Clients of Special Category (CSC)
Clients of Special Category (CSC) is a higher-risk client classification under India’s anti-money-laundering framework, defined in the SEBI Master Circular on AML/CFT obligations of securities market intermediaries dated 6 June 2024, that obliges a broker such as Zerodha to run enhanced due diligence on the client, the practical trigger being a mandatory income-proof and source-of-funds check at account opening or re-KYC . The classification flows from the Prevention of Money Laundering Act, 2002 and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, which require every regulated intermediary to grade clients by money-laundering risk and apply heavier scrutiny to the riskier ones.
CSC is not a penalty and it is not a rejection. It is a label the broker assigns during know your customer checks, and it changes two things: the documents you must produce before the account opens, and how closely the account is watched afterward. For an ordinary resident individual at Zerodha, income proof is optional unless you want the futures and options segment . For a CSC client it is compulsory, full stop. The same income-proof requirement resurfaces when a dormant or deactivated account is reactivated through re-KYC, because the broker has to refresh the source-of-funds picture before letting the client trade again.
This article sets out who the PML Rules and the SEBI circular treat as a Client of Special Category, what enhanced due diligence actually involves, the income-proof documents Zerodha accepts and their thresholds, and how CSC interacts with the FATF country lists for non-resident clients.
Conflict-of-interest disclosure. This guide is published by the WebNotes Editorial Team for informational purposes and is written independently. WebNotes operates a Zerodha account-opening referral programme, disclosed on the pages that carry the referral link; this guide does not carry it and earns no referral commission from the procedure described here.
The PMLA basis for client classification
The Prevention of Money Laundering Act, 2002 makes a broker a “reporting entity”. Rule 9 of the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 obliges every reporting entity to identify its clients, verify their identity, identify the beneficial owner, and grade each client on a risk scale running from low to high. SEBI translates that statutory duty into operating instructions through its Master Circular on AML/CFT obligations, the current version dated 6 June 2024, which supersedes the earlier Master Circular SEBI/HO/MIRSD/MIRSD-SEC-5/P/CIR/2023/022 dated 3 February 2023 and its 13 October 2023 amendment SEBI/HO/MIRSD/SEC-FATF/P/CIR/2023/0170.
The circular tells intermediaries to apply a risk-based approach: ordinary clients get standard customer due diligence, while clients who fall into the higher-risk buckets get enhanced due diligence. The Clients of Special Category list is the enumeration of those higher-risk buckets. A broker cannot open the account of a CSC client on the documentation that suffices for an ordinary client; it has to gather more, verify the source of funds, and keep the account under ongoing transaction monitoring so that any unusual or suspicious activity can be flagged in a Suspicious Transaction Report to the Financial Intelligence Unit-India.
Who is a Client of Special Category
Zerodha’s account-opening desk states the CSC categories directly. The six categories it lists, drawn from the PML Rules and the SEBI circular, are:
| CSC category | Why it is higher risk |
|---|---|
| Non-resident Indian clients | Cross-border funds, harder identity and address verification, exposure to FATF-listed jurisdictions |
| High net worth clients | Large-value flows where source of funds needs confirming |
| Trusts, charities, NGOs and organisations receiving donations | Pooled third-party money with diffuse beneficial ownership |
| Companies with close family shareholdings or beneficial ownership | Concentrated control that can obscure the true owner of the funds |
| Politically Exposed Persons (PEPs) | Corruption and bribery exposure tied to a prominent public function |
| Clients publicly known to have a questionable reputation | Documented adverse-media or reputational risk |
The wider PML Rules and SEBI framework also draw in residents of countries that insufficiently apply the FATF Recommendations, non-face-to-face clients, and clients with dubious public backgrounds. The unifying logic is the same across every category: each is a setting where the money entering the account is harder to trace to a legitimate source, so the law asks the broker to look harder before it opens the account and to keep looking afterward.
Politically Exposed Persons
A Politically Exposed Person is an individual entrusted with a prominent public function, an example being a head of state, a senior politician, a senior government, judicial or military officer, a senior executive of a state-owned corporation, or an important political-party official. The PML Rules and the SEBI circular single out PEPs for the strictest enhanced due diligence: the broker must obtain senior-management approval to open the account, establish the source of the PEP’s funds and wealth, and conduct enhanced ongoing monitoring. The same treatment extends to the immediate family members and close associates of a PEP, because the corruption risk does not stop at the named individual. At Zerodha, a PEP must submit income proof to open an account, the income-proof requirement being the practical form the source-of-funds rule takes.
Trusts, NGOs and charities
A trust, a charity, an NGO or any organisation that receives donations is a CSC because the account holds third-party money rather than the operator’s own. The broker has to look through the entity to the natural persons who ultimately control it, the beneficial owners, and verify them. For these entities the income-proof and financial-statement documentation runs deeper than for an individual, and the account stays under closer transaction monitoring because donation inflows are a known channel for layering illicit funds.
What enhanced due diligence requires
Enhanced due diligence is the heavier version of customer due diligence the SEBI circular reserves for CSC and other high-risk clients. For a broker onboarding a CSC client it means, in practice, four things beyond the standard PAN-Aadhaar-bank checks every client clears.
First, source of funds. The broker must establish where the money funding the account comes from and satisfy itself that it is legitimate. The income-proof document is the evidence of that. Second, beneficial ownership. For an entity client, the broker must identify and verify the natural persons who own or control it, not stop at the entity’s own registration. Third, senior-management approval, mandatory before a PEP or PEP-linked account is opened. Fourth, enhanced ongoing monitoring: the account’s transactions are watched more closely against the client’s stated profile, and a mismatch, a sudden large inflow, a pattern with no economic rationale, or a counterparty in a high-risk jurisdiction, is escalated for a possible Suspicious Transaction Report.
These obligations are continuous, not one-off. SEBI requires periodic KYC review of high-risk clients on a tighter cadence than low-risk ones, which is why a CSC client is more likely to receive a re-KYC or KYC-update email asking for refreshed income proof, and why the income-proof requirement reappears when a dormant account is reactivated.
Income proof at Zerodha: the documents and thresholds
For a resident individual classified as CSC, Zerodha accepts any one of the following as income proof. The same set is what the broker asks for when it activates the F&O segment for an ordinary resident, because the exchange margin framework also wants a source-of-funds check there.
| Income proof | Threshold Zerodha applies |
|---|---|
| Bank statement, in the account holder’s name, with the bank’s logo or seal, for the last six months | Average balance over Rs 10,000 |
| Latest salary slip | Gross monthly income over Rs 15,000 |
| Latest ITR acknowledgement | Gross annual income over Rs 1,20,000 |
| Latest Form 16 | Gross annual income over Rs 1,20,000 |
| Net-worth certificate (from a chartered accountant) | Net worth over Rs 10,00,000 |
| Latest demat holdings statement (holdings unpledged) | Current holdings value over Rs 10,000 |
| Latest fixed deposit receipt | Deposit amount over Rs 1,00,000 |
The document must be in the account holder’s own name, recent, and legible. A bank statement has to carry the bank’s logo or seal to be accepted; a demat holdings statement counts only if the holdings are not pledged. Where the source of funds cannot be evidenced from any of these, the account does not clear enhanced due diligence and will not open.
CSC and the FATF country lists for non-residents
The NRI category sits at the intersection of CSC and the FATF country lists . Because every NRI is a CSC, income proof is mandatory for an NRI account at Zerodha even where the same client, as a resident, would face only the optional requirement. On top of that, Zerodha applies a country filter: an NRI resident in a country on the FATF black list, formally the High-Risk Jurisdictions Subject to a Call for Action, cannot open an account at all, and an NRI resident in a country on the FATF grey list, formally Jurisdictions under Increased Monitoring, can open one only after Zerodha’s compliance team approves it. That filter is the country-level expression of the same PMLA enhanced-due-diligence regime that CSC expresses at the client level.
What CSC means for you in practice
If you are an ordinary resident individual buying equity delivery, you are almost certainly not a CSC, and income proof is optional until you ask for the F&O segment. If you are an NRI, a PEP or PEP-linked person, a high net worth client, or you operate a trust or NGO account, expect the income-proof requirement at the outset and treat it as non-negotiable. Keep one of the seven accepted documents current, because the request will recur at periodic re-KYC and again on any reactivation. CSC raises the documentation bar; it does not block access for a client whose funds have a clean, demonstrable source.
See also
- Zerodha
- Prevention of Money Laundering Act
- Politically Exposed Person
- FATF lists and your Zerodha account
- KYC Registration Agency
- Central KYC Records Registry
- Zerodha KRA
- How to re-KYC your Zerodha account
- How to check your KYC status at Zerodha
- How to respond to a KYC-update email from Zerodha
- How to respond to an additional-documents email from Zerodha
- How to reactivate a dormant Zerodha account
- How to reactivate a voluntarily deactivated Zerodha account
- How to activate the F&O segment at Zerodha
- Zerodha F&O segment
- How to verify PAN and Aadhaar at Zerodha
- How to update your income details at Zerodha
- How to open a Zerodha NRI account
- How to open a Zerodha trust account
- How to open a Zerodha corporate account
- SEBI
- Zerodha Console
- Kite by Zerodha
- In-person verification
- CKYC number explained
External references
- Zerodha support: Who are Clients of Special Category (CSC), and when must they provide income proof?
- Zerodha support: Who is a Politically Exposed Person (PEP) and why must they submit income proof?
- SEBI: Master Circular on AML/CFT obligations of securities market intermediaries under PMLA
- Financial Intelligence Unit-India
- FATF: black and grey lists
References
- SEBI Master Circular, Guidelines on Anti-Money Laundering (AML) Standards and Combating the Financing of Terrorism (CFT) / Obligations of Securities Market Intermediaries under the Prevention of Money Laundering Act, 2002, dated 6 June 2024 (superseding SEBI/HO/MIRSD/MIRSD-SEC-5/P/CIR/2023/022 dated 3 February 2023 and amendment SEBI/HO/MIRSD/SEC-FATF/P/CIR/2023/0170 dated 13 October 2023).
- Prevention of Money Laundering Act, 2002, and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, Rule 9 (client due diligence and risk classification).
- Zerodha support, Who are Clients of Special Category (CSC), and when must they provide income proof? (as of 20 June 2026).
- Zerodha support, Who is a Politically Exposed Person (PEP) and why must they submit income proof? (as of 20 June 2026).
WebNotes Editorial Team prepares factual reference articles based on publicly available regulatory documents and broker disclosures. WebNotes is not affiliated with Zerodha Broking Limited. AML rules, document thresholds and FATF lists change; verify current requirements at support.zerodha.com, sebi.gov.in and fatf-gafi.org before acting.