SEBI's Accredited Investor Overhaul: What It Means for HNIs, NRIs
SEBI's August 2026 consultation paper proposes a new securities market assets route to Accredited Investor status and deemed AI status for NRIs and OCIs, which would lower the minimum ticket size for Category I and II AIFs. Here is what changes, what stays the same until the final circular, and what AIF investors need for their ITR.
CA Harun Raaj
Chartered Accountant · Harun Raaj & Associates
Legal basis: Not yet codified — based on SEBI guidance as of September 2026.
SEBI's consultation paper on the Accredited Investor (AI) framework, released on 13 August 2026, is the most significant proposed change to AI eligibility since the framework was introduced. Public comments closed on 3 September 2026, and a final circular is expected within weeks. Until that circular is notified, the current rules apply. Here is what the framework says today, what SEBI has proposed, and what it means if you are an HNI or NRI client evaluating Alternative Investment Funds.
What Is an Accredited Investor Under SEBI Rules?
An Accredited Investor is an investor who has demonstrated sufficient financial sophistication — measured by income or net worth — to access higher-risk products at reduced minimum ticket sizes. The concept exists to let sophisticated investors access Category I and II AIFs at lower minimums than the standard regulatory floor.
Current eligibility thresholds for individuals:
- Annual income of ₹2 crore or more, or
- Net worth of ₹7.5 crore or more, with financial assets of at least ₹3.75 crore within that net worth
For body corporates: Net worth of ₹75 crore or more.
Accreditation matters because SEBI allows AIFs to accept accredited investors at minimum investment amounts as low as ₹25 lakh for Category I/II AIFs, against the standard ₹1 crore minimum. For a family allocating across multiple funds, that gap changes portfolio construction options materially.
A January 2026 SEBI circular already simplified the net worth certificate process — a Chartered Accountant now certifies only that the threshold has been met, without disclosing the investor's actual net worth figure in the certificate. This change is in effect and has removed a common friction point for HNI clients going through accreditation.
What SEBI Proposed in the August 2026 Consultation Paper
A New Securities Market Assets Route
The proposal adds a third accreditation route alongside income and net worth:
"Securities market assets" are broadly defined to include listed equities, mutual funds, bonds, and other SEBI-regulated instruments held in demat form. SEBI estimates this route alone could expand the potentially eligible pool to approximately 3.7 lakh investors, against roughly 96,000 existing AIF investors today. This matters for investors who are asset-rich in equities or mutual funds but whose formal income or net worth figures may not cross the existing thresholds.
NRIs, OCIs, and PROI as Deemed Accredited Investors
The proposal most relevant to NRI clients: all Persons Resident Outside India (PROI) as defined under FEMA 1999 — including NRIs, OCIs, and other non-resident foreign nationals — would be automatically deemed Accredited Investors, with no income or net worth threshold to clear.
SEBI's stated rationale is that NRIs, OCIs, and FPIs already operate under FEMA and FPI regulatory oversight, so a separate SEBI accreditation layer is duplicative. If adopted, an NRI client based in the UK or Singapore would qualify for the reduced Cat I/II AIF minimum regardless of reported India income — currently the biggest structural barrier for smaller NRI portfolios.
What Has Not Changed Yet
The proposal is at the consultation stage. Until SEBI notifies the final circular:
- Existing thresholds (₹2 crore income or ₹7.5 crore net worth) continue to apply.
- NRIs must still formally obtain accreditation, or invest at the standard ₹1 crore minimum.
- The accreditation-body framework (SEBI-recognised accreditation agencies) remains unchanged.
Key point: SEBI's August 2026 consultation proposes a securities market assets route and deemed Accredited Investor status for NRIs and OCIs, which — if finalised — would remove the biggest structural barrier to reduced-minimum AIF access for these investors.
Tax Treatment of AIF Investments
The accredited investor framework governs access and minimum investment amounts. Taxation of AIF returns is a separate question, governed by the Income Tax Act 1961 for AY 2026-27.
Category I and II AIFs [Section 115UB, ITA 1961]: Pass-through taxation means each investor is taxed on their proportionate share of the fund's income as if earned directly. An investor in a Cat II debt AIF, for example, pays slab rates on their share of interest income.
Form 64D and 64C: The AIF manager must file Form 64D with the Income Tax Department by 15 June of the following financial year, and furnish Form 64C to each investor by 30 June. Investors need Form 64C to correctly complete Schedule CG, Schedule OS, and Schedule FA in ITR-2 or ITR-3.
NRI investors in Cat I/II AIFs: Pass-through income retains its character. Long-term capital gains from listed equities within the AIF are taxed at 12.5% under Section 112A; short-term capital gains at 20% under Section 111A; interest at the applicable slab rate. TDS may apply at source, and Form 64C will show the India-source income.
GIFT City AIFs: A separate category — IFSC-registered Cat III AIFs may qualify for the Section 10(4D) exemption at the fund level, or investors may claim Section 80LA deductions. These structures need dedicated analysis and are outside the scope of this article.
Practical Steps for HNI and NRI Clients
- Collect Form 64C before filing your ITR. If you are invested in a Cat I/II AIF, request Form 64C from your AIF manager (due 30 June) to correctly complete ITR-2/3 for AY 2026-27.
- NRI clients: wait for the final SEBI circular. If the PROI deemed-AI proposal is adopted, formal accreditation becomes unnecessary. Holding off on accreditation paperwork until the circular is notified avoids duplicated effort.
- HNI clients with ₹5 crore or more in listed securities: track when the final circular is issued — the securities market assets route, if finalised, could qualify you without a net worth exercise.
- FEMA compliance is separate. SEBI Accredited Investor status does not resolve FEMA questions around remitting funds to invest in Indian AIFs. NRIs must separately ensure compliance with FEMA and RBI's Overseas Investment Direction requirements.
This article provides general information about SEBI's regulatory framework and Indian tax law as of September 2026. SEBI's accredited investor proposals described above are not yet final — verify the position against the official SEBI circular once issued. Taxation of AIF income cited here is under the Income Tax Act 1961 applicable to AY 2026-27 (FY 2025-26). Individual circumstances vary. This does not constitute investment, financial, legal, or tax advice.
I'm CA Harun Raaj, Visakhapatnam. If this proposal affects your AIF investments or NRI accreditation, reach out and we'll work through it with you.
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See Also
Frequently Asked Questions
Can an NRI invest in an Indian AIF today without becoming an Accredited Investor?
Yes, at the standard ₹1 crore minimum for Category I/II AIFs. The Accredited Investor framework lowers this minimum for qualifying investors, it does not restrict the ability to invest at all. If SEBI's proposed PROI deemed-AI status is finalised, NRIs would automatically access the reduced minimum without separate accreditation.
Does my PF or PPF count toward the SEBI net worth threshold for Accredited Investor status?
Under the January 2026 SEBI circular, the Chartered Accountant certificate only needs to confirm the net worth threshold is met, without disclosing the actual figure. What is included within net worth for that certification is determined by the CA based on the investor's financial assets and holdings.
I hold ₹6 crore in listed shares. Do I qualify as an Accredited Investor today?
Not under the current framework, which sets income or net worth as the criteria. The proposed securities market assets route (₹5 crore for individuals) was put forward in SEBI's August 2026 consultation paper but is not yet in force. It applies only once the final circular is notified.
What is the tax difference between Category I/II and Category III AIFs?
Category I and II AIFs use pass-through taxation under Section 115UB of the Income Tax Act, 1961 — each investor is taxed on their proportionate share of income at the applicable rate for that income's character. Category III AIFs are taxed at the fund level at the Maximum Marginal Rate, roughly 42.744% including the 37% surcharge above ₹5 crore, with investors receiving post-tax distributions.
What is Form 64C and why do AIF investors need it?
Form 64C is furnished by the AIF manager to each investor by 30 June, following the manager's filing of Form 64D with the Income Tax Department by 15 June. Investors need Form 64C to correctly populate Schedule CG, Schedule OS, and Schedule FA in their ITR-2 or ITR-3 for AY 2026-27.
When is SEBI expected to issue its final circular on the Accredited Investor framework?
SEBI released the consultation paper on 13 August 2026 and closed public comments on 3 September 2026. A final circular is expected within weeks of that closure, but until it is notified, the existing income and net worth thresholds remain the operative rules.
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