Every April, AIF managers face a document that looks like an internal checklist but behaves like a statutory dialogue: the Compliance Test Report (CTR). It is prepared by the manager, scrutinised by the trustee and sponsor, answered by the manager within a fixed window, and, if a violation is found, escalated to SEBI. This article explains the CTR timeline, what it must cover under the current Master Circular, how it differs from other year-end filings, and how to prepare one that stands up to scrutiny.
The Compliance Test Report is an annual self-assessment of an AIF's compliance with the SEBI AIF Regulations and circulars, in a specified format. The manager must submit it to the trustee and sponsor within 30 days of the financial year end. They have 30 days from receipt to comment, the manager has 15 days to respond, and any violation noticed must be reported to SEBI at the earliest.
What is the Compliance Test Report for AIFs?
The Compliance Test Report is the manager's annual statement, in a specified format, of how the AIF and each of its schemes complied with the SEBI (Alternative Investment Funds) Regulations, 2012 and the circulars issued under them during the financial year. The requirement sits in the Master Circular for AIFs, which was re-issued on 3 June 2026 and replaced the earlier Master Circular of 7 May 2024.
The CTR is not filed with SEBI as a routine matter. Its audience is the fund's own oversight layer: the trustee and the sponsor for an AIF set up as a trust, and the sponsor for other structures. That is what makes it powerful. It converts a year of activity into a set of specific compliance assertions that people with fiduciary responsibility must review and, where necessary, challenge.
The CTR format is standardised for the industry through the Standard Setting Forum for AIFs. Managers should use the version current for the year being reported, since the format is updated as regulations change.
The CTR timeline: 30 days, 30 days, 15 days
The process runs in three statutory steps after the financial year closes on 31 March:
| Step | Who | Time limit |
|---|---|---|
| Prepare the CTR in the specified format and submit it | Manager, to trustee and sponsor | Within 30 days from the end of the financial year |
| Review the CTR and give comments, if any | Trustee and sponsor | Within 30 days of receipt of the CTR |
| Make necessary changes and submit a reply | Manager | Within 15 days of receipt of comments |
| Report any violation observed | Trustee or sponsor, to SEBI | At the earliest |
For FY 2025-26, a manager sends the CTR on 28 April 2026. The trustee receives it the same day and sends comments on 25 May 2026, within its 30 days. The manager must respond by 9 June 2026, which is 15 days later. If the trustee concludes that a concentration limit was breached during the year, it must inform SEBI promptly; it does not wait for the loop to finish.
The time limits are short by design. Oversight starts while the year's events are fresh, and corrective action can be taken before problems compound.
What the CTR must cover under the current Master Circular
The CTR cannot be selective. The June 2026 Master Circular requires the trustee, sponsor and manager to ensure that the CTR prepared by the manager includes compliance with the provisions of all chapters of the Master Circular, in addition to the Regulations themselves. In practice that means testing, at the scheme level, areas such as:
Newer obligations are added as they arise. For example, a SEBI circular issued in December 2025 requires the CTR to confirm whether the Compliance Officer meets, or is on track to meet, the NISM Series-III-C certification requirement that applies from 1 January 2027.
When must the trustee or sponsor report a violation to SEBI?
The most important feature of the CTR process is the escalation duty. If the trustee or sponsor notices any violation while reviewing the CTR, it must intimate SEBI at the earliest. This turns the trustee and sponsor from passive recipients into active gatekeepers.
Two practical consequences follow. First, a manager cannot treat the trustee's comments as a private negotiation; an unresolved violation will reach the regulator. Second, trustees and sponsors need enough understanding of the regulations to recognise a violation. Signing off a CTR that contains an obvious breach may expose them to questions of their own.
A violation corrected after year end is still a violation for the year in which it occurred. The CTR should disclose the breach, the date it was identified, the corrective action and the date compliance was restored, rather than presenting the year as clean.
How the CTR differs from the PPM audit and the Annual Activity Report
Several year-end obligations draw on the same data but serve different audiences:
| Report | Prepared by | Goes to | Timeline |
|---|---|---|---|
| Compliance Test Report | Manager | Trustee and sponsor | 30 days from year end |
| Annual Activity Report | Manager | SEBI, via SI Portal | 30 calendar days from end of March |
| PPM audit report | Independent auditor (where applicable) | Trustee, board or designated partners, and SEBI | Within six months of year end |
The three should tell a consistent story. If the PPM auditor later finds a deviation that the CTR did not mention, the manager will have to explain why. Our article on PPM audit and corrective action covers that process.
Who is accountable for the accuracy of the CTR?
The manager prepares the CTR, so the manager owns its accuracy. Within the manager, the Compliance Officer is usually the person who compiles and certifies it, but the key management personnel and the investment team supply most of the underlying facts. The trustee and sponsor are accountable for reviewing it diligently and escalating what they find.
Good practice is to support every assertion in the CTR with evidence that someone other than the preparer could follow: computations of limits, investor-wise KYC and investment records, investment committee minutes, valuation reports and copies of filings with acknowledgements. A CTR that consists only of "Complied" against each line is weak evidence, both for the trustee and in any later SEBI inspection.
A practical checklist for preparing the CTR
- Start from the latest format. Download the current CTR format and map each line to the relevant Regulation and Master Circular paragraph.
- Test scheme by scheme. Limits such as concentration, investor count and minimum investment apply at the scheme level.
- Use year-round monitoring data. Pull from monthly or quarterly compliance logs rather than reconstructing the year in April.
- Record breaches honestly. Include passive and active breaches, the period of breach and the remedy.
- Attach working papers. Keep computations and evidence ready for the trustee to sample.
- Calendar the response window. Track the date comments are received so the 15-day reply is not missed.
- Close the loop. Record the final reply, any changes made and any SEBI intimation by the trustee or sponsor.
Frequently asked questions
Who prepares the Compliance Test Report for an AIF?
The manager of the AIF prepares the CTR in the specified format, usually through its Compliance Officer, and submits it to the trustee and sponsor.
What is the deadline for submitting the CTR?
Within 30 days from the end of the financial year, which is normally 30 April. The trustee and sponsor then have 30 days from receipt to comment, and the manager has 15 days to reply.
Is the CTR filed with SEBI?
Not routinely. It goes to the trustee and sponsor. However, if they notice a violation while reviewing it, they must inform SEBI at the earliest, and SEBI can examine the CTR during inspections.
Does the CTR need to cover every chapter of the Master Circular?
Yes. The June 2026 Master Circular requires the CTR to include compliance with the provisions of all its chapters, not only selected areas.
What if a breach was corrected during the year?
It should still be disclosed in the CTR, with details of when it occurred, when it was identified and how compliance was restored.
Conclusion
The Compliance Test Report works because it is a loop, not a form: the manager asserts, the trustee and sponsor test, the manager responds, and violations travel to SEBI. Managers who prepare the CTR from year-round monitoring data, record breaches candidly and support each assertion with evidence will find the process straightforward. Those who treat it as an April box-ticking exercise risk turning an internal review into a regulatory finding.
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H K Davra & Co. supports AIF managers with SEBI compliance, PPM audits, CA certifications and investor reporting.
Talk to usThis article is for general information only and does not constitute professional advice or solicitation. The CTR format and scope are updated by SEBI and the Standard Setting Forum from time to time; confirm the current version before preparing the report. Provisions are summarised as of October 2026. Please refer to the relevant provisions and seek advice on your specific facts.