GIFT City & IFSC Fund Setup

Funds in GIFT City are regulated by the IFSCA (Fund Management) Regulations 2022 notified under Section 28 of the International Financial Services Centres Authority Act 2019. The Regulations distinguish three entity types: Venture Capital Scheme (VCS), Restricted Scheme, and Retail Scheme — each with separate eligibility, corpus, and investor count thresholds. The Fund Management Entity (FME) itself must hold a registration under Regulation 4 of the FM Regulations before launching any scheme.

Under Schedule III of the IFSCA (Fund Management) Regulations 2022, a Restricted Scheme requires a minimum corpus of USD 5 million (or equivalent) and may not have more than 1,000 investors. Each investor must be a "qualified investor" as defined in Regulation 2(1)(s) — broadly, an entity or individual with a minimum net worth of USD 500,000 or a professional investor within the meaning of the Regulations. The minimum investment per investor is USD 150,000.

An IFSC unit holding a valid Letter of Approval from IFSCA is eligible for a 10-year tax holiday on income from fund management activities under Section 80LA of the Income Tax Act 1961 (ITA 1961), which continues to apply for AY 2026-27 (FY 2025-26). For Tax Year 2026-27 onward under ITA 2025, the equivalent provision is carried forward under Section 163 read with the Tenth Schedule. Additionally, transfer of securities by a non-resident investor in a Category III AIF located in IFSC is exempt from capital gains tax under Section 47(viiab) of ITA 1961 (Section 87 of ITA 2025), subject to the securities being listed on a recognised stock exchange in IFSC.

A GIFT City FME and its schemes are treated as non-residents for FEMA purposes per RBI AP Dir Series Circular No. 15 of 2015 read with the FEMA (IFSC) Regulations 2015. Foreign capital flows into IFSC funds under the Automatic Route — no prior RBI approval is required — but the FME must file Form FC-GPR (for equity) or the relevant FC reporting through the AD Bank within 30 days of each capital call. Repatriation of profits is permitted freely, and no LRS limits apply to the fund vehicle itself.

Yes. Indian residents may invest in a GIFT City Restricted or Retail Scheme subject to the Liberalised Remittance Scheme (LRS) limit of USD 250,000 per financial year under Schedule III of the Foreign Exchange Management (Current Account Transactions) Rules 2000. Income received by a resident from such a fund is taxable in India under the normal provisions — capital gains on redemption are subject to ITA 1961 Section 45 (ITA 2025 Section 67) based on holding period and asset class. The fund is not a pass-through for Indian tax purposes unless it qualifies as a Category I or II AIF and separately registers with SEBI under the AIF Regulations 2012.