Accredited Investors in India: Who Qualifies and What It Unlocks

The US has “qualified purchasers” and “accredited investors”. India introduced its own framework in 2021. It matters because it decides which private market products you can buy and at what ticket size.

The eligibility tests

What it changes

Accreditation is a signal that you can take more risk with less protection. It does not tell you whether a particular fund is any good. Our PMS vs AIF vs direct equity comparison covers how to compare routes.

The trade-off

Before committing, write an investment memo, using our family office memo template.

The financial thresholds

SEBI introduced the accredited investor framework through amendments to the AIF and PMS regulations in 2021. For individuals, HUFs, family trusts and sole proprietorships, any one of these tests qualifies:

For body corporates, the threshold is a net worth of at least ₹50 crore. Trusts other than family trusts need a net worth of at least ₹50 crore, and partnership firms are assessed on each partner meeting the individual test. Certain institutions, such as qualified institutional buyers and family trusts above specified sizes, are treated as accredited automatically.

The financial asset requirement matters. A family whose ₹10 crore net worth is almost all property does not qualify under the net worth test if its financial assets are below ₹3.75 crore.

How to get accredited

Accreditation is not self-declared. It is issued by an accreditation agency, which in practice means a subsidiary of a KYC registration agency (KRA) or a depository.

1. Apply online through the accreditation agency.
2. Submit proof: income tax returns for income tests, and a net worth certificate from a chartered accountant with statements of financial assets.
3. The agency verifies and issues an accreditation certificate.
4. The certificate is valid for a limited period, typically one year, and longer for applicants who have met the test consistently over prior years. Renew before it lapses.

What changes once you are accredited

• Lower ticket sizes: AIF managers may accept less than ₹1 crore, and PMS managers less than ₹50 lakh, from accredited investors. The manager decides; it is not automatic.
• Large Value Funds: AIF schemes in which every investor is accredited and commits above a high minimum can get relaxations, including a lighter filing process and more flexible concentration limits. SEBI has revised the minimum commitment for these funds, so check the current figure.
• Customised PMS: a PMS can offer bespoke arrangements, including on fees, to accredited clients.
• Fewer protections: you give a written consent that you understand the lower regulatory safeguards for these products.

Accredited investor vs HNI vs QIB

These terms are often used interchangeably, but they differ:

Being an HNI in an IPO application does not make you accredited. Accreditation must be applied for.

Should you become accredited?

Accreditation is useful if you already plan to invest in AIFs or PMS and want flexibility on ticket size or structure. It is not a reason to invest in them. Private funds are illiquid, often for 5–10 years, charge higher fees, and report less often than mutual funds. Before using the status, check the manager’s track record over a full cycle, the fee structure including carry, and the exit terms. A disciplined pre-IPO and unlisted due diligence process applies equally here.

The global comparison

India’s thresholds are lower in absolute terms but high relative to median incomes. The design choice that stands out is the financial-asset condition, which excludes families whose wealth sits mostly in property or a private business.

The products accreditation unlocks

Category I AIFs invest in startups, early-stage companies, social ventures and infrastructure. Category II AIFs include private equity, private credit and real estate funds. Category III AIFs run hedge-fund style strategies, including long-short equity, using leverage within limits. PMS gives you a separately managed portfolio of listed securities held in your own name.

Each carries different risks:

Accreditation lowers the entry point to these products. It does not reduce their risk.

Tax considerations

Category I and II AIFs have pass-through status: income is taxed in the investor’s hands as if earned directly, except business income, which is taxed at the fund level. Category III AIFs are taxed at the fund level, often at the maximum marginal rate, which reduces post-tax returns for investors in lower brackets. PMS gains are taxed directly in your hands, trade by trade, because you own the securities. That last point matters for reconciliation: a PMS can generate hundreds of transactions a year, each of which flows into your capital gains schedule, as covered in our AIS and capital gains guide.

Practical steps for a family office

1. Decide which family entity should hold private investments: individuals, an HUF, a family trust or a company. Each has different thresholds and tax treatment.
2. Prepare a CA-certified net worth statement with financial assets itemised.
3. Apply for accreditation for the chosen entity and diarise the renewal date.
4. Build an allocation limit for illiquid assets, often 10–25% of investable wealth, before talking to managers.
5. Run each opportunity through the same memo and due diligence process.