The Securities and Exchange Board of India (SEBI) overhauled the regulatory framework for angel funds with the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2025, notified on 08 September 2025, followed by Circular No. SEBI/HO/AFD/AFD-POD-1/P/CIR/2025/128 dated 10 September 2025. The changes are more structural than cosmetic: angel funds are no longer a sub-category of Venture Capital Funds under Category I, the scheme construct has been dismantled, the single-company concentration cap has been removed entirely, and investor access is now restricted to accredited investors who are simultaneously treated as Qualified Institutional Buyers (QIBs) for angel fund purposes under an amendment to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. For the 103 registered angel funds that collectively held total commitments of ₹10,138 crore as of 31 March 2025, this is not incremental tinkering. It is a full regulatory reset. The amendments follow the Union Budget 2024-25 announcement abolishing angel tax under Section 56(2)(viib) of the Income Tax Act, 1961, which removed one of the primary friction points in the ecosystem and cleared the way for SEBI to raise governance standards without being accused of piling on. This article walks through every material change, the registration process as it stands today, the compliance calendar for existing funds, and the open questions the circular has left unanswered.
What is an angel fund under SEBI AIF Regulations, and what changed in September 2025?
An angel fund is a Category I Alternative Investment Fund (AIF) registered with SEBI under Chapter III-A of the SEBI (Alternative Investment Funds) Regulations, 2012 (AIF Regulations), designed to pool capital from angel investors for direct investment in early-stage startups. Before September 2025, angel funds operated as a sub-category of Venture Capital Funds. They could accept investments from a broad pool of “angel investors” who self-declared a minimum net worth of ₹2 crore (individuals) or ₹10 crore (body corporates). Each investment was structured as a separate scheme with up to 200 investors per scheme, and term sheets had to be filed with SEBI for each scheme.
The September 2025 amendments changed six things at the structural level. First, angel funds are now a standalone sub-category under Category I AIF, distinct from Venture Capital Funds. Second, the scheme construct is gone. Regulation 19E of the AIF Regulations now explicitly bars angel funds from launching schemes, and all operations consolidate at the fund level. Third, the investor access standard has changed from self-declared net worth to formal accreditation, and accredited investors are simultaneously treated as QIBs under the SEBI (ICDR) Regulations, 2018, bypassing the 200-investor private placement cap under Section 42(2) of the Companies Act, 2013. Fourth, investment thresholds have been revised: the minimum per investee drops from ₹25 lakh to ₹10 lakh, while the maximum rises from ₹10 crore to ₹25 crore. Fifth, the 25% single-company concentration limit under Regulation 19F(5) has been removed entirely. Angel funds can now concentrate their entire investment pool in one company if they choose to. Sixth, manager skin-in-the-game has been restructured from a fund-level commitment to a per-investment obligation.
The consultation paper behind these amendments, published on 13 November 2024, cited three concerns: inadequate investor verification given the high-risk nature of early-stage investing, lack of transparency in how investment opportunities were allocated among investors in a fund, and the operational redundancy of the scheme structure when investors were already consenting deal by deal. A second consultation paper, published on 21 February 2025, specifically addressed the QIB treatment of accredited investors to resolve the tension between angel fund operations and Section 42(2) of the Companies Act, 2013.
Who qualifies as an accredited investor, and how does the QIB treatment work?
An accredited investor (AI) for the purpose of angel fund participation is defined under Regulation 2(1)(ab) of the AIF Regulations, as amended. To qualify, an individual, Hindu Undivided Family (HUF), family trust, or sole proprietorship must meet one of two tests:
- Net worth of at least ₹7.5 crore, of which a minimum ₹3.75 crore is held in financial assets; or
- Annual income of at least ₹1 crore and a minimum net worth of ₹5 crore, of which at least ₹2.5 crore is in financial assets.
For a body corporate or partnership firm (where each partner independently meets eligibility criteria), the accreditation threshold is a net worth of at least ₹50 crore.
Accreditation is granted by agencies authorised by SEBI. Currently, National Stock Exchange of India Limited (NSE), BSE Limited, and CDSL Ventures Limited are the designated accrediting bodies. The process involves submitting financial documents to the accreditation agency, which verifies net worth or income and issues a certificate with a defined validity period.
The regulation also permits “deemed accredited investor” status under Regulation 2(1)(ab), covering categories such as certain senior management personnel of listed companies (CXOs), Chartered Accountants and legal professionals with ten or more years of experience, and other categories specified by SEBI. The deemed accreditation route bypasses the financial threshold test entirely and is verified by the fund manager at the time of contribution.
The QIB bridge: why it matters for scale
Before the September 2025 amendments, angel funds operated in a structural conflict. The Companies Act, 2013 limits private placement offers to 200 investors under Section 42(2), excluding QIBs. Angel funds were separately capped at 200 investors per scheme. But the fund could offer an investment opportunity to a far larger number of investors before restricting allotment to 200, raising concerns that this functioned as a circumvention of public offering norms from the investee company’s perspective.
The fix: SEBI amended the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 to treat accredited investors as QIBs for the limited purpose of investing in angel funds. QIBs are excluded from the 200-person cap under Section 42(2) of the Companies Act, 2013. This means an angel fund can now offer investment opportunities to, and accept allotments from, more than 200 accredited investors in a single investee company without triggering public issue norms. The scheme-level 200-investor cap has been removed entirely. The fund-level investor count is now theoretically unlimited, subject only to the accreditation requirement.
The practical constraint remains accreditation scale. As of May 2025, only 649 investors had obtained formal accreditation in India. SEBI acknowledged in the consultation paper that it would consider easing accreditation requirements, but those relaxations had not been notified as of the date of this article. Fund managers building investor pipelines post-September 2025 must work with this thin pool and maximise the deemed accreditation route.
Accredited investor eligibility at a glance
| Investor category | Net worth test | Income + net worth test |
|---|---|---|
| Individual / HUF / family trust / sole proprietorship | Net worth ≥ ₹7.5 cr (min ₹3.75 cr in financial assets) | Annual income ≥ ₹1 cr + net worth ≥ ₹5 cr (min ₹2.5 cr in financial assets) |
| Body corporate | Net worth ≥ ₹50 cr | Not applicable |
| Partnership firm | Each partner independently meets individual criteria | As above |
| Deemed accredited (e.g. CXO of listed co.) | No financial threshold required | Verified by manager at contribution |
How does the reclassification to Category I AIF change how angel funds operate?
Prior to September 2025, angel funds were a sub-category of Category I AIF: Venture Capital Funds. Under the amended AIF Regulations, they are recognised as a standalone sub-category: Category I AIF: Angel Fund. This matters for three operational reasons.
First, compliance obligations that previously applied at the “scheme” level now apply at the fund level. Provisions of the AIF Regulations that referenced a “scheme of an AIF” are read, where applicable, as references to the angel fund itself. Second, the reclassification affects how SEBI monitors and categorises the fund in its SEBI Intermediary Portal (SI Portal). Existing angel funds registered before 10 September 2025 are automatically deemed to be registered under the new Category I AIF: Angel Fund classification; no fresh registration is required for that change alone. Third, it positions angel funds to benefit directly from any Category I-specific regulatory treatment SEBI extends in future amendments, rather than inheriting those benefits indirectly through the VCF sub-category.
What are the investment rules under the revised angel fund framework?
The revised framework dismantles the scheme structure entirely and introduces direct, fund-level investing. Each decision to invest in an investee company requires specific, individual consent from each participating investor. This deal-by-deal consent is a defining characteristic of angel funds that distinguishes them from all other AIF categories. In that sense, an angel fund is not a blind-pool product: it is closer to a portfolio management service model where investors opt in to each opportunity, but investments are held in the name of the fund rather than the individual.
Investment thresholds (revised from September 2025)
The minimum investment per investee company is ₹10 lakh (reduced from ₹25 lakh). The maximum is ₹25 crore per company (increased from ₹10 crore). The total investment in any investee, including follow-on investments, must not exceed ₹25 crore in aggregate.
Concentration limit: removed
Under Regulation 19F(5) as it existed before September 2025, an angel fund could not invest more than 25% of its total investments in a single investee company. This restriction has been removed in its entirety by the Second Amendment Regulations. Angel funds can now concentrate their entire investment pool in a single company if they choose. No other AIF category has this flexibility. Even large value funds for accredited investors of Category I and II are subject to a 50% concentration ceiling. This makes angel funds uniquely positioned for high-conviction investing, but it also places a greater premium on the allocation methodology and conflict-of-interest disclosures in the PPM.
Investee company eligibility: the corporate group and family connection bars
Angel funds can only invest in startups that meet the DPIIT startup recognition criteria under Regulation 19F(1). Specifically, the investee company must:
- Comply with the age, turnover, and innovation criteria specified by the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry, currently incorporated within ten years and with turnover not exceeding ₹100 crore in any financial year since incorporation
- Not be promoted, sponsored by, or related to a corporate group whose group turnover exceeds ₹300 crore. “Corporate group” is defined in Regulation 19F(1) to include body corporates with the same promoter or promoter group, parent-subsidiary chains, companies under common control, and associates or holding companies of the investee
- Not have any family connection between any of the investors proposing to invest and the founders or promoters of the investee company
The family connection bar is a hard prohibition under the original AIF Regulations and is carried forward unchanged. It exists to prevent angel funds from being used as a vehicle for related-party investing dressed up as arm’s-length institutional capital. Fund managers must conduct this check at the investment level for every deal.
Term sheet records without SEBI filing
The requirement to file term sheets with SEBI for each investment has been removed. Angel funds must maintain internal records of term sheets for every investment, including the list of investors who participated and their contribution amount. SEBI may inspect these records during routine oversight.
Follow-on investments in companies that have lost startup status
Angel funds may make follow-on investments in companies that are no longer classified as startups, subject to conditions under the proviso to Regulation 19F(1). The post-issue shareholding percentage of the angel fund must not exceed its pre-issue shareholding percentage, investors in the follow-on must participate pro-rata to their original commitment, and the aggregate investment including follow-on must not exceed ₹25 crore. This provision matters for funds that backed early-stage companies before those companies crossed DPIIT thresholds.
Lock-in period
A one-year lock-in applies to all angel fund investments from the date of investment. This reduces to six months for third-party sales, meaning sales to investors who who were not part of the original investment in the investee company. The lock-in now applies at the fund level, not the scheme level.
Overseas investments
Angel funds may invest up to 25% of their total investments (calculated at cost) in overseas companies. This requires a No Objection Certificate (NOC) from SEBI and must comply with guidelines issued by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA), 1999. The 25% cap is calculated on total investments held at cost as of the date of filing the SEBI application for overseas investment, not on the total committed corpus. Related parties of the investee company, as defined under Regulation 2(1)(zb) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, are barred from contributing to any investment in that company.
Key investment parameters: before and after the September 2025 amendments
| Parameter | Pre-September 2025 | Post-September 2025 |
|---|---|---|
| Investor eligibility | Self-declared net worth: ₹2 cr (individual) / ₹10 cr (body corporate) | Formal accreditation as AI per Reg 2(1)(ab) |
| Investor treatment under Companies Act | Not QIBs; subject to 200-investor private placement cap | Treated as QIBs for angel fund purposes; cap does not apply |
| Minimum investment per company | ₹25 lakh | ₹10 lakh |
| Maximum investment per company | ₹10 crore | ₹25 crore |
| Single-company concentration limit | 25% of total investments | Removed entirely |
| Minimum per-investor commitment | ₹25 lakh | Removed; no floor |
| Investment structure | Scheme-based (up to 200 investors per scheme) | Direct fund-level investing, no schemes |
| Term sheet filing with SEBI | Required | Not required; internal records only |
| Fund classification | Sub-category of Category I VCF | Standalone: Category I Angel Fund |
| Manager continuing interest | 2.5% of fund corpus or ₹50 lakh, whichever lower (fund level) | 0.5% of amount invested or ₹50,000, whichever higher (per deal) |
| Annual PPM audit | Not required | Required for funds with aggregate investments > ₹100 crore |
What changed in the manager continuing interest requirement?
The structural change here is more significant than it appears. Under the old framework, the investment manager or sponsor maintained a continuing interest at the fund level: not less than 2.5% of the corpus or ₹50 lakh, whichever was lower. This was a one-time commitment made at fund formation and remained constant regardless of how many deals the fund executed.
Under the revised framework, the continuing interest obligation is restructured as a per-deal requirement. For every investment the angel fund makes, the manager or sponsor must maintain a continuing interest of at least 0.5% of the amount invested in that specific investment, or ₹50,000, whichever is higher. This cannot be satisfied by waiving management fees; it must be actual co-investment capital.
The consequence is that manager skin-in-the-game scales with deal activity, not with corpus. A fund that deploys capital across twenty investments must co-invest alongside investors in each of those twenty deals. For fund managers accustomed to treating the continuing interest as a fixed, one-off commitment, this is a material change in both cash flow planning and governance mechanics. The PPM must reflect this structure, and the Compliance Test Report must demonstrate per-deal compliance.
What is the step-by-step SEBI registration process for an angel fund?
Angel fund registration in India follows the standard AIF registration process under the AIF Regulations, with angel-fund-specific variations at the PPM and fee stages. The process has five stages.
Stage 1: Entity formation
The angel fund must be set up as a trust, company, or limited liability partnership (LLP) under Indian law. The trust structure is most common for angel funds because it offers governance flexibility and is easier to administer at the fund level. The constitutive document (trust deed, memorandum of association, or partnership deed) must include clauses addressing investment strategy, fund objectives, governance mechanisms, and an explicit restriction on making invitations or solicitations to the public to subscribe to its securities (a mandatory eligibility condition under the AIF Regulations).
The investment manager entity must be established separately from the AIF itself, as a company incorporated in India with a track record of investing or managing funds. At least one key investment team member must hold the NISM Series-XIX-C certification before the application is filed, mandatory for applications filed after 10 May 2024 under amended Regulation 4(g)(i) of the AIF Regulations. The Accredited Investors Only Fund (AIOF) structure introduced by the SEBI (AIF) (Third Amendment) Regulations, 2025 (notified 18 November 2025) is exempt from this certification requirement, but that exemption does not extend to standard angel funds.
Stage 2: Application on SEBI’s SI Portal
The application is filed entirely online at siportal.sebi.gov.in. The steps:
- Create a login ID on the SI Portal; the system generates it automatically on first access
- Click “Fresh Registration” under the AIF tab
- Pay the non-refundable application fee of ₹1,00,000 plus 18% GST (₹1,18,000 total); the system requires exact amounts to the paisa; rounded figures are rejected
- Complete Form A under the First Schedule of the AIF Regulations: details of the applicant, fund structure, investment strategy, proposed investments, and compliance history
- Upload all supporting documents; the exact bundle varies by entity structure (trust, company, or LLP), each requiring different constitutive documents, signatory formats, and undertaking formats
- Disciplinary history declaration: must cover all persons controlling 10% or more, directly or indirectly, in the sponsor or manager, going back five years; this is the most commonly missed field in rejected applications
Stage 3: PPM preparation and filing
For angel funds, the Private Placement Memorandum (PPM) is filed simultaneously with Form A. The PPM must follow SEBI’s standardised two-part template under the AIF Master Circular dated 07 May 2024:
- Part A (mandatory template): investment objective and strategy, risk factors, fee and expense structure including management fees and carried interest, distribution waterfall, conflict of interest disclosures, disciplinary history, and track record of the manager and key investment team
- Part B (additional disclosures specific to the fund): investment allocation methodology, investor consent mechanics, related party and family connection policy, per-deal continuing interest structure, and any overseas investment framework
The allocation methodology must be non-discretionary and disclosed in the PPM before the first investment is made. For existing funds, the deadline to incorporate this methodology was extended to 31 January 2026 following industry representations to SEBI.
Stage 4: SEBI review and queries
SEBI’s Investment Management Department reviews Form A, the PPM, and supporting documents. Where clarifications are needed, SEBI raises queries on the SI Portal. Typical review-to-approval time is six to twelve weeks, with documentation quality as the primary variable. Once satisfied, SEBI communicates in-principle approval and taking the PPM on record.
Stage 5: Payment of registration fee and certificate issuance
Registration fees are paid only after SEBI’s in-principle approval, not at the time of application. For angel funds specifically, the registration fee under the SEBI (Payment of Fees) (Amendment) Regulations, 2014 is ₹2,00,000 (plus applicable GST). This is a concessional rate. Other Category I AIFs (VC funds, SME funds, infrastructure funds) pay ₹5,00,000. On receipt of the registration fee, SEBI issues the Certificate of Registration. The certificate is valid for the life of the AIF.
AIF registration fees summary
| AIF category | Registration fee (excl. GST) |
|---|---|
| Angel Fund | ₹2,00,000 |
| Other Category I AIFs (VCF, SME Fund, Infrastructure Fund, Social Venture Fund) | ₹5,00,000 |
| Category II AIF | ₹10,00,000 |
| Category III AIF | ₹15,00,000 |
| Application fee (non-refundable, all categories) | ₹1,00,000 + 18% GST |
| Refiling fee for angel fund PPM under Regulation 19D(7) | ₹1,00,000 + GST |
| Additional scheme filing fee (not applicable to angel funds) | ₹1,00,000 per scheme |
What are the first close requirements and the 12-month PPM deadline?
The first close of an angel fund must be declared within 12 months of SEBI communicating that it has taken the PPM on record. Before declaring the first close, the fund must onboard at least five accredited investors. These requirements apply to all new funds; existing funds that had not declared a first close as of 10 September 2025 must do so by 08 September 2026.
If the first close is not declared within the prescribed timeline, the fund must refile the PPM with SEBI under Regulation 19D(7) and pay the refiling fee. The 12-month clock restarts from the date SEBI takes the refiled PPM on record.
The minimum corpus for an angel fund is ₹10 crore, compared to ₹20 crore for all other Category I and II AIFs. Separately, the previous requirement of a minimum ₹25 lakh per-investor commitment has been removed by the Second Amendment Regulations, and there is no longer a floor on how much an individual accredited investor must commit. This gives fund managers flexibility in structuring smaller participation from a wider accredited investor base, particularly when using the deemed accredited route.
What compliance obligations apply from FY 2025-26 onwards?
Four compliance obligations now apply to angel funds from FY 2025-26, all introduced or modified by the September 2025 amendments:
PPM compliance audit
Angel funds with aggregate investments (at cost) exceeding ₹100 crore must undergo an annual audit of compliance with the PPM terms. The audit assesses whether the fund’s investments, allocations, and disclosures are consistent with the PPM. The trustee or sponsor must ensure the manager’s Compliance Test Report includes PPM adherence. Funds below ₹100 crore are not subject to the annual PPM audit but remain subject to all other reporting requirements.
Benchmarking reporting
All angel funds, regardless of corpus size, must submit investment-wise valuation and cash flow data to SEBI-designated benchmarking agencies. Any disclosure of past performance in the PPM or marketing materials must be accompanied by a benchmark comparison report from the designated agency. This brings angel funds into the same performance transparency framework that applies to other AIF categories.
Investment-level due diligence thresholds
SEBI’s circular on “Specific due-diligence of investors and investments of AIFs” dated 08 October 2024 set due diligence thresholds at the fund corpus level. The September 2025 circular clarifies that for angel funds, these thresholds (at paras 3.2.1, 4.2.1, 5.2.1 and 8.2.1 of the October 2024 circular) are now calculated at each investment level, based on individual investor contribution to a particular investment, not at the overall fund corpus level. The due diligence trigger now fires at every deal rather than once at the fund level, a significant operational change for managers running active deal flow.
Allocation methodology: the January 2026 deadline
The PPM allocation methodology disclosure was originally required by 15 October 2025. Following industry representations, SEBI extended this to 31 January 2026. Any investment made by existing angel funds after 31 January 2026 must strictly follow the defined and disclosed allocation methodology in the PPM. Fund managers who have not amended their PPMs are in technical non-compliance for every investment made since that date.
What is the transition timeline for existing angel funds?
Existing angel funds registered on or before 10 September 2025 operate under a defined transition framework.
Transition compliance calendar
| Deadline | Obligation |
|---|---|
| 10 September 2025 (immediate) | Revised framework applies to all new registrations; existing funds auto-reclassified as Category I AIF: Angel Fund |
| 31 January 2026 | Existing funds must have incorporated allocation methodology in PPM; all investments after this date must follow the disclosed methodology |
| 08 September 2026 | Full accredited-investor-only transition; no new contributions from non-accredited investors after this date; first close must be declared if not already done |
| FY 2025-26 onwards | Annual PPM audit (funds > ₹100 cr aggregate investments at cost) and benchmarking reporting apply |
During the transition period, existing funds may continue to accept contributions from non-accredited investors but cannot offer an investment opportunity to more than 200 non-accredited investors in total. After 08 September 2026, existing non-accredited investors retain their existing investments under the terms of the PPM and are not forced to exit. The prohibition covers only fresh contributions from non-accredited investors.
Common mistakes that delay registration or create compliance liability
Treating the angel fund PPM as a template exercise
The PPM is the legal foundation for every investor relationship, every investment decision, and every compliance audit. Funds that use boilerplate PPMs without tailoring the allocation methodology, the per-deal continuing interest structure, the family connection screening process, and the investee eligibility criteria create disclosure gaps that SEBI identifies during review, or that surface in a PPM audit with actual liability attached. The allocation methodology must be non-discretionary and specific enough that a third-party auditor can verify compliance deal by deal.
Confusing accreditation with the old net-worth self-declaration
Under the old framework, an investor self-declared net worth and that was sufficient. Under the revised framework, accreditation requires a formal certificate from a SEBI-designated accrediting body (NSE, BSE, or CDSL Ventures). Fund managers who accept contributions without verifying either a valid accreditation certificate or deemed accredited investor status are exposed to regulatory liability under the AIF Regulations. The verification obligation sits with the manager, not the investor.
Missing the 12-month first close deadline
The clock starts from the date SEBI communicates taking the PPM on record, not from the date of registration. Funds that treat the registration date as day zero for fundraising planning find themselves scrambling. The minimum five accredited investors must be onboarded before the first close can be declared, so pipeline building must begin before the PPM is filed.
Not tracking the January 2026 allocation methodology deadline
The September 2026 accreditation transition is visible on everyone’s radar. The January 2026 PPM methodology deadline is not. Every investment an existing angel fund made after 31 January 2026 without a disclosed, non-discretionary allocation methodology in its PPM is technically non-compliant with Circular No. SEBI/HO/AFD/AFD-POD-1/P/CIR/2025/128. This deadline is already past; funds that have not acted are compounding the problem with each new deal.
Misunderstanding the continuing interest restructure
Several fund managers are still computing their continuing interest obligation as 2.5% of corpus or ₹50 lakh, whichever is lower. That is the old fund-level formula. Under the revised framework, the obligation is 0.5% of the amount invested or ₹50,000, whichever is higher, per investment. This is not only a different formula; it is a different structure entirely. Management fee waivers cannot substitute for it. A fund with ₹2 crore deployed across ten deals must co-invest a minimum amount separately in each of those ten deals, verified deal by deal in the Compliance Test Report.
Missing the investee eligibility screening at each deal
The corporate group turnover restriction (₹300 crore cap) and the family connection bar apply at the time of each investment, not just at fund launch. Fund managers who screen investees once during due diligence and do not re-check at the time of contribution acceptance are creating a compliance gap. As companies grow and group structures change, a company that was eligible at first investment may connect to a larger group by the time a follow-on is being considered.
Treelife practitioner note
In the angel fund engagements we have run at Treelife, the September 2025 amendments have created two distinct compliance tracks that require very different responses from managers.
For new fund formations, the accredited investor constraint is the primary structural challenge. With fewer than 700 formally accredited investors in India as of mid-2025, the pipeline for an angel fund’s first five investors is narrower than it looks on paper. The deemed accredited investor category covers professionals like Chartered Accountants and lawyers with ten or more years of experience, and it is underutilised because the verification mechanics are less understood. Fund managers often focus only on the financial threshold route and miss eligible investors from the deemed category. Mapping your specific investor pool against both routes before filing the PPM reduces the risk of a delayed first close. One nuance worth building into the PPM early: given the removal of the 25% concentration cap under Regulation 19F(5), the conflict of interest and allocation methodology sections need to be more detailed, not less, precisely because there is no regulatory floor forcing diversification. SEBI will scrutinise this during review.
For existing funds, two compliance issues run in parallel. The PPM allocation methodology deadline of 31 January 2026 is behind us. Every investment made since then without a disclosed methodology is a non-compliance event. The September 2026 accreditation transition is the second front. The ambiguity SEBI has left open is the minimum number of investors who must participate in each investment for funds registered after September 2025. The old scheme-level 200-investor cap is gone; no floor has been set. The AIF Regulations and the September 2025 circular are silent on this. Until SEBI clarifies via a FAQ or amendment, managers should document their internal governance approach to minimum deal participation clearly in the PPM, and ensure the approach is consistent with the disclosed allocation methodology.
FAQs on Angel Fund Registration in India
Q: What is the registration fee for an angel fund with SEBI?
A: The non-refundable application fee is ₹1,00,000 plus 18% GST, payable at time of filing. The registration fee, payable only after SEBI’s in-principle approval, is ₹2,00,000 (plus GST) for angel funds specifically, under the SEBI (Payment of Fees) (Amendment) Regulations, 2014. This is lower than the ₹5,00,000 registration fee applicable to other Category I AIFs. Both payments must be made to the exact paisa via the SI Portal; rounded figures are rejected.
Q: How long does the angel fund registration process take?
A: SEBI review typically takes six to twelve weeks from the date of a complete application submission. Documentation quality is the primary variable; each round of SEBI queries adds two to four weeks. After registration, the fund has 12 months from the date SEBI takes the PPM on record to declare its first close with at least five accredited investors.
Q: Does an angel fund need a minimum corpus?
A: Yes. The minimum corpus for an angel fund is ₹10 crore, lower than the ₹20 crore minimum applicable to other Category I and II AIFs. There is no minimum per-investor commitment under the revised framework. The previous ₹25 lakh per-investor floor was removed by the September 2025 amendments.
Q: What documents are required at the time of filing?
A: The core documents are: Form A (First Schedule of the AIF Regulations), constitutive document of the AIF (trust deed, MOA, or partnership deed), constitutive documents of the investment manager entity, KYC documents and disciplinary history declarations for key persons covering five years and 10%-or-more controllers, the PPM in SEBI’s two-part template, NISM Series-XIX-C certification for at least one key investment team member, and undertakings in the format specified in Annexure A of the SEBI January 2025 FAQ. The exact bundle varies by entity structure.
Q: Does the accreditation requirement apply to individuals who invest directly into startups as angel investors?
A: No. The SEBI AIF Regulations govern only investors who contribute capital to a SEBI-registered angel fund. An individual who invests directly into a startup’s cap table, or through an angel network that facilitates direct co-investments without an AIF vehicle, is not subject to the accreditation requirement. The amended framework is entirely about investors in SEBI-registered pooled vehicles, not direct angel investing.
Q: What does the QIB treatment of accredited investors mean in practice?
A: Under an amendment to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, accredited investors are treated as Qualified Institutional Buyers (QIBs) for the limited purpose of investing in angel funds. QIBs are excluded from the 200-investor cap under Section 42(2) of the Companies Act, 2013. This means an angel fund can now offer investment opportunities to, and accept subscriptions from, more than 200 accredited investors in a single investee company without triggering public issue norms. The scheme-level 200-investor ceiling has been removed.
Q: What restrictions apply on which startups an angel fund can invest in?
A: Three tests apply at the time of each investment under Regulation 19F(1). The investee must qualify as a startup under the DPIIT framework (incorporated within ten years, turnover under ₹100 crore). It must not be promoted by or related to a corporate group with group turnover exceeding ₹300 crore. And there must be no family connection between any of the investing angels and the founders or promoters of the investee company. All three are checked at the time of contribution, not just at fund launch.
Q: Can an NRI or foreign investor participate in an angel fund in India?
A: Yes, subject to compliance with the Foreign Exchange Management Act (FEMA), 1999, RBI guidelines on foreign investment in AIFs, and the investor qualifying as an accredited investor under the AIF Regulations. Downstream investments by the fund into Indian startups must also comply with FDI policy under the FEMA (Non-debt Instruments) Rules, 2019.
Q: What is the tax treatment for returns from an angel fund?
A: Equity returns from angel fund investments are typically structured as capital gains. For unlisted equity held for more than 24 months, the applicable rate is 20% under Section 112 of the Income Tax Act, 1961, with indexation. For listed equity (less common in angel fund portfolios), Section 112A applies at 12.5% on long-term gains above ₹1.25 lakh from FY 2024-25 onwards per the Finance (No. 2) Act, 2024. The abolition of angel tax under Section 56(2)(viib) removes the prior deeming provision that treated share premium on startup issuances as income in the hands of the investor.
Q: What happens if an angel fund does not declare a first close within 12 months?
A: The fund must refile its PPM with SEBI under Regulation 19D(7) and pay the refiling fee of ₹1,00,000 plus GST. The 12-month clock restarts from the date SEBI takes the refiled PPM on record. There is no automatic revocation of registration for missing the deadline, but continued fundraising without a valid PPM on record creates regulatory exposure.
Q: Can an angel fund invest in overseas companies?
A: Yes, up to 25% of its total investments (calculated at cost) in overseas companies, subject to a SEBI NOC and RBI guidelines under FEMA, 1999. The 25% limit is calculated on total investments held at cost on the date of filing the SEBI application for overseas investment, not on committed corpus.
Q: What is the lock-in period for angel fund investments?
A: One year from the date of investment. This reduces to six months for third-party sales, meaning exits to investors who were not part of the original investment. The lock-in now applies at the fund level, not the scheme level.
Q: How does the PPM audit work, and which funds are subject to it?
A: Angel funds with aggregate investments (at cost) exceeding ₹100 crore must conduct an annual audit of compliance with PPM terms, starting from FY 2025-26. The audit covers whether the fund’s investments, allocations, and disclosures are consistent with the PPM. The trustee or sponsor must ensure the manager’s Compliance Test Report covers PPM adherence. Funds below ₹100 crore are not subject to the annual PPM audit.
Q: What is the NISM Series-XIX-C certification requirement?
A: Under amended Regulation 4(g)(i) of the AIF Regulations, at least one key investment personnel of the investment manager must hold the NISM Series-XIX-C certification before the AIF registration application is filed. This applies to applications filed after 10 May 2024. Standard angel funds are not exempt. The exemption available under the SEBI (AIF) (Third Amendment) Regulations, 2025 applies only to Accredited Investors Only Fund schemes, not to angel funds.
Q: What is the continuing interest requirement, and how has it changed?
A: Under the old framework, the manager or sponsor maintained a fund-level continuing interest of 2.5% of corpus or ₹50 lakh, whichever was lower, a one-time commitment at fund formation. Under the revised framework, this is a per-deal obligation: at least 0.5% of the amount invested in each specific investment, or ₹50,000, whichever is higher. This cannot be met by waiving management fees. A fund manager running twenty deals must co-invest separately in each, and this must be tracked and reported deal by deal in the Compliance Test Report.
Q: Can an angel fund concentrate all its capital in one company?
A: Yes, under the revised framework. The 25% single-company concentration limit under Regulation 19F(5) has been removed by the Second Amendment Regulations, 2025. Angel funds are the only AIF category with no domestic concentration ceiling. This makes high-conviction investing structurally possible, but it raises the importance of conflict-of-interest disclosures and allocation methodology in the PPM, which SEBI will scrutinise.
Regulatory references:
- SEBI (Alternative Investment Funds) Regulations, 2012, Chapter III-A (Regulations 19A to 19G) as amended
- SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2025, notified 08 September 2025
- SEBI Circular No. SEBI/HO/AFD/AFD-POD-1/P/CIR/2025/128 dated 10 September 2025: Revised regulatory framework for Angel Funds under AIF Regulations
- SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018: amendment to include accredited investors as QIBs for angel fund purposes
- SEBI AIF Master Circular dated 07 May 2024
- SEBI Circular on Specific due-diligence of investors and investments of AIFs dated 08 October 2024
- SEBI (Alternative Investment Funds) (Third Amendment) Regulations, 2025, notified 18 November 2025: Accredited Investors Only Fund framework
- SEBI (Payment of Fees) (Amendment) Regulations, 2014: Schedule II, AIF registration fees
- Income Tax Act, 1961, Section 56(2)(viib): Angel tax (repealed by Finance (No. 2) Act, 2024)
- Income Tax Act, 1961, Section 112: Long-term capital gains on unlisted securities
- Finance (No. 2) Act, 2024: Section 112A amendment on long-term capital gains rates from FY 2024-25
- Companies Act, 2013, Section 42(2): Private placement cap of 200 investors, excluding QIBs
- SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Regulation 2(1)(zb): Definition of related party
- Foreign Exchange Management Act (FEMA), 1999: Overseas investment provisions
- FEMA (Non-debt Instruments) Rules, 2019: Foreign investment in AIFs
- AIF Regulations, Regulation 4(g)(i): NISM Series-XIX-C certification requirement for key investment personnel
- DPIIT Startup Recognition Policy: Startup definition and eligibility criteria for investee companies
External sources:
![AIF Category II in India – A Complete Setup Guide [2026]](https://cdn.treelife.in/2026/03/AIF-Category-II-in-India-A-Complete-Setup-Guide.jpg "AIF Category II in India - A Complete Setup Guide [2026]")