Comparison · SEBI-regulated vehicles

PMS vs AIF vs Mutual Fund

Three SEBI-regulated ways to have someone else manage your money, separated by how much you must commit, what you actually own, and how the returns are taxed.

The Short Answer

Mutual fund — from ₹500, pooled units, fully liquid
PMS — from ₹50 Lakhs, securities in your own demat
AIF — from ₹1 Crore, pooled units, close-ended

Side by Side

Feature	PMS	Mutual Fund	AIF
Min Investment	₹50 Lakhs	₹500	₹1 Crore
Ownership	Direct (demat)	Units of pool	Units of pool
Customisation	High – bespoke	None	Limited
Transparency	Full holding-level	Monthly disclosure	Periodic
Leverage	Not allowed	Not allowed	Allowed (Cat III)
Regulation	SEBI PMS Regs 2020	SEBI MF Regs	SEBI AIF Regs 2012
Taxation	Investor level	Investor level	Cat I/II pass-through; Cat III fund level
Liquidity	Notice period, typically 30–90 days	Open-ended, T+1 to T+3	Close-ended, 3-year minimum tenure

What you own

This is the sharpest structural difference. A PMS holds securities in your own demat account, so you can see every position and the portfolio can be tailored to you. Mutual funds and AIFs both issue units of a pooled vehicle — the fund owns the securities, and every investor holds the same blend.

What it costs to enter

SEBI sets a floor for two of the three: ₹50 Lakhs for PMS and ₹1 Crore for an AIF, reduced to ₹25L for employees and directors of the Manager. An AIF scheme must also reach a corpus of ₹20 Crore and is capped at 1,000 investors.

How gains are taxed

PMS and mutual funds are taxed in your hands. Category I and II AIFs are pass-through under Section 224, Income-tax Act 2025. Category III is the exception — taxed at the fund at the maximum marginal rate of ~42.744%, so distributions reach you already taxed.

Frequently Asked Questions

What is the minimum investment for PMS, AIF and mutual funds?

SEBI sets the PMS minimum at ₹50 Lakhs per client and the AIF minimum commitment at ₹1 Crore per investor (₹25L for employees and directors of the Manager). Mutual funds have no comparable floor — most accept a few hundred rupees.

Do I own the shares directly in PMS, AIF or a mutual fund?

In PMS you own the underlying securities directly in your own demat account. In both AIFs and mutual funds you own units of a pooled vehicle instead, and the fund owns the securities.

How is each vehicle taxed?

PMS and mutual funds are taxed in the investor's hands. Category I and II AIFs have pass-through status under Section 224 of the Income-tax Act, 2025, so income other than business income is taxed at the investor level. Category III AIFs are taxed at the fund level at the maximum marginal rate of ~42.744%.

Which should an HNI choose first?

The ₹50 Lakhs PMS floor is half the ₹1 Crore an AIF requires, and PMS portfolios stay liquid and fully transparent at holding level, so PMS is often the first step into managed alternatives. AIFs open up strategies a PMS cannot run — private equity, private credit, and leveraged Category III books.

Can an AIF use leverage when a PMS cannot?

Yes. Category III AIFs may lever up to Up to 2× NAV under the SEBI Master Circular. Categories I and II may not borrow to invest, and PMS mandates do not permit leverage either.