How to Set Up an Alternative Investment Fund (AIF) in India, SEBI Registration, Documents & Compliance (2026)

If you are planning how to set up an Alternative Investment Fund in India, the process begins and ends with the Securities and Exchange Board of India (SEBI). Every AIF, whether a venture capital fund, a private equity vehicle, or a hedge-fund-style Category III structure, must obtain a Registration Certificate (RC) from SEBI before it can pool capital or make investments. The governing framework is the SEBI (Alternative Investment Funds) Regulations, 2012, and applications are filed exclusively through SEBI’s online SI Portal at siportal. sebi. gov. in.

This article provides a sequential, practitioner-level walkthrough of the entire AIF registration process in 2026, covering eligibility criteria, the Form A filing procedure, required documents, realistic timelines, costs and the regulatory changes that sponsors and fund managers need to account for this year.

Overview of the AIF Registration Process and Who It Applies To

An Alternative Investment Fund is any privately pooled investment vehicle established in India that collects funds from investors, whether Indian or foreign, for investing in accordance with a defined investment policy. SEBI classifies AIFs into three categories:

• Category I. Funds that invest in start-ups, early-stage ventures, social ventures, SMEs, infrastructure or other sectors that SEBI or the Government of India considers socially or economically desirable. Includes venture capital funds, angel funds, social venture funds and infrastructure funds.
• Category II. Funds that do not fall into Category I or III and do not undertake leverage or borrowing except to meet day-to-day operational requirements. Most private equity funds, debt funds and fund-of-funds structures fall here.
• Category III. Funds that employ diverse or complex trading strategies and may use leverage, including through investment in listed or unlisted derivatives. Hedge funds and PIPE funds are typical examples.

An AIF may be established as a trust, a company, a limited liability partnership (LLP), or a body corporate. In practice, the trust structure, with a trustee, a sponsor and an investment manager, is overwhelmingly the most common vehicle used in the Indian market.

The high-level registration sequence is: incorporate the fund vehicle → draft the Private Placement Memorandum (PPM) and constitutional documents → file Form A (First Schedule of the SEBI AIF Regulations) on the SI Portal → respond to SEBI queries → obtain the RC → proceed to first close and capital call.

This guide is written for sponsors, general partners (GPs), fund counsel, CFOs and foreign sponsors evaluating Indian fund formation. It covers every stage from pre-incorporation to post-registration compliance. The minimum fund corpus for an AIF is ₹20 crore (₹10 crore for angel funds), and minimum investor commitments and concentration limits are detailed in the eligibility section below.

AIF Eligibility and Prerequisites

Sponsor and manager eligibility

The sponsor of an AIF must be a fit and proper person as defined under SEBI’s criteria. The investment manager, which may be the same entity as the sponsor or a separate entity, must have adequate experience, with key personnel possessing relevant professional qualifications and a demonstrable track record in fund management or advisory. SEBI evaluates the background, net worth and credentials of both sponsor and manager as part of the Form A review.

Minimum fund size and investor thresholds

Under the SEBI (AIF) Regulations, 2012, the minimum corpus of an AIF is ₹20 crore. For angel funds (a sub-category of Category I), the minimum corpus is ₹10 crore. Each investor in a Category I or Category II AIF must commit a minimum of ₹1 crore. For Category III AIFs, the minimum investor commitment is also ₹1 crore. For angel funds, the minimum investment by an angel investor is ₹25 lakh. The AIF must have no more than 1,000 investors in each scheme.

The concentration rule

SEBI imposes investment concentration restrictions to prevent over-exposure. Under these rules, an AIF may not invest more than 25% of its investable funds in a single investee company. Category I and II AIFs are further subject to diversification norms that limit the proportion of any one investor’s capital that may be deployed in a single asset, a framework sometimes referenced as the concentration norm. Sponsors should confirm the exact applicable limits for their chosen category directly against the prevailing SEBI circulars and the AIF Regulations.

Foreign sponsor and foreign investor eligibility

Foreign investors may invest in Indian AIFs, subject to the Foreign Exchange Management Act (FEMA) and the consolidated FDI policy administered by the Department for Promotion of Industry and Internal Trade (DPIIT). Foreign portfolio investors (FPIs) registered with SEBI may subscribe to AIF units. Non-resident Indians (NRIs) and other foreign entities may invest through the automatic route or the approval route depending on the sector in which the AIF deploys capital. Where a foreign sponsor controls or manages the AIF, additional RBI/DPIIT notifications on downstream investment and ownership reporting apply. Counsel should be engaged early to confirm FEMA pricing guidelines, sectoral caps and any prior-approval requirements.

Legal vehicle formation

The fund vehicle must be incorporated or registered before the Form A application is filed. For a company or LLP, this involves filing with the Ministry of Corporate Affairs (MCA). For a trust, a trust deed must be executed and, where required, registered under the Indian Registration Act or the relevant state trust legislation. The choice of vehicle affects governance structure, tax treatment and investor liability, a decision best made with qualified counsel.

Step-by-Step Procedure to Set Up an Alternative Investment Fund in India

The AIF registration process with SEBI follows a defined sequence. The table below summarises the key steps, responsible parties and typical durations, followed by a detailed walkthrough of each stage.

Step 1: Choose the fund structure, draft constitutional documents and the PPM

The sponsor and GP must first decide on the fund category (I, II or III), the legal vehicle (trust, company or LLP), and the investment strategy. Once these are settled, corporate counsel prepares the constitutional documents:

• Trust structure: execute and register the Trust Deed; appoint the trustee and the investment manager.
• Company structure: incorporate through MCA; file the Memorandum of Association (MoA) and Articles of Association (AoA).
• LLP structure: register through MCA; file the LLP Agreement.

Simultaneously, the GP drafts the Private Placement Memorandum (PPM), which must disclose the investment strategy, target sectors, fee structure (management fee and carried interest), risk factors, key personnel, conflict-of-interest policy and terms of the fund. The PPM is a mandatory attachment to the Form A application. This stage also involves an initial tax-structure review to determine whether a pass-through or non-pass-through treatment is optimal for the chosen category and investor base.

Typical duration: 2–4 weeks. Responsible party: Sponsor / GP + corporate counsel.

Step 2: Appoint fund service providers and establish governance

Before filing the SEBI application, the fund must have its governance infrastructure in place. Key appointments and tasks include:

• Appoint the investment manager (or confirm the sponsor entity as manager) and designate a compliance officer.
• Appoint a custodian registered with SEBI (mandatory for Category III AIFs and for Category I/II AIFs with a corpus above ₹500 crore; optional but recommended for others).
• For trust-structured AIFs, confirm the trustee and execute the trusteeship agreement.
• Draft and adopt the fund’s AML/KYC policy, including FATCA and CRS self-certification templates for investors.
• Prepare the investment management agreement, subscription agreement and contribution agreement templates.

These tasks can run in parallel with Step 1. The compliance officer must be identified by name in the Form A application.

Typical duration: 1–3 weeks (concurrent with Step 1). Responsible party: GP + admin service provider + counsel.

Step 3: File Form A on the SEBI SI Portal

The application for AIF registration is made in Form A, prescribed under the First Schedule of the SEBI (AIF) Regulations, 2012. Since SEBI’s transition to online filing, all applications are submitted through the SI Portal (siportal.sebi.gov.in). The procedural steps are:

1. Create an account on the SI Portal. Register the applicant entity with valid corporate credentials (PAN, email, authorised signatory details).
2. Complete Form A online. Populate all required fields: fund name, category and sub-category, sponsor and manager details, proposed investment strategy, compliance officer details, proposed custodian, fee structure and fund tenure.
3. Upload mandatory attachments. These include the PPM, Trust Deed (or MoA/AoA/LLP Agreement), board or trustee resolution, sponsor/manager KYC documents, net-worth certificates, AML/KYC policy, management agreement, proposed investor list and the fit-and-proper declarations. The full list is set out in the required documents section below.
4. Pay the application fee. The SEBI application fee is payable online through the SI Portal at the time of submission. Retain the payment receipt, it must be attached as part of the application record.
5. Submit and obtain acknowledgement. On submission, the SI Portal generates an acknowledgement number. SEBI typically confirms initial acceptance (or flags deficiencies) within 1–3 business days.

Practical portal tips: Upload all attachments as searchable PDFs. Where multiple documents are required for a single Form A field, combine them into a single compressed PDF with bookmarks. Name each file according to the Form A schedule reference (e.g., “FormA_Annexure3_PPM.pdf”, “FormA_Annexure5_TrustDeed.pdf”). This reduces the likelihood of deficiency notices and speeds SEBI’s internal routing.

SEBI’s substantive review typically takes 30–60 days from the date of a complete submission. During this period, SEBI may raise queries, usually communicated through the SI Portal or by email, requesting clarification on the investment strategy, sponsor credentials, fee disclosures or governance arrangements.

Typical duration: Portal submission takes one day; SEBI intake acknowledgement within 1–3 business days; substantive review and queries over 30–60 days. Responsible party: GP / authorised signatory + counsel.

Step 4: Respond to SEBI queries and obtain the Registration Certificate

Most applications attract at least one round of queries from SEBI. Common areas of inquiry include the adequacy of risk-factor disclosures in the PPM, the sponsor’s or manager’s track record, the basis for the proposed fee structure, and governance safeguards for investor protection. Responses should be filed through the SI Portal within 7–10 business days of receiving the query to avoid unnecessary delays or the risk of the application being treated as dormant.

Once SEBI is satisfied, it issues the Registration Certificate (RC). The RC specifies the AIF’s registered name, category, sub-category and SEBI registration number. No AIF may accept commitments or deploy capital until the RC has been granted.

Typical duration: 2–8 weeks after queries are resolved, depending on the complexity of the fund and the completeness of the initial filing. Responsible party: GP + counsel.

Step 5: First close, investor subscriptions and post-registration compliance

With the RC in hand, the fund proceeds to its first close. This involves:

• Circulating the final PPM to prospective investors.
• Completing investor KYC and AML checks, including FATCA/CRS self-certifications.
• Executing subscription agreements and receiving capital commitments.
• Issuing capital calls in accordance with the fund documents.

Post-registration, the AIF must comply with ongoing reporting obligations to SEBI, including periodic returns (quarterly and annual), annual audits, NAV reporting, compliance certificates and investor-level disclosures. The compliance officer is responsible for ensuring filings are made within SEBI’s prescribed deadlines.

Typical duration: 2–6 weeks to first close; compliance obligations are ongoing thereafter. Responsible party: GP + fund admin + compliance officer.

Required Documents and Information for AIF Registration

The documents listed below must be prepared and uploaded as part of the Form A application on the SI Portal. The table distinguishes between documents required at the time of initial filing and those that may be finalised before the RC is issued or before the first close.

Ensure every document is current at the time of filing. Net-worth certificates older than six months are commonly flagged by SEBI for refresh. The PPM should cross-reference the fund’s constitutional documents, any inconsistency between the Trust Deed and the PPM is a frequent cause of SEBI queries.

AIF Registration Timeline and Key Deadlines

The table below sets out a realistic end-to-end timeline for the AIF registration process, from initial vehicle formation through to first close and ongoing compliance.

The total elapsed time from the start of vehicle formation to the grant of the RC is typically 3–5 months for a straightforward application. Complex structures, including those with foreign sponsors, multi-scheme architectures or novel investment strategies, may extend to 6 months or longer. The single most common cause of delay is an incomplete initial filing; a second common cause is slow responses to SEBI queries. Responding to SEBI within 7–10 business days of receiving a query is strongly recommended to keep the application on track.

Post-registration, the fund must file periodic returns with SEBI (quarterly and annually), submit an annual audit report, and, for Category III AIFs, report NAV on a regular basis. Missed reporting deadlines can trigger SEBI show-cause notices and, in severe cases, suspension of the RC.

AIF Registration Costs, Fees and Tax Considerations

Understanding the full cost profile is essential when planning how to set up an Alternative Investment Fund in India. The table below summarises the principal cost items. All amounts are indicative and should be confirmed directly with SEBI (via the SI Portal) and with the relevant service providers at the time of filing.

Tax structuring considerations

Category I and Category II AIFs structured as trusts benefit from pass-through tax treatment under the Income Tax Act, meaning income (other than business income) is taxed in the hands of the investors rather than at the fund level. Category III AIFs do not currently receive pass-through status and are taxed at the fund level on their trading income. The tax treatment of carried interest, management fees, and gains on fund investments depends on the AIF’s category, the nature of the income and the investor’s residency status. Foreign investors should also consider withholding-tax obligations and the applicability of India’s double-taxation avoidance agreements (DTAAs). Tax counsel should be instructed alongside fund counsel from the outset.

What Changes in 2026: SEBI, DPIIT and FEMA Implications for AIF Registration

The AIF registration process in 2026 is shaped by several regulatory developments from 2025 and early 2026 that sponsors and fund managers must account for.

SEBI SI Portal and process updates

SEBI has progressively consolidated its intermediary registration processes onto the SI Portal, and early indications suggest that the portal’s document-upload and query-response workflows have been further streamlined in the 2025–2026 cycle. Industry observers expect that SEBI will continue to tighten the completeness checks applied at the point of Form A submission, meaning applications with missing or non-compliant attachments are more likely to be rejected at intake rather than accepted and then queried later. The practical effect is that applicants should treat the document checklist as an absolute prerequisite and avoid submitting placeholder documents.

DPIIT / FEMA developments affecting foreign investors

The DPIIT has continued to refine India’s consolidated FDI policy, with implications for AIFs that accept foreign capital or have foreign sponsors. FEMA regulations administered by the RBI govern pricing, reporting and downstream-investment obligations for AIFs with foreign participation. Where an AIF’s investment strategy involves sectors subject to FDI caps or conditions (such as defence, insurance, telecommunications or multi-brand retail), the fund must confirm sectoral compliance both at the time of SEBI registration and at the time of each deployment. Sponsors with cross-border structures should verify the latest DPIIT press notes and RBI master directions on foreign investment, as amendments to sector-specific conditions and reporting formats are issued periodically.

Practical impact for 2026 applicants

The likely practical effect of these changes is threefold: first, higher documentation standards at the Form A stage; second, stricter scrutiny of foreign-investor eligibility and downstream-investment compliance; and third, a greater emphasis on real-time reporting via digital portals rather than manual filings. Fund founders are advised to confirm the prevailing requirements directly with SEBI and RBI portals and, where any ambiguity remains, to engage qualified counsel before filing.

Common Pitfalls in AIF Registration and How to Avoid Them

• Incomplete Form A attachments. The most frequent cause of delay. Missing or outdated documents, particularly net-worth certificates, the PPM or trust-deed registration proof, result in deficiency notices. Mitigation: use the document checklist above as a compliance gate and verify that every attachment is current, properly signed and in searchable PDF format before submission.
• Inconsistencies between the PPM and constitutional documents. SEBI cross-references the fund’s investment strategy, fee terms and governance provisions across the PPM and the Trust Deed or MoA. Any mismatch triggers queries. Mitigation: have counsel perform a reconciliation review of both documents before filing.
• Incorrect investor categorisation. Misclassifying a foreign investor as domestic, or failing to disclose an investor’s NRI or FPI status, can raise FEMA compliance issues post-registration. Mitigation: complete investor KYC and residency verification before including them on the proposed-investor list filed with SEBI.
• Sponsor net-worth shortfall. The sponsor must demonstrate sufficient net worth to meet its minimum contribution commitment to the fund. Stale or insufficient net-worth certificates are a common deficiency. Mitigation: obtain a fresh CA-certified net-worth certificate dated within six months of the filing date.
• Delayed responses to SEBI queries. Letting SEBI queries sit unanswered for weeks can cause the application to become dormant. Mitigation: designate a single point of contact (typically the compliance officer or counsel) to monitor the SI Portal daily and respond within 7–10 business days.
• Failure to appoint a custodian where required. Category III AIFs and larger Category I/II funds must appoint a SEBI-registered custodian. Filing without this appointment will result in a deficiency notice. Mitigation: confirm the custodian requirement for your category and corpus size before filing Form A.

When to engage counsel

Engaging experienced fund-formation counsel is advisable in every case, but it is particularly critical where the fund involves cross-border investors or a foreign sponsor, tax-sensitive structures (such as multi-tier or feeder-fund architectures), sponsor or manager background issues that may require SEBI explanation, or material investor concentration that approaches regulatory limits. The cost of early legal advice is almost always lower than the cost of remedial filings, SEBI queries and registration delays.

Conclusion

Setting up an Alternative Investment Fund in India requires careful navigation of a multi-authority regulatory framework, anchored by the SEBI (AIF) Regulations, 2012 and supplemented by FEMA, DPIIT and MCA requirements. The AIF registration process in 2026 demands rigorous documentation, a thorough understanding of eligibility thresholds and concentration rules, and a methodical approach to the Form A filing on SEBI’s SI Portal. Sponsors and GPs who invest in proper preparation, complete documents, reconciled PPM and constitutional terms, and prompt responses to SEBI queries, consistently achieve faster registrations and smoother first closes.

For funds with cross-border investors or complex structures, engaging experienced counsel from the outset is not optional, it is the single most effective way to manage regulatory risk and accelerate the path to a successful launch. Find qualified India-based fund-formation counsel to guide your AIF registration.

Sources

1. SEBI, AIF FAQs / Regulations (official PDF)
2. SEBI, SI Portal
3. SEBI, Regulations & Circulars (official site)
4. Invest India, AIF FAQ / Guidance
5. DPIIT, Department for Promotion of Industry and Internal Trade
6. RBI, FEMA Notifications and Master Directions
7. Partners.AssetPlus, 2025 AIF Guide
8. ClearTax, AIF Registration Guide
9. KFintech, Steps to Invest in AIFs in India