SEBI AIF Regulations 2026: A Guide to the Third Amendment

What are the new Alternative Investment Funds India rules?

The Securities and Exchange Board of India (SEBI) issued the Securities and Exchange Board of India (Alternative Investment Funds) (Third Amendment) Regulations, 2026 on 15 October 2026. The Securities and Exchange Board of India issued the Securities and Exchange Board of India (Alternative Investment Funds) (Third Amendment) Regulations, 2026 on 15 October 2026.

What are the updated AIF investment categories?

An Alternative Investment Fund (AIF) is a pooled investment vehicle that invests in assets outside of traditional categories like capital stocks, bonds, and cash. These funds include investments in commodities, private equity, hedge funds, venture capital, financial derivatives, and physical assets such as paintings, art, wine, antiques, coins, and stamps.

Gains generated from these AIF assets are classified as capital gains and are subject to the corresponding regulatory provisions.

How are AIFs categorized?

SEBI classifies AIFs into three categories based on their specific investment strategies and risk profiles. A 2026 report by Vajiram & Ravi provides details regarding these classifications.

Category I AIFs include venture capital funds, social venture funds, infrastructure funds, and SME funds. These funds receive incentives from the government or regulatory bodies. SME funds invest in unlisted securities or securities to be listed on an SME exchange. Social venture funds target companies, trusts, or limited liability partnerships that provide social benefits while satisfying performance norms.

Category II AIFs consist of private equity funds and debt funds. These funds cannot raise debt, though they may borrow to meet daily operational requirements. They do not receive special incentives or concessions.

Category III AIFs include hedge funds and other diverse or complex trading strategies. These funds operate for short-term gains and receive no concessions. Strategy Funds act as a residual category that includes various types of funds, such as hedge funds. AIFs generally raise capital from High Net Worth Investors to invest according to a defined policy for the benefit of those investors.

What are the financial requirements for AIFs?

Under the 2012 regulations, AIFs require a minimum investment limit of INR 1 Crore. The total amount committed by investors in an investee company or trust must be at least INR 20 Crores.

Fund managers must contribute 2.5% or at least INR 5 Crores in initial capital investment. According to a report from Moneycontrol.com on September 24, 2026, the SEBI board cleared a proposal to widen the Accredited Investor pool, which includes a requirement of Rs 5 crore in securities assets.

How do you register an AIF with SEBI?

To register an AIF, you must file Form A along with a cover letter and the necessary documents required by the regulations. You are also required to submit an application fee of Rs 1,00,000 by bank draft in favour of SEBI, payable at Mumbai.

Upon receipt of your application, SEBI will reply within 21 working days, though the total registration time depends on your compliance with all requirements. Once your application is approved, you must pay a registration fee of Rs 5,00,000 to SEBI, after which the regulator will grant you a certificate of registration.

Who is exempt from AIF regulations?

Certain entities do not need to register as an AIF. According to biatconsultant.com, this includes family trusts set up for the benefit of relatives as defined under the Companies Act. It also excludes ESOPs established under SEBI guidelines of 1999 or the Companies Act of 1956.

Employee welfare or gratuity trusts, holding companies under the Companies Act, and special purpose vehicles not established by fund managers are exempt from these regulations.

What is the regulatory history of AIFs in India?

SEBI introduced the Alternative Investment Fund regulations on 21 May 2012 to govern the previously unregulated fund market, including private equity, real estate, and hedge funds. These regulations, notified via LAD-NRO/GN/2012-13/04/11262, replaced the 1996 Venture Capital Funds regulations.

While the 1996 regulations were repealed, funds registered under them continue to operate until their schemes are wound up. Any pooled investment vehicle incorporated in India as a trust, company, limited liability partnership, or body corporate must register as an AIF. These funds must be distinct from those covered by the 1996 Mutual Funds regulations or the 1999 Collective Investment Scheme regulations.

This process requires approval from two-thirds of your investors by value.

To register as an AIF, your fund’s charter must permit AIF activities and explicitly prohibit public subscription. Your trust or partnership deed must be duly registered.

What role do AIFs play in the Indian economy?

According to a report by the Free Press Journal on 14 October 2026, SEBI has emphasized that these funds will play a larger role in fueling the next growth phase of the Indian market.