Category I AIF
Alternative Investment Funds that invest in start-ups, early-stage ventures, social ventures, SMEs, and infrastructure sectors that the government and regulators consider socially or economically desirable — attracting specific regulatory incentives.
- Socially / economically desirable sectors
- Start-ups and early-stage ventures
- SME and angel investments
- Infrastructure projects
- No leverage to make investments; short-term borrowing only, up to 30 days and 10% of investable funds
SEBI Definition
Under Regulation 3(4)(a) of the SEBI (Alternative Investment Funds) Regulations, 2012, Category I AIF means an alternative investment fund which invests in start-up or early stage ventures or social ventures or SMEs or infrastructure or such other sectors or areas which the Government or regulators consider as socially or economically desirable and shall include venture capital funds, SME funds, social venture funds, infrastructure funds and such other alternative investment funds as may be specified.
SEBI AIF Regs, 2012 – Schedule I
Why Category I AIFs Exist
The Category I designation exists to channel institutional capital towards sectors that drive economic development but may not attract sufficient funding through conventional market mechanisms. By providing a regulated framework with potential government incentives, SEBI has encouraged the formation of specialised funds targeting India's innovation economy, rural infrastructure, and social enterprises.
For investors, Category I AIFs represent an opportunity to participate in early-stage wealth creation — venture capital, angel co-investment, and infrastructure development — within a regulated, transparent structure with defined governance obligations.
Fund Types
Venture Capital Funds
Invest in early-stage startups and growth-stage technology companies. Typically hold concentrated positions with long horizons of 7–10 years, targeting IRRs of 20–30%.
View FundsAngel Funds
A direct sub-category of Category I permitting pooled angel investments into start-ups. Raises only from Accredited Investors with no minimum ticket; each investee investment falls between ₹10 Lakh and ₹25 Crore.
View FundsInfrastructure Funds
Deploy capital into roads, airports, power generation, water treatment, and logistics. Offer inflation-linked, long-duration cash flows with government concession structures.
View FundsSocial Venture Funds
Target enterprises with measurable social or environmental impact alongside financial returns. Aligned with ESG mandates, SDG goals, and impact investing frameworks.
View FundsSME Funds
Provide growth capital to small and medium enterprises. Typically invest via structured equity or quasi-equity in businesses with ₹10–500 Cr revenue.
View FundsRegulatory Requirements
SEBI Registration
- Must register with SEBI before commencing operations
- Submit Form A along with due diligence and track record
- Application fee: ₹1 Lakh + 18% GST. Registration fee on approval: ₹5 Lakh + 18% GST (₹2 Lakh for Angel Funds)
- Scheme fee: ₹1 Lakh + 18% GST per scheme, payable when the placement memorandum is filed. The first scheme launched by an AIF is exempt; the fee does not apply to Angel Funds
- Angel Funds: a further ₹1 Lakh to refile a placement memorandum under Regulation 19D(7) where first close is not declared in the specified manner
- Annual compliance report to SEBI
Structural Requirements
- Minimum corpus: ₹20 Crore per scheme
- Maximum 1,000 investors per scheme
- Each investor minimum: ₹1 Crore (₹25L for employees)
- Close-ended structure with minimum 3-year tenure
Disclosure Requirements
- Offer document / Private Placement Memorandum mandatory
- Quarterly portfolio disclosure to investors
- Annual audit by registered Chartered Accountant
- Material changes require investor intimation
Operational Obligations
- Appointment of Custodian for securities
- Separate bank account for each scheme
- No co-mingling of assets across schemes
- Investment Manager must hold 2.5% co-investment or ₹5 Crore
Tax Treatment
Pass-Through Status
Category I AIFs enjoy pass-through tax treatment under Section 224 of the Income-tax Act, 2025. This means income (other than business income) is not taxed at the fund level. Instead, it is deemed to be the income of the investor and taxed at the investor's applicable rate in the year of accrual.
Taxed at investor level — listed equity LTCG at 12.5% on gains above ₹1.25 Lakh, STCG at 20%. Unlisted: LTCG 12.5% without indexation after 24 months; short-term gains as per slab.
Passed through to investors and taxed at their applicable income tax slab rate.
Exception: Business income is taxed at the fund level at Maximum Marginal Rate before pass-through.
Key Characteristics at a Glance
Minimum Corpus
₹20 Crore
per scheme
Min. Investor Ticket
₹1 Crore
₹25L for employees
Max. Investors
1,000
per scheme
Fund Structure
Close-Ended
mandatory
Minimum Tenure
3 Years
from final close
Leverage
Not Permitted
except short-term borrowing
Taxation
Pass-Through
Sec. 224, IT Act 2025
Skin-in-the-Game
2.5% / ₹5 Cr
whichever is lower
Explore Category I Funds
Browse registered Category I AIFs available through Platizio Alternatives's institutional platform.