AIF Registration: SEBI AIF or GIFT City Fund?

AIF registration comes down to a choice of regulator: SEBI (onshore) or IFSCA (GIFT City). Where investors are mostly Indian residents putting in rupees for Indian deals, the SEBI route generally involves fewer cross-border steps. Where they are mostly foreign investors or NRIs, or the portfolio is global, an IFSCA-regulated fund in GIFT City is the closer fit: it runs in a foreign currency (in practice usually USD), is treated as a person resident outside India under FEMA, and can invest in IFSC, India or abroad.

The two regimes in one paragraph each

GIFT IFSC. IFSCA regulates funds under the IFSCA (Fund Management) Regulations, 2025 (“FM Regulations”), as amended to 10 September 2026. The manager registers as a Fund Management Entity (FME) in one of three categories: Authorised FME, Registered FME (Non-Retail) or Registered FME (Retail) (Reg. 3(4), FM Regulations). It then files each scheme: Venture Capital Schemes, Restricted Schemes (filed as Category I, II or III AIF) or Retail Schemes (Regs. 18, 30, 42).

SEBI. The SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”), amended up to 14 July 2026, require the fund itself to register in Category I, II or III (Reg. 3(1), (4), AIF Regulations). Each scheme is then launched by filing a placement memorandum (Reg. 12).

SEBI published the Third Amendment Regulations, 2026 on 15 October 2026 (in force on Gazette publication). The changes below are described as decided by SEBI’s Board on 24 September 2026 (PR No. 59/2026), which the amendment implements; the exact wording is in the Gazette text.

The labels match on purpose. An IFSC restricted scheme for start-ups, SMEs, infrastructure or similar sectors “shall be filed before the Authority as Category I Alternative Investment Fund”; complex trading strategies go in Category III, and the rest in Category II (see Category I, II and III AIFs in GIFT City). Each “may be construed as” that category for the Income Tax Act, 1961 and FEMA (Reg. 30(1), Explanations).

AIF registration with SEBI: the route in brief

This is a summary of Chapter II of the AIF Regulations, not a full guide.

• Who registers. The fund itself. No entity may act as an AIF without a certificate of registration from SEBI (Reg. 3(1)). The fund may be a trust, company, LLP or body corporate (Reg. 2(1)(b)).
• Category. The applicant seeks registration in Category I (with a sub-category), II or III (Reg. 3(4)).
• Application. In Form A (First Schedule), with a non-refundable application fee under the Second Schedule, Part A (Reg. 3(5)). SEBI may ask for further information and may require the applicant, sponsor or manager to appear before it (Reg. 5(1)-(2)).
• Eligibility (Reg. 4). The constitutional document must permit AIF activity and prohibit an invitation to the public to subscribe to its securities (Reg. 4(a)-(b)). A trust must be a registered deed, and an LLP must be incorporated with its deed filed (Reg. 4(c)-(d)). The applicant, sponsor and manager must be fit and proper under Schedule II of the SEBI (Intermediaries) Regulations, 2008 (Reg. 4(f)). The manager’s key investment team needs at least one key person with a professional qualification in finance or a related field (Reg. 4(g)(ii)); Reg. 4(g)(i) requires a key person with a SEBI-specified certification. That requirement has applied since 10 May 2024 (SEBI circular, 13 May 2024). At least one key investment team member must hold NISM Series XIX-C, or XIX-D (Category I and II) or XIX-E (Category III) (Master Circular, paras 1.2.1-1.2.2). Accredited Investors only funds are exempt (proviso to Reg. 4(g)(i)). The manager or sponsor needs adequate infrastructure and manpower (Reg. 4(h)). The application must describe the objective, targeted investors, proposed corpus, strategy and tenure (Reg. 4(i)).
• Grant. SEBI may grant registration in a category if satisfied, issuing Form B on receipt of the registration fee, with conditions if it sees fit (Reg. 6(1)-(3)). An in-principle approval is available while the trust deed or LLP filing is completed (within six months); the fund may then accept commitments but not money until registered (Reg. 6(4)-(5)). The certificate is valid until the fund is wound up (Reg. 3(7)). Changing category later needs SEBI’s approval (Reg. 7(2)).
• Refusal. After a hearing, and communicated within thirty days (Reg. 8(1)-(2)).

Registration of the fund is the first step. Each scheme then needs its own placement memorandum (Reg. 12), covered in the table below.

The GIFT IFSC route in brief

In GIFT City the regulated entity is the manager, not the fund. It registers as a Fund Management Entity with IFSCA and then files each scheme. The steps, from FME registration to first close, are in the GIFT City AIF set-up guide. The comparison below shows how the two routes differ.

AIF registration side by side: SEBI vs IFSCA

Launch timing

Neither text sets a deadline for granting registration, so any quoted timeline is an estimate. In IFSC the set-up work sits with the manager: a principal officer based in IFSC, plus a compliance officer for a Registered FME (Reg. 7(1), (2), (5)); a dedicated office (Reg. 10(2)); and the SEZ steps in IFSCA’s indicative workflow, such as Unit Approval Committee approval and the Letter of Approval (IFSCA SWIT workflow). Deficiencies must be fixed within 30 days (Reg. 14(1)).

Under GARUDA the IFSC green channel is not, on its own, a large timing advantage.

Once the FME is registered, a VC or restricted scheme’s placement memorandum is valid for 12 months to reach first close. Each six-month extension costs 25% of the fresh filing fee the first time and 50% after that (Reg. 19(3), w.e.f. 30 January 2026; Reg. 31(3), w.e.f. 10 September 2026).

AIF registration fees: SEBI and IFSCA

SEBI. These come from the Second Schedule, Part A of the AIF Regulations:

IFSCA. The current fees are in IFSCA’s fee circular of 2 March 2026, corrected on 13 March 2026, which applies from FY 2026-27 (1 April 2026) (Fee Circular 2026, para 16; Schedule I, Part 2, section A):

• Application fee: USD 2,500 for any FME.
• FME registration: USD 5,000 (Authorised FME; Family Investment Fund: USD 15,000), USD 7,500 (Registered FME, Non-Retail) or USD 10,000 (Registered FME, Retail).
• Scheme filing: USD 5,000 (VC scheme or restricted Cat I), USD 10,000 (Cat II) or USD 15,000 (Cat III, retail scheme or ETF).
• Annual fees: a flat USD 3,000 per FME, plus USD 1,000 for each VC, restricted, retail or ETF scheme (other than co-investment Special Schemes).
• Modifying a scheme document: USD 500 (para 7.2).

The circular supersedes the April 2025 and other 2025 fee circulars from FY 2026-27: the corrigendum changed para 15.1 from the date of issuance to the date of commencement (Corrigendum IFSCA-DTFA/2/2026).

Tax in one line each

The full position, including the tax holiday, is in GIFT City tax benefits for funds and fund managers.

• Category I and II, SEBI or IFSC: Under s. 224 of the Income-tax Act, 2025, unit holders are taxed as if “the investments made by the investment fund [had] been made directly by him”. For an IFSC fund this is conditional. Section 224(10)(a), Schedule VI Note 1(g)(i) (even as amended by Finance Act 2026), s. 70(2) (“resultant fund”) and Schedule V still refer to the repealed IFSCA (Fund Management) Regulations, 2022. The result rests on Reg. 148(4) of the FM Regulations, which deems those references to be to the 2025 provisions; it is not confirmed by CBDT. The FM Regulations’ “taken on record” Explanations (Regs. 19(2), 31(2)) still refer to the Income Tax Act, 1961.
• Category III, SEBI: Outside s. 224, so no statutory pass-through.
• IFSC Category III, retail schemes and ETFs: These can be a “specified fund” if all units other than the sponsor’s or manager’s are held by non-residents, with a 5% allowance for holders who later become resident (Schedule VI, Note 1(g), Income-tax Act, 2025, as amended by Finance Act 2026, s. 125). Income in Sl. 1-4 (such as gains on securities other than shares of Indian companies, and income from securities issued by non-residents) is then exempt to the extent attributable to non-resident unit holders. Unit holders’ income from the fund is exempt (Sl. 9). The same 2022 cross-reference condition applies to specified-fund status.

FEMA: how a GIFT fund invests into India

Because an IFSC fund is a person resident outside India (see also the FEMA page), money it sends into India is foreign investment and must use a route open to non-residents. IFSCA has said that IFSC schemes and funds investing in listed Indian securities “are required to be registered as Foreign Portfolio Investors” (IFSCA circular, 2 May 2024, para 1). The same circular and the SEBI FPI amendments of 2024 let NRI, OCI and resident Indian investors contribute up to 100% of an IFSC-based FPI’s corpus, subject to conditions. Funds in other foreign jurisdictions cannot take more than 50% of their corpus from NRIs and OCIs (IFSCA FAQ Q176).

In the other direction, resident individuals may remit to IFSC under the Liberalised Remittance Scheme (LRS), up to USD 250,000 per financial year (RBI Master Direction – LRS, paras A.1, A.11), and “a person resident in India may make contribution to an investment fund or vehicle set up in an IFSC as OPI” (Schedule V, para 1(2), proviso (iii), FEM (Overseas Investment) Rules, 2022). RBI’s Directions name Indian entities (company, body corporate, LLP, registered partnership firm) and resident individuals (para 24(1), Master Direction – Overseas Investment). No ordinary route for trusts or HUFs is confirmed.

Decision guide

A SEBI AIF is generally the closer fit when most investors are Indian residents investing in rupees, the portfolio is Indian (overseas investment is capped), and Category I or II pass-through under s. 224 is wanted. With a resident investor base, the FEMA rules for foreign investment do not arise.

A GIFT IFSC fund is generally the closer fit when: – Investors are foreign institutions, family offices or NRIs seeking a USD fund. The eligibility rules are in who can invest in a GIFT City fund. – One vehicle is wanted for IFSC, India and other countries (Regs. 22, 34, 46). – Fund-level leverage is needed outside Category III, or a close-ended tenure shorter than SEBI’s 3 years. – Investors are non-resident and the strategy is Category III, so the “specified fund” regime may be available (subject to the 2022 cross-reference point above).

Running both. Nothing in either text stops a manager from running both side by side. A feeder from IFSC into India is permitted by the fund regulations: an IFSC VC scheme may invest in units of “alternative investment funds” (Reg. 22(1)(g)), a restricted scheme in “units of other investment schemes” (Reg. 34(1)(f)), and a SEBI AIF “may raise funds from any investor whether Indian, foreign or non-resident Indians” (Reg. 10(a), AIF Regulations). The reverse is harder. A SEBI AIF’s overseas investment must go into offshore venture capital undertakings, meaning a foreign company whose shares are not listed (Master Circular, para 5.1.2). Whether an IFSC fund qualifies as an offshore venture capital undertaking is not addressed in the text.

The fund regulations’ investment powers do not themselves establish FEMA compliance. An IFSC fund is a person resident outside India (FEMA IFSC Regulations, Reg. 3), so its subscription to a SEBI AIF is foreign investment in an investment vehicle (NDI framework, Schedule VIII). The AIF’s own investments in India may be indirect foreign investment, depending on who owns and controls its sponsor and manager (RBI Master Direction – Foreign Investment, paras 9.1.15, 9.3.4). The NDI Rules’ Schedule VIII text was not reviewed.

Co-investment tools exist on each side, but within one regime. IFSCA’s circular of 21 May 2025 lets an existing VC or restricted scheme set up an SPV “Special Scheme” for a single portfolio company. The existing scheme must hold at least 25%, and a term sheet is filed within 45 days of investment (paras 1(d), 2(b), 5(a)). SEBI’s equivalent is the Reg. 17A co-investment scheme (from 9 September 2025), open only to the fund’s accredited investors.

Common questions

Can Indian residents invest in a GIFT City fund? Yes, for individuals and Indian entities. Individuals can invest through the LRS (up to USD 250,000 a year). Companies, body corporates, LLPs and registered partnership firms can contribute as overseas portfolio investment (OI Directions, para 24(1)). No ordinary route for trusts or HUFs is confirmed. Scheme minimums still apply unless the investor is accredited.

Is a GIFT City fund a foreign investor when it invests in India? Yes (FEMA 339/2015-RB, Reg. 3). For listed Indian securities, it registers as an FPI.

Can GIFT City investors waive the sponsor commitment? For VC and restricted schemes, yes: the contribution is exempted if two-thirds of investors by value permit it, or if two-thirds of the investors are accredited (Regs. 28(4), 40(4)). Since 10 September 2026 it is measured on actual corpus rather than targeted corpus. Reg. 10(d) of the SEBI Regulations contains no investor waiver (it does not apply to angel funds or co-investment schemes, which have their own rules).

What is the AIF registration process with SEBI? The fund applies in Form A with the application fee, SEBI may seek further information, and on grant issues a certificate in Form B once the registration fee is paid (Regs. 3(5), 5, 6). See the summary above.

How long does SEBI AIF registration take? The Regulations set no deadline for granting registration. A rejection must be communicated within thirty days (Reg. 8(2)). Any quoted timeline is an estimate.

Can a SEBI AIF change its category after registration? Only with SEBI’s approval (Reg. 7(2)).

Sources

1. International Financial Services Centres Authority (Fund Management) Regulations, 2025, as amended up to 10 September 2026 (consolidated). IFSCA, 14 September 2026. ifsca.gov.in
2. IFSCA (Fund Management) (Second Amendment) Regulations, 2026 (IFSCA/GN/2026/015). IFSCA, notification dated 31 August 2026, Gazette uploaded 10 September 2026. ifsca.gov.in
3. IFSCA (Fund Management) (Amendment) Regulations, 2026 (IFSCA/GN/2026/006). IFSCA, notification dated 27 January 2026, Gazette of 28 January 2026 (effective 30 January 2026 per the consolidated text). ifsca.gov.in
4. FAQs on IFSCA (Fund Management) Regulations, 2025 (information updated to 30 June 2026). IFSCA, August 2026. ifsca.gov.in
5. Accredited Investors in IFSC (F. No. IFSCA-IF-10PR/1/2023-Capital Markets). IFSCA, 25 January 2024. ifsca.gov.in
6. Framework to facilitate Co-investment by Venture Capital Scheme and Restricted Scheme (F. No. IFSCA-AIF/6/2025-Capital Markets). IFSCA, 21 May 2025. ifsca.gov.in
7. Facilitating investments by NRIs and OCIs into Indian securities through Schemes / Funds in an IFSC (F. No. IFSCA-IF-10PR/2/2024-Capital Markets). IFSCA, 2 May 2024. ifsca.gov.in
8. Fee structure for the entities undertaking or intending to undertake permissible activities in IFSC (IFSCA-DTFA/1/2026). IFSCA, 2 Mar 2026 (applicable from FY 2026-27). ifsca.gov.in
9. Setting up a Unit in GIFT IFSC: workflow on the SWIT portal (v1.0). IFSCA, 7 July 2026. ifsca.gov.in
10. SEBI (Alternative Investment Funds) Regulations, 2012, last amended 14 July 2026 (before the Third Amendment of 15 October 2026). SEBI. sebi.gov.in
11. Master Circular for Alternative Investment Funds (HO/19/34/11(6)2025-AFD-POD1/I/12928/2026), Chapter 5. SEBI, 3 June 2026 (updated 30 July 2026). sebi.gov.in
12. Foreign Exchange Management (International Financial Services Centre) Regulations, 2015 (FEMA 339/2015-RB), as amended up to 7 January 2020. RBI, 2 March 2015. rbi.org.in
13. Master Direction – Liberalised Remittance Scheme (updated as on 6 September 2024), paras A.1 and A.11. RBI. rbi.org.in
14. Foreign Exchange Management (Overseas Investment) Rules, 2022, Schedule V. Ministry of Finance (hosted by RBI), 22 August 2022. rbi.org.in
15. Income-tax Act, 2025, s. 224 (Tax on income of investment fund and its unit holders). Income Tax Department. incometaxindia.gov.in
16. Income-tax Act, 2025, Schedule VI. Income Tax Department. incometaxindia.gov.in
17. Finance Act, 2026 (Act No. 4 of 2026), s. 125. Ministry of Law and Justice, Gazette of India, 30 March 2026.
18. Corrigendum to fee circular (IFSCA-DTFA/2/2026). IFSCA, 13 March 2026. Official URL not located
19. Securities and Exchange Board of India (Alternative Investment Funds) (Third Amendment) Regulations, 2026. SEBI, 15 October 2026. sebi.gov.in
20. Key decisions of the 215th SEBI Board meeting (PR No. 59/2026). SEBI, 24 September 2026. sebi.gov.in
21. SEBI Board memorandum on amendments to the AIF Regulations (accredited investors, para 9.1). SEBI, September 2026 (exact date not stated in the file reviewed). sebi.gov.in
22. Master Circular for Alternative Investment Funds (as updated 7 September 2026), paras 1.2.1-1.2.3. SEBI, 3 June 2026. sebi.gov.in
23. Certification requirement for key investment team of manager of AIF (SEBI/HO/AFD-1/AFD-1-PoD/P/CIR/2024/42). SEBI, 13 May 2024 (copy hosted by NISM). nism.ac.in
24. Green-Channel: AIF Rollout Upon Document Acknowledgement (GARUDA) mechanism (HO/19/19/11(2)2026-AFD-RAC2/I/17617/2026). SEBI, 30 July 2026. sebi.gov.in
25. Master Direction – Overseas Investment (FED Master Direction No. 15/2024-25), para 24(1). RBI, 24 July 2024, updated 1 April 2026. rbi.org.in
26. Master Direction – Foreign Investment in India, paras 9.1.15 and 9.3.4 (updated up to 15 June 2026). RBI. rbi.org.in
27. Foreign Exchange Management (Non-debt Instruments) Regulations, 2019 (FEMA 395/2019-RB), Schedule VIII (as amended to 13 June 2026). RBI. rbi.org.in
28. Income-tax Act, 2025, Schedule V; s. 70(2). Income Tax Department. incometaxindia.gov.in

Related reading

• GIFT City AIF Setup (2026): FME Registration to Fund Launch – the IFSC route step by step.
• Category I, II and III AIFs in GIFT City: Rules Compared – how the SEBI categories map onto IFSC schemes.
• GIFT City Tax Benefits for Funds and Fund Managers – the tax side of the choice.
• Who Can Invest in a GIFT City Fund: A Manager’s Guide – investor eligibility, including Indian residents and NRIs.
• Launch a GIFT City AIF Without Your Own FME – using a third-party manager.
• GIFT City FEMA guide – the foreign exchange rules for IFSC funds.

This article is general information and not legal advice. The legal framework and its application change over time; please take advice on your specific circumstances.