Specialised Investment Funds, or SIFs, are quickly becoming a popular choice for Indian investors seeking diversified exposure. These funds offer a range of strategies, from equity to debt, and are managed by professional asset managers. Their growing popularity is reflected in the latest market data.
According to the August 2026 edition of Fund Bytes, SIFs now hold Rs 23,177 crore in assets under management. This figure is a dramatic rise from the initial Rs 2,010 crore at the time of launch. The jump shows how quickly the sector has attracted capital.
The sector now has 30 active SIF schemes available to investors. In addition, there are 94,447 individual folios opened across these schemes. This expansion offers more choices for different risk appetites.
However, one factor that can significantly affect returns is the tax treatment of each SIF. The tax rules differ based on the strategy chosen and the length of time the investment is held. Investors need to be aware of these differences before committing money.
For Hybrid Long‑Short SIFs, the tax table shows that holdings of up to 12 months are taxed at the investor’s normal income tax slab. If the holding period exceeds 12 months, the gains are treated as long‑term capital gains and taxed at 12.5 percent. Equity allocation in these funds must remain between 35 percent and 65 percent.
This means that a trader who sells a hybrid SIF within a year may pay a higher tax rate. On the other hand, keeping the investment beyond a year shifts the gains into the lower long‑term category. The holding period is therefore a key consideration for hybrid SIF investors.
Equity‑oriented SIFs, which invest 65 percent or more in domestic equities, have a different tax regime. Investments held for up to 12 months attract a flat 20 percent tax. For holdings longer than 12 months, the tax falls to 12.5 percent.
Debt‑oriented SIFs, where more than 65 percent of assets are in debt or non‑equity instruments, are taxed differently. In these funds, gains are taxed according to the investor’s applicable income tax slab, regardless of how long the investment is held.
Non‑resident Indian investors face another set of rules. The tax rate applied to their income from SIFs depends on the type of income earned, such as capital gains or dividends. These rates can differ from those applicable to resident investors.
SIFs are not a single product; they come in many flavours. Equity Long‑Short, Equity Ex‑Top 100 Long‑Short, and Sector Rotation Long‑Short are examples of equity‑oriented strategies. Hybrid Long‑Short and Active Asset Allocator Long‑Short represent hybrid approaches.
Because of this diversity, investors should not judge a SIF solely on its headline tax rate. The underlying strategy, risk profile, cost structure, and expected returns also play a critical role in the decision.
In short, before choosing a SIF, check the specific strategy, understand how long you plan to hold it, and apply the correct tax rules. By doing so, you can avoid surprises and make a more informed investment choice.