved for accredited investors, and admits you to Large Value Funds, whose floor fell from ₹70 crore to ₹25 crore in November 2025. It also lets a PMS or an AIF admit you below its ₹50 lakh or ₹1 crore minimum on terms set out in its documents, and it carries no tax benefit.

How a growing portfolio typically layers them

• Below ₹10 lakh: mutual funds are the only one of these open to you.
• ₹10 lakh to ₹49 lakh: a SIF sleeve becomes possible alongside mutual funds.
• ₹50 lakh to ₹99 lakh: a PMS becomes available for directly owned listed equity.
• ₹1 crore and above: AIFs open up, Category II for private equity and credit, Category III for hedged listed strategies.
• NRIs and global allocators: GIFT City funds in foreign currency.

Mutual funds remain the liquidity reserve and goal-based core, the PMS is the sleeve you can see line by line, and the AIF is the part you agree not to touch, so keep cash aside for capital calls and check that your PMS and AIF do not hold the same stocks. One caveat from the industry itself: after fees and carry, alternatives tend to deliver returns comparable to flexible mutual funds, so their case is diversification, not a shortcut. None of these products promises a return.

Frequently asked questions

What is the PMS minimum investment in India? ₹50 lakh under the SEBI (Portfolio Managers) Regulations, 2020. Cash, existing securities or a combination can make up the amount, some strategies set a higher floor, and a SEBI-accredited investor can be admitted below it on terms set out in the disclosure document. The SEBI (Portfolio Managers) Regulations, 2026, notified on 7 October 2026 and in force from 1 April 2027, keep the ₹50 lakh floor for a standard PMS and add a mutual-fund-only route at ₹25 lakh.

Mutual fund vs PMS: which is more tax-efficient? Different rather than better. A mutual fund taxes you only when you redeem units; a PMS taxes every sale in your demat account. Both use the same FY 2026-27 equity rates: 20% short term and 12.5% long term above ₹1.25 lakh a year. A low-turnover PMS held beyond a year ends up broadly similar; a high-turnover one pays sooner. Confirm with a chartered accountant.

What is the difference between PMS and AIF? Ownership and universe. A PMS holds listed securities in your own demat account from ₹50 lakh with no regulatory lock-in. An AIF gives you units of a pooled fund that can hold private equity, private credit, real estate or leveraged listed strategies from ₹1 crore, close-ended for three to ten years in Category I and II. PMS is taxed in your hands, Category I and II AIFs pass income through, Category III AIFs pay at fund level.

Who is an accredited investor in India? Under SEBI's August 2021 framework, an individual with annual income of ₹2 crore or more, net worth of ₹7.5 crore or more with half in financial assets, or income of ₹1 crore plus net worth of ₹5 crore on the same test. Accreditation agencies recognised by SEBI, both subsidiaries of the depositories, issue the certificate. It waives the ₹10 lakh SIF minimum, lets a PMS or an AIF admit you below its usual minimum on disclosed terms, and opens Large Value Funds at ₹25 crore; it gives no tax benefit.

Can I hold mutual funds, PMS and AIF together? Yes, and many portfolios above ₹1 crore do: mutual funds as the liquid core, PMS for listed equity you can see line by line, AIF for private markets or hedged strategies you agree to lock away. One industry panel sketched a ₹10 crore portfolio as ₹3 to 4 crore in listed strategies, ₹4 to 5 crore in Category II funds and ₹1 to 2 crore in early-stage funds. Keep cash for capital calls and check for stock overlap.

What GIFT City taxation rests on

GIFT City is India's first IFSC. For exchange-control purposes it is treated as a territory outside India, even though it sits inside India. Funds there are regulated by the International Financial Services Centres Authority (IFSCA) under the IFSCA (Fund Management) Regulations, 2025, not by SEBI, and can be denominated in foreign currency.

Two layers of tax therefore matter: what the fund pays, and what you pay. The gap between them is where "tax-free GIFT City" claims fall down. How the structures work is set out on our GIFT City funds page.

IFSC tax exemption at the fund level

• No Securities Transaction Tax, Commodity Transaction Tax or stamp duty on IFSC transactions, and GST exemption on fund services.
• Section 80LA of the Income Tax Act gives an IFSC unit a deduction on its business income for ten consecutive years out of its first fifteen.
• Budget 2025 treats securities held by Category I and II funds registered under SEBI or IFSCA rules as capital assets, so gains are capital gains rather than business income.
• Section 10(4D) exempts specified income of a qualifying "specified fund" in the IFSC, broadly to the extent attributable to units held by non-residents.

None of these is a blanket exemption for every investor on every return; each attaches to the fund, to a category of income, or to non-resident unit holders.

GIFT City NRI tax: what applies to you

Category I and II AIFs are pass-through. Income is taxed in your hands as if you had invested directly, with TDS on distributions under Section 194LBB and treaty relief on production of a tax residency certificate and Form 10F. For non-residents in Category II AIFs and retail schemes, capital gains on bonds, debentures, derivatives, foreign securities and IFSC-listed securities are exempt in India; gains on shares of Indian companies are not. Dividend and interest from Indian investments is taxed at 10 per cent, and income from foreign securities is exempt. If your only Indian income is from such a fund and tax has been deducted correctly, you may not need a PAN or an Indian return.

Category III AIFs are taxed at fund level, and you are generally not taxed again in India on redemption. Eligible non-residents in certain Category III IFSC funds pay no Indian capital gains tax on specified IFSC exchange transactions.

IFSC PMS income from investments deployed outside India is exempt for non-residents, with no GST, stamp duty or STT.

Your home country is the other half. US residents face FATCA, PFIC rules and FBAR reporting above USD 10,000; UK, Canadian and Australian residents may be taxed at home, with treaty credits; UAE and Singapore residents pay no personal capital gains tax at home, which is why the structure suits them most.

These rules are as they stood in 2026 and change with each Finance Act; the Income-tax Act, 2025, in force from 1 April 2026, renumbers the 1961 Act sections quoted here (Section 194LBB becomes Section 393), so check the current section in scheme documents. Confirm your position with a chartered accountant before you invest.

Resident Indians: the LRS route and a smaller advantage

A resident can invest in dollar-denominated IFSC AIFs and PMS through the RBI Liberalised Remittance Scheme, within USD 250,000 per financial year. The tax advantage is then limited. IFSC PMS income for a resident is taxed as if you had invested directly: capital gains under the usual provisions, dividends in your hands with surcharge and cess. Exemptions that are powerful for non-residents are neutral for residents, and some Category II IFSC AIF structures exclude residents other than IFSC entities altogether.

If your income and spending are entirely in rupees, a domestic SIF, PMS or AIF, or an international feeder among mutual funds, may reach a similar outcome with less paperwork.

GIFT City vs NRE NRO: the repatriation difference

For an NRI the repatriation experience is usually decided at the time of investment, so compare the three routes first.

The NRO limit resets on 1 April and covers everything in the account, including PMS profits and AIF distributions. Eligible GIFT City structures sit outside these domestic FEMA limits, proceeds return in the currency you contributed, and many funds need no NRE or NRO account at all. Confirm the permitted route for each fund before you transfer.

The currency question: USD exposure is not free of risk

Most IFSC funds are USD-denominated, and IFSC entities transact in around fifteen currencies. A USD net asset value suits an NRI whose wealth and spending are already in dollars, and usually needs no extra hedge. It does not remove currency risk:

• A USD fund holding Indian assets still carries rupee exposure, so a 10 per cent gain in rupees can look very different in dollars.
• For a resident, rupee depreciation lifts rupee returns and rupee appreciation dilutes them.
• Hedging is allowed at fund level, but only through IFSC banks where spreads can be wider; some funds offer hedged unit classes.

Match the fund currency to your future liabilities, such as overseas education or relocation, rather than to a view on the rupee.

Who actually benefits from GIFT City

• NRIs and returning Indians: very high fit, especially in zero capital gains jurisdictions.
• Family offices and global entrepreneurs managing multi-currency wealth: high fit.
• Resident HNIs with real overseas liabilities: medium to high fit.
• First-time alternative investors: low to medium fit.

It may not suit you if your horizon is short, liquidity matters more than tax, your cash flows are entirely in rupees, or your portfolio does not justify the added compliance. The IFSCA floor for a restricted (non-retail) scheme, its term for an AIF, has been USD 75,000 since February 2025, though several funds still set USD 150,000 or more by share class; lock-ins of three to seven years are common. Not every IFSC fund is global either: some hold largely Indian assets routed offshore, so check the portfolio, not the wrapper. The honest test is whether you would still invest if the tax benefit disappeared.

Sanriya Finvest, Pune, is an AMFI-registered mutual fund distributor (ARN-193359) and APMI-registered PMS distributor (APRN01056). As a distributor, we help you compare GIFT City, AIF, PMS and SIF routes against your residency, currency and repatriation needs and coordinate the paperwork; tax questions go to your chartered accountant. Talk to us.

Frequently asked questions

Do resident Indians get the GIFT City tax benefit? A small one. A resident invests through the RBI Liberalised Remittance Scheme (USD 250,000 per financial year) and is taxed largely as if investing directly: capital gains and dividends in your hands with surcharge and cess. The exemptions that matter are for non-residents, and some IFSC AIF structures exclude residents altogether.

How is GIFT City different from NRE and NRO accounts for repatriation? NRO repatriation is capped at USD 1 million per financial year per PAN under FEMA and needs Form 15CA and a chartered accountant's Form 15CB. NRE balances are freely repatriable. Eligible GIFT City structures sit outside these limits: no cap, no Form 15CA or 15CB for routine repatriation, and proceeds return in the currency you contributed.

What is the minimum investment for a GIFT City AIF? There is no single minimum. Since February 2025 the IFSCA floor for a restricted (non-retail) scheme, its term for an AIF, is USD 75,000, while several funds still set USD 150,000 or thresholds that vary by share class. Check the private placement memorandum of the scheme.

Who can invest in an AIF: eligibility and the ₹1 crore minimum

SEBI sets the minimum investment in an AIF at ₹1 crore per investor; the floor is ₹25 lakh for employees or directors of the fund, and accredited-investor-only schemes have no prescribed minimum. Since September 2025 angel funds have no ₹25 lakh floor and take only accredited investors.

Individuals, HUFs, family offices, trusts, companies and institutions can invest, and NRIs through NRE or NRO accounts under FEMA rules. Accredited investor status (income of ₹2 crore or more, net worth of ₹7.5 crore or more, or ₹1 crore income with ₹5 crore net worth) opens lower thresholds in some AIF, SIF and PMS schemes.

Read the AIF PPM before you sign

The private placement memorandum (PPM) is the fund's main disclosure document and the contract you accept. SEBI requires it to set out the fee and distribution waterfall; it also holds the drawdown, default, transfer, tenure and extension terms. Verify the fund's SEBI registration against the PPM, then check:

• Fee base. On a ₹5 crore commitment with ₹2 crore drawn, a 2% fee is ₹10 lakh a year on committed capital but ₹4 lakh on invested capital. Typical ranges are 1% to 2.5% management fee and 15% to 20% carried interest, plus 18% GST on the management fee.
• Waterfall. Return of capital, then the hurdle, then a manager catch-up, then carried interest, then residual profit. Check whether the hurdle is hard or soft and how it is measured, for example by XIRR.
• Distribution fee. Every scheme must offer a direct plan with no placement fee (SEBI circular, April 2023); through a distributor the fee must be disclosed at onboarding.

How AIF onboarding works

Onboarding follows a fixed sequence with no fixed timeline:

• Choose a SEBI-registered scheme (see the AIF page for the three categories).
• Review the PPM and contribution agreement.
• Complete KYC: PAN, address and bank proof, FATCA/CRS declarations.
• Give demat details, as SEBI requires AIF units in demat form.
• Sign, and pay the first contribution.

AIF capital call and drawdown: commitment is not cash on day one

In a close-ended Category I or II fund you do not pay ₹1 crore up front. You sign a capital commitment; the fund issues a capital call (the drawdown notice) when it needs money; what you pay is your capital contribution, the balance your unfunded commitment. The terms capital call and drawdown are used interchangeably; follow your PPM's definitions.

One source's example: on a ₹1 crore commitment the fund calls ₹20 lakh, ₹15 lakh, ₹25 lakh and ₹20 lakh; you have paid ₹80 lakh and still owe ₹20 lakh. Category II marketing material describes about 25% at first close and the rest over 12 to 24 months, but observed funds call 10% to 100% at the first drawdown, and the PPM sets the notice period. Treat the unfunded amount as a future liability and keep the reserve in the entity that signed; calls may cover fees too.

What happens if you miss an AIF drawdown notice

Default clauses are contractual; under the PPM and contribution agreement a missed call can bring:

• default interest and recovery of the fund's costs;
• restrictions on future participation and loss of voting rights;
• forced transfer or sale of your units, dilution, or forfeiture.

SEBI lets Category I and II funds borrow briefly to cover a shortfall in called amounts; that helps the fund, not you.

The J-curve: why the early years look weak

This early-years pattern is the J-curve. Fees and expenses start early, sometimes charged on the full commitment, while capital goes in over 12 to 24 months and exits come years later, so your holding tends to show below cost before it climbs. That is why AIF reports quote XIRR on invested capital, which adjusts for drawdown and distribution timing, not the time-weighted return a PMS uses.

AIF lock-in period, distributions and exit

Category I and II AIFs must be close-ended with a minimum tenure of three years and in practice run seven to ten years; tenure can extend by up to two years with approval from two-thirds of unit holders by value. Lock-in means a close-ended scheme offers no routine redemption before maturity. Category III funds may be open-ended, with monthly or quarterly windows, notice periods, gates and exit loads.

Money returns as distributions through the waterfall: in private equity from strategic sales, secondary sales or IPOs; in private credit as monthly or quarterly interest and principal at maturity. Anything unsold at the end of tenure can go into a liquidation scheme or be distributed in specie under SEBI's framework.

Transfer of AIF units before maturity

A transfer is a sale to another eligible investor, not a redemption by the fund. The PPM sets the restrictions and any manager or trustee consent, and the price is negotiated around NAV, remaining tenure and unfunded commitments, usually at a discount for illiquidity. Agree who takes on the unfunded commitment, allow for tax and stamp duty, and expect a buyer search to take time.

AIF tax forms: 64C, 64D, 78 and 79

Category I and II AIFs are pass-through for non-business income: capital gains, interest and dividends keep their character and are taxed in your hands; business income is taxed at the fund level. The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026, moving the provision from Section 115UB to Section 224. Category III AIFs sit outside this regime and pay tax at the fund level, at up to the maximum marginal rate (about 42.744%) where it applies.

The fund files by 15 June and sends your statement by 30 June. Report the income in Schedule PTI (ITR-1 lacks it), reconcile the 10% TDS with Form 26AS and AIS, and note that TDS is rarely your final liability. These figures apply to FY 2026-27; confirm your position with a chartered accountant.

Frequently asked questions

Do I have to pay the full ₹1 crore AIF minimum upfront? Not in most close-ended funds. You commit ₹1 crore and pay it as capital calls arrive, on the schedule in the PPM. Open-ended Category III funds may ask for the full amount at entry.

How much notice does an AIF give before a capital call? There is no SEBI-wide notice period; the PPM and contribution agreement set it. Hold a reserve that can pay within that window, in the entity that signed.

Can I exit an AIF before the lock-in ends? Close-ended Category I and II funds offer no routine redemption before maturity; your routes are a permitted transfer of units, usually at a discount to NAV, or waiting for distributions. Open-ended Category III funds offer periodic windows with notice periods, gates and exit loads.

What is Form 64C and will I still receive it? Form 64C is the income statement a Category I or II AIF gives each unit holder under Section 115UB of the Income-tax Act, 1961. For income from FY 2026-27 the equivalent is Form 78 under Section 224 of the Income-tax Act, 2025. You use it to fill Schedule PTI; confirm your position with a chartered accountant.

What GIFT City and IFSCA are

GIFT City stands for Gujarat International Finance Tec-City. It houses India's first operational IFSC, set up in 2015 as a zone treated as foreign territory for exchange-control purposes while staying under Indian oversight.

IFSCA is the unified regulator for securities, banking, insurance and pensions in the zone, so a GIFT City fund answers to IFSCA rather than SEBI. The current rulebook is the IFSCA (Fund Management) Regulations, 2025, under which a registered Fund Management Entity (FME) can run retail schemes, restricted (non-retail) schemes and portfolio management services.

Types of IFSC funds: AIF categories, retail, restricted and feeder

IFSC funds use the same three categories as domestic AIFs, plus GIFT City-specific labels:

• Category I AIF: start-ups, social ventures, SMEs, infrastructure and other sectors treated as economically desirable.
• Category II AIF: private equity, private credit, real estate and fund-of-funds strategies, without external leverage.
• Category III AIF: diverse or complex trading strategies, including long-only, long-short, arbitrage and hedged portfolios, with derivatives and disclosed leverage within limits.
• Retail schemes: open to a wider investor base at lower minimums, with more prescribed limits.
• Restricted (non-retail) schemes: for eligible investors above set thresholds, with more flexibility and often lower liquidity. Category II and III AIFs are the usual examples.
• Feeder funds: a GIFT City vehicle that channels money into a larger master fund in India or abroad, with expenses at both levels.
• Inbound and outbound funds: inbound funds pool foreign and NRI money for Indian assets; outbound funds take Indian, NRI and global money overseas.

A public directory of 229 GIFT City funds, captured on 10 October 2026, shows the split:

Who can invest in GIFT City funds

IFSCA sets no minimum Indian-connection requirement. NRIs, OCIs, PIOs, overseas trusts and companies, foreign portfolio investors, family offices and institutions are eligible; parties on sanctions lists are excluded.

Not every fund is open to every NRI: eligibility also depends on your country of residence, FATCA and CRS declarations, source of funds and the scheme's own rules, and your home country may tax the gains, with credit under India's DTAA treaties.

NRI investment in GIFT City: currency and repatriation

Most IFSC funds are USD-denominated; some operate in GBP, EUR or AED. You subscribe in foreign currency straight into the fund's IFSC bank account, with no INR conversion and, for many funds, no NRE or NRO account.

Proceeds return in the currency you contributed, with no USD 1 million annual cap and no Form 15CA or 15CB, both of which apply to the NRO route under FEMA. A dollar NAV does not remove currency risk: if a fund holds Indian shares, a weaker rupee cuts the dollar return.

LRS GIFT City route for resident Indians

Under the RBI's LRS, a resident individual can remit up to USD 250,000 per financial year, which resident investors use to buy dollar-denominated AIFs or PMS at GIFT City. Some IFSC schemes exclude resident Indian investors, so read the placement memorandum before you remit. And a resident's return is finally measured in rupees, so a stronger rupee shrinks the gain.

A resident in a GIFT City PMS is taxed as if the investment were made directly, with capital gains at the applicable rates and dividends in your hands; confirm your position with a chartered accountant. If your income and spending are entirely in rupees, a domestic PMS, SIF or mutual fund may do the job with less complexity.

Minimum investment in GIFT City funds

There is no single minimum. USD 150,000 is the IFSCA floor for restricted schemes and the figure most listed funds show: 17 of the 19 directory funds that state a minimum display it. Accredited investors are exempt from that floor and retail schemes carry lower entry points. The USD 75,000 that some sites quote for GIFT City AIFs is the February 2025 minimum for a GIFT City PMS client, so check each scheme's placement memorandum.

How GIFT City funds are taxed, in brief

Category I and II AIFs at IFSC are pass-through vehicles: income other than business income is taxed in your hands, and treaty benefits apply. Category III AIFs are taxed at fund level, so you are generally not taxed again in India on redemption. The specified-fund exemption, Section 10(4D) of the Income-tax Act, 1961 until 31 March 2026 and now Schedule VI of the Income-tax Act, 2025, covers specified income of qualifying IFSC funds held by non-residents, who also see a 10 per cent rate on Indian dividends and interest and no STT, CTT or stamp duty on IFSC exchange transactions. These are the rules for financial year 2026-27; check your outcome with a chartered accountant.

Process and documents for GIFT City investment

1. Shortlist a fund by strategy, minimum, liquidity, fees and currency, and confirm you are eligible.
2. Complete KYC: passport, overseas address proof, NRI or OCI status, PAN where applicable, tax residency details, source-of-wealth documents and FATCA or CRS declarations, plus a Tax Residency Certificate and Form 10F for a DTAA claim.
3. Read the Private Placement Memorandum, then sign the application and subscription documents.
4. Pass the fund administrator's AML review and transfer money in the permitted foreign currency.
5. Receive your unit allotment and periodic reports.

KYC is accepted in English and physical presence is not required. Assets sit with an IFSC-licensed custodian, NAV is disclosed quarterly and accounts are audited yearly.

Risks to weigh before you invest

A GIFT City wrapper does not remove market, credit, liquidity, currency, manager, regulatory or tax risk. Many IFSC AIFs have lock-ins of three to seven years or longer, and an open-ended label does not mean daily liquidity. Performance fees above a hurdle and double expenses in feeder structures can leave net returns materially below gross figures.

Sanriya Finvest Pvt. Ltd., Pune, an AMFI-registered mutual fund distributor (ARN-193359) and APMI-registered PMS distributor (APRN01056), helps you compare GIFT City fund options, check eligibility and complete the paperwork as a distributor. See our GIFT City funds page or contact us.

Frequently asked questions

Can resident Indians invest in GIFT City funds under LRS? Yes, where the scheme permits it. The RBI's LRS lets a resident individual remit up to USD 250,000 in financial year 2026-27, which can go into a dollar-denominated AIF or PMS at GIFT City. Some IFSC schemes exclude residents, so read the placement memorandum.

Do NRIs need an NRE or NRO account for GIFT City investment? Usually not. Many GIFT City funds take subscriptions in foreign currency directly into the fund's IFSC bank account and return proceeds in the same currency, with no USD 1 million annual cap and no Form 15CA or 15CB. Confirm the route in the fund's documents.

Are returns from GIFT City funds tax-free for NRIs? Not automatically. Category I and II AIFs are pass-through vehicles, Category III AIFs are taxed at fund level, and the IFSC specified-fund exemption (Schedule VI of the Income-tax Act, 2025, formerly Section 10(4D)) covers qualifying funds held by non-residents, who pay 10 per cent on Indian dividends and interest. Confirm your outcome with a chartered accountant.