SEBI Proposes ₹5 Crore Securities Route for Accredited Investors: What HNIs Need to Know About AIF Access in 2026

In August 2026, SEBI released a consultation paper proposing a major overhaul of India's Accredited Investor (AI) framework — one that could open the doors of AIFs, Specialised Investment Funds (SIFs), and sophisticated PMS structures to a much larger population of High Net Worth Individuals. If finalized, the proposed ₹5 crore securities-asset route could triple the number of eligible investors from approximately 100,000 to 400,000.

This article explains what the Accredited Investor framework is, what SEBI is proposing, and why it matters for HNIs and business owners with significant investment portfolios.

Note: This article is based on the SEBI consultation paper dated 13 August 2026. The proposed changes are not yet in force. SEBI invited public comments by 3 September 2026. Final circular, if issued, will be the operative document.

What Is an Accredited Investor Under the Current Framework?

SEBI introduced the Accredited Investor framework in August 2021 (SEBI Circular SEBI/HO/IMD/DF6/CIR/P/2021/655, 3 August 2021) to allow sophisticated investors access to investment products with lighter regulatory requirements — products that are typically unsuitable for retail investors.

Under the current framework, an individual qualifies as an Accredited Investor if they meet any one of these criteria:

• Annual income of ₹2 crore or more, OR


• Net worth of ₹7.5 crore or more (of which at least ₹3.75 crore must be in financial assets), OR


• Annual income of ₹1 crore or more AND net worth of ₹5 crore or more.

Verification is done through Accreditation Agencies (currently BSE, NSE, CDSL, NSDL). An accreditation certificate is required to access AI-specific benefits.

What Is SEBI Proposing to Change?

SEBI's August 2026 consultation paper proposes adding a new standalone eligibility route: securities market assets of ₹5 crore or more for individuals, or ₹20 crore or more for body corporates.

The proposed "securities market assets" that would count include:

• Equity shares (listed or unlisted, held in demat)


• Debt instruments


• Units of REITs and InvITs


• (Specific list to be defined in the final circular — the consultation paper gives indicative categories)

Critically, this would not require the applicant to meet the income or net-worth tests. A promoter or a professional who has accumulated a ₹5 crore-plus equity portfolio but whose declared income is modest, or whose real-estate heavy net worth does not meet the ₹7.5 crore test, could qualify under this route.

SEBI estimates this single change could expand the AI-eligible population from approximately 100,000 to 400,000 — a fourfold increase.

Why Does AI Status Matter? — The Access Benefits

Accredited Investor status is not a tax benefit. It is an access benefit — it determines which investment vehicles and structures a person may legally participate in, under more flexible regulatory terms.

Alternative Investment Funds (AIFs): Cat I and Cat II AIFs typically require a minimum investment of ₹1 crore (SEBI AIF Regulations 2012). For investors who qualify as AIs, SEBI has proposed (and partially implemented) the ability for all-AI AIFs to operate with lower minimum thresholds and reduced reporting requirements.

Specialised Investment Funds (SIFs): SEBI's mutual fund framework allows SIFs to cater to sophisticated investors with structures and strategies not permitted in regular open-ended or closed-ended mutual funds. AI status may be a gateway condition.

AIF Reporting Framework (2026): SEBI's March 2026 AIF master circular introduced an Annual Activity Report and a simplified quarterly reporting framework. AIFs where all investors are Accredited Investors may benefit from lighter compliance under the proposed framework.

AIF Investor Taxation — What Changes When You Invest?

Entering an AIF as an Accredited Investor does not change how you are taxed. Taxation follows the nature of the AIF:

Category I and Category II AIFs — Pass-Through:
Under Section 115UB of the Income-tax Act 1961, Cat I and Cat II AIFs are treated as pass-through vehicles. Each investor is taxed as if they received their proportionate share of the fund's income directly, in the same nature as the fund earned it.

• If the fund earns LTCG → investor reports LTCG in their ITR


• If the fund earns dividend income → investor reports dividend income


• If the fund earns interest → investor reports interest income

Category III AIFs — Fund-Level Tax:
Cat III AIFs are taxed at the fund level at the Maximum Marginal Rate (30% plus applicable surcharge and cess). Investors in Cat III AIFs do not receive pass-through income — they receive post-tax returns.

Note: ITA 2025 section numbering for the Section 115UB equivalent has not been confirmed from a primary CBDT circular as of August 2026. Use ITA 1961 references in formal computations.

Common Mistakes HNIs Make With AIF Investments

Not maintaining Form 64D documentation: Many HNI investors hold AIF units but receive distributions without tracking Form 64D. This creates errors in ITR-2/3 capital gains and Schedule OS reporting, which can trigger AIS mismatches.

Confusing Cat III post-tax returns with pre-tax returns: A Cat III AIF quoting 18% returns is quoting a post-MMR figure from the fund. Investors sometimes double-count the tax paid at the fund level.

Ignoring the lock-in and illiquidity profile: AI status unlocks access, not liquidity. AIFs are typically closed-ended with 3–7 year lock-ins. Promoters with concentrated equity who invest exit proceeds into AIFs must model cash flow needs carefully.

Treating AI accreditation as permanent: Accreditation is not permanent. It must be renewed and the investor must continue to meet eligibility criteria.

Generic Planning Points — Discuss With Your CA

• If your current securities portfolio is approaching ₹5 crore, it may be worth tracking this threshold as SEBI's final circular will define which assets count.
• For existing AIF investors: ensure Form 64D is received from the fund manager before 31 July / 31 August (applicable ITR due date) to report income correctly.
• Promoters post-exit evaluating AIF deployment: the pass-through taxation structure of Cat I/II AIFs may be more efficient than Cat III, depending on the nature of returns.
• If your advisor suggests an AIF, verify the SEBI registration and the AIF category before proceeding. SEBI's AIF registration is publicly searchable on sebi.gov.in.

Frequently Asked Questions

Q1. If SEBI finalises the ₹5 crore securities route, do I automatically become an Accredited Investor?
No. You would still need to apply through an Accreditation Agency (BSE, NSE, CDSL, NSDL) and obtain an accreditation certificate. Automatic conferral of status is not the proposal.

Q2. Do mutual funds (other than SIFs) offer any different treatment to Accredited Investors?
For regular open-ended mutual funds, AI status does not currently confer a different product. The benefits are primarily in AIFs, SIFs, and certain PMS structures.

Q3. Is the ₹5 crore threshold on market value or cost of acquisition?
The consultation paper suggests market value of securities — but this is a proposal. The final circular will define valuation methodology. Verify before using this threshold for planning.

Q4. How does the SEBI Accredited Investor status interact with NRI status under FEMA?
NRIs can also qualify as Accredited Investors subject to FEMA portfolio investment route compliance. AIF investment by NRIs involves FEMA repatriation rules and RBI notifications, which are separate from the AI eligibility threshold. A CA familiar with both SEBI and FEMA frameworks should be consulted.

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This article provides general information about SEBI's regulatory framework for Accredited Investors and does not constitute investment, financial, legal, or tax advice. Individual circumstances vary significantly. The proposals described are based on a consultation paper and are not yet in force. Consult a SEBI-registered investment adviser, Chartered Accountant, or legal advisor before making any investment decisions. Harun Raaj & Associates is not a SEBI-registered Investment Adviser.

Learn more about our PMS and AIF taxation services and wealth management advisory.

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See Also

• SEBI's MF-PMS Framework: ₹25L Minimum, 2.5% Fee Cap Explained
• SEBI Clarifies Intraday Borrowing by Mutual Funds: What It Means
• SEBI Exemption Order for Waaree Energies: What Listed Companies Should Know

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