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Intermediate

Understanding AIF Categories: Category I, II, and III Explained

A deep-dive comparison of Category I, II and III Alternative Investment Funds for investors who already know what an AIF is and want to go further. Go past the basic definitions into the investment conditions, leverage limits and structural nuances that actually separate a venture capital fund from a hedge fund from a real estate AIF, compare how each category is taxed under the pass-through and fund-level regimes, and build a practical framework for choosing between categories as an HNI, angel investor or experienced retail investor moving into alternatives.

MODULES

6

DURATION

~3.7 hrs

TRACK

Alternative Investing

Access Level

LEARNER

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Actionable Exercises

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Curriculum Breakdown

Chapter 1: Beyond the Basics: How the Three Categories Actually Differ

3 Lessons

Why SEBI Split AIFs Into Three Categories: The Regulatory Logic12 min read

Category I vs II vs III at a Glance: Leverage, Risk and Investment Conditions13 min read

A Two-Minute Recap: AIF Structure, Minimum Ticket Size and Investor Eligibility10 min read

Chapter 2: Category I AIFs Deep Dive

3 Lessons

Venture Capital Funds vs Angel Funds: Where the Investment Conditions Diverge13 min read

SME Funds, Social Venture Funds and Infrastructure Funds: The Fine Print12 min read

Concentration Norms, Sunset Clauses and Government Incentives for Category I12 min read

Chapter 3: Category II AIFs Deep Dive

3 Lessons

Private Equity and Private Credit Funds: Structuring Nuances Beyond the Basics13 min read

Fund of Funds and Real Estate AIFs: How the Underlying Deals Actually Work12 min read

The 30-Day Operational Leverage Rule and Typical Waterfall Structures13 min read

Chapter 4: Category III AIFs Deep Dive

3 Lessons

SEBI's Leverage Caps: The 2x NAV Rule and the 2022 Tightening13 min read

Long-Short, Arbitrage and Quant Strategies Used by Indian Category III Funds12 min read

Open-Ended vs Close-Ended Category III Funds: Margin and Derivatives Exposure Limits12 min read

Chapter 5: Taxation Compared Across Categories

3 Lessons

Pass-Through Taxation for Category I and II AIFs, Explained Properly13 min read

Why Category III Is Taxed at the Fund Level Instead of Pass-Through12 min read

TDS, Capital Gains Character and Post-Tax Return Comparison Across Categories13 min read

Chapter 6: Choosing Between Categories

3 Lessons

A Decision Framework by Investor Profile: HNI, Angel Investor and Experienced Retail12 min read

Risk, Return and Liquidity Compared Side by Side11 min read

Common Mistakes Investors Make When Picking a Category11 min read