Our article for the India chapter of International Asset Management & Investment Funds Review 2026/27 has been published by Beaumont Capital Markets at India Investment Funds | Asset Management Review.

Decoding GIFT City’s Boom: The Rise of Asia’s New Investment Hub

Gujarat International Finance Tec-City (“GIFT City”), located in Gandhinagar, Gujarat, is the crystallization of India’s long-standing ambition to build a globally competitive financial jurisdiction. GIFT City is India’s first International Financial Services Centre (“IFSC”).

The International Financial Services Centres Authority (“IFSCA”) is the unified regulator for GIFT City and was set up as a statutory body in 2019 to develop and regulate the financial services market in the IFSC.

Strategic location and connectivity, financial regulations benchmarked to global standards, single-window clearances and approvals, plug-and-play infrastructure, access to skilled workforce and service providers, growing and stable Indian economy, attractive tax incentives, regulatory certainty, and ease of doing business, 22-hours operational stock exchange, liberalized foreign exchange regime facilitating transactions in 15 freely convertible currencies, ensure that GIFT City is well-positioned to becoming a leading global hub for financial services, technology, and allied support services.

GIFT City is India’s deemed foreign jurisdiction and accommodates a multitude of services such as banking, capital markets, fund management, insurance, bullion, finance companies, aircraft leasing, ship leasing, global in-house centers, fintech, foreign universities and ancillary services.

Asset Management

At the heart of this progress is a fast-developing fund management ecosystem in GIFT City, which now manages USD 26.3 billion in assets and commitments from 4,733 investors across more than 65 jurisdictions.

As of September 2025, GIFT City hosts 194 registered Fund Management Entities (“FMEs”), collectively operating 310 active schemes. Investor confidence has translated into meaningful capital formation, with aggregate commitments rising to USD 26.30 billion from USD 22.11 billion in the previous quarter. While Category I and II restricted schemes account for USD 12.56 billion of this pool, Category III strategies contribute USD 13.50 billion, and Venture Capital Schemes contribute USD 230.53 million. Importantly, capital deployment reflects GIFT City’s dual mandate: USD 9.78 billion has been invested into India, while USD 1.59 billion has been deployed overseas, reinforcing its role as a conduit between domestic opportunities and global capital flows.

Regulatory Framework: Fund Management

The IFSCA (Fund Management) Regulations, 2025 (“FM Regulations”) establish a clear, activity-based framework for fund management in the IFSC, aligned with international standards, offering operational certainty and consistent regulatory oversight for global managers.

Categories of FME and Permitted Activities

Entities seeking to undertake fund management activities within GIFT City are required to register with the IFSCA as a FME prior to commencing operations. FMEs may be set up as a company, limited liability partnership (“LLP”), or branch. However, retail FMEs are permitted only in the form of a company. Below is a snapshot of kinds of FME license, kinds of scheme each category of FME can manage and additional activities it can undertake. Each FME is subject to minimum net-worth requirement, minimum number of key personnel as prescribed as well as adequate infrastructure and compliance (including stewardship code), risk and cyber security framework as mandated under the FM Regulations.

Investment Vehicles in GIFT City

1. Venture Capital Schemes

As per the FM Regulations, a venture capital scheme (“VCS”) can be set up to invest into unlisted securities of start-ups and earlystage or emerging venture capital undertakings engaged in new products, services, technologies, or innovative business models, including angel-style investment strategies. Every such scheme can be filed with the IFSCA as a VCS or as a Restricted Scheme under the “venture capital fund” Category I Alternative Investment Fund (“AIF”).

VCS can raise commitments from investors on a private placement basis and the maximum investors can be only 50. They must be mandatorily close-ended and have a minimum disclosed tenure of three years. Each scheme must maintain a minimum corpus of USD 3 million, and maximum corpus of a VCS is capped at USD 200 million. The minimum commitment per investor in a VCS is USD 250,000.

This stands reduced to USD 60,000 for employees, directors, or designated partners of the FME. Accredited investors are exempt from any minimum commitment requirement.

There is no cap on corpus for a venture capital fund set up as a Category I AIF, the maximum number of investors for such a scheme is 1000 and the minimum commitment per investor in a Category I AIF is USD 150,000.

2. Restricted Schemes

Restricted Schemes under the FM Regulations are designed to provide fund managers with broad strategic flexibility while remaining anchored to a regulated, private-placement architecture.

Restricted Schemes could be offered exclusively to Accredited Investors or to investors committing a minimum of USD 150,000 per investor. Restricted Schemes consist of three categories:

• Category I AIFs focus on development-oriented investment themes, including venture capital, small and medium enterprise (SME) financing, social impact, ESG, infrastructure, and special situations.
• Category II AIFs cover strategies such as private equity, private credit, hybrid, and multi-asset strategies that do not fall within Category I or Category III.
• Category III AIFs are funds that focus on trading-oriented mandates, including long-short strategies, derivatives-based approaches, and hedge fund strategies.

A Restricted Scheme can admit a maximum of 1,000 investors. The minimum commitment for each scheme is USD 150,000 per investor, reduced to USD 40,000 for employees, directors, or designated partners of the FME. Accredited Investors are exempt from any minimum commitment requirement. Restricted Schemes may be structured as open-ended or close-ended funds.

Each Restricted Scheme must maintain a minimum corpus of USD 3 million, and close-ended schemes must have a minimum tenure of one year. Restricted Schemes may invest in a variety of instruments including unlisted and listed securities, money market instruments, debt, securitized debt instruments, scheme units, derivatives, LLPs, and physical assets such as real estate, bullion, and art.

Furthermore, there is no regulatory limit on leverage or borrowing that can be undertaken by Restricted Schemes, except as disclosed in the private placement memorandum (“PPM”).

Restricted Schemes are the most popular form of fund structures in GIFT City. Such schemes are used as pooled vehicles to invest in (a) Indian securities (inbound investments) by raising funds from global investors or (b) to invest in non-Indian securities (outbound investments) by raising funds from Indian resident investors.

3. Retail Schemes

A fund manager desirous of raising funds from retail investors must seek registration as Registered FME (Retail) in order to be able to launch and manage Retail Schemes. Closely resembling mutual fund structures, the Retail Schemes may be launched across different strategies such as equity, debt, sectoral, thematic and retirement schemes.

Each Retail Scheme must have a minimum of 20 investors and no single investor can hold more than 25% of the scheme’s assets. Each Retail Scheme must have a minimum corpus of USD 3 million, although open-ended schemes may commence operations with USD 1 million, subject to achieving the prescribed corpus within 12 months.

Other Investment Products and Services at GIFT City

Some of the other specialized strategies that can be pursued through appropriate fund structure in GIFT City are summarized below.

1. Special Situation Funds (“SSFs”)

SSFs, structured as close-ended funds, can be launched by Registered FMEs to engage in distressed and stressed asset strategies, including investments in stressed loans, security receipts of asset reconstruction companies, and securities of entities undergoing insolvency or resolution under the Insolvency and Bankruptcy Code.

    2. Family Investment Funds (“FIFs”)

FIFs provide a private and flexible platform for managing wealth of single-family offices. Exempt from conventional net-worth requirements, FIFs can invest across listed and unlisted securities, real assets, derivatives, and other investment schemes. They can be structured as open-ended or close-ended vehicles and are permitted to engage in leverage in line with defined risk policies.

3. Exchange Traded Funds (“ETFs”)

ETFs may be launched by Registered (Retail) FMEs and must be listed and traded on a recognised stock exchange in GIFT City. ETFs span across equity, debt, commodity, hybrid and actively managed strategies, combining liquidity, transparency, and continuous price discovery within a regulated framework.

4. Portfolio Management Services (“PMS”) and advisory services

PMS enable FMEs to manage tailored portfolios for eligible domestic and global clients, including multi-family offices, under discretionary or non-discretionary mandates, with flexible fee arrangements. Furthermore, FMEs may also offer advisory services to clients by entering into agreements, subject to the conditions and code of conduct prescribed under the IFSCA Capital Markets Intermediaries Regulations, 2025.

5. Third-Party Fund Management Services (“TPFMS”)

Recently introduced in July 2025, TPFMS allows IFSCA-registered FMEs to undertake third-party fund management on behalf of a non-IFSCA registered fund manager, without requiring the latter to establish a presence in the GIFT City. Subject to enhanced eligibility norms, including an additional net-worth requirement of USD 500,000 and a cap of USD 50 million on corpus per scheme. TPFMS positions GIFT City as a plug-and-play gateway for global managers, while regulatory and fiduciary responsibility remains firmly with the licensed FME.

6. Regulatory sandbox for tokenized funds

Tokenization refers to the process of representing ownership of real-world assets, such as shares, funds, bonds, or real estate, using blockchain-based digital tokens. IFSCA has given approval for regulatory sandbox testing of India’s first regulated tokenized real estate fund, Terazo. Terazo, through its maiden USD 7 million tokenized fund, will allow qualified primary investors the opportunity to invest in Oryx, a ~USD 50 million greenfield development of ~8,50,000 sq ft Grade A commercial property located in the heart of GIFT City, from USD 100,000 and allowing secondary investors with as little as USD 1,000.

7. Relocation of funds to GIFT City

Pursuant to amendments in Indian Income-tax Act, 1961 (“ITA”) introduced through the Finance Act, 2024, offshore funds can be relocated to GIFT City under a tax-neutral and streamlined process, thereby enabling fund managers to take advantage of the benefits that GIFT City offers as a global hub for financial services, technology, and allied support services. Around 23 funds, representing approximately USD 9.1 billion in commitments have relocated to the GIFT City across private equity, venture capital, hedge, real estate, and debt strategies.

Marketing and distribution in GIFT City

FMEs may either directly market their schemes or engage a registered distributor regulated under the IFSCA (Capital Market Intermediaries) Regulations, 2025. There is no separate registration required for FMEs for marketing their own schemes. Fund raising for Restricted Schemes is subject to private placement restrictions, prohibiting public solicitation or advertising of fund units. All promotional materials, whether PPM or offer document (for Retail Schemes) must adhere to the IFSCA Advertisement Code ensuring that content is accurate, fair, clear, and not misleading. Testimonials, exaggerated claims, and rankings are prohibited. Materials must avoid complex legal jargon and reflect true risk-return characteristics of the scheme(s).

Tax Benefits

Entities set up in GIFT City enjoy several tax benefits such as 100% tax holiday for business income for any 10 consecutive years within a 15-year window and zero goods and services tax (“GST”) on management fee income. In the Union Budget 2026 – 27, placed before the Parliament on February 1, 2026, the Ministry of Finance has proposed extending this tax holiday framework for GIFT IFSC units to a block of 20 consecutive years out of 25 years and post expiry of this period business income would be taxed at a concessional rate of 15%. This is a welcome move as it offers greater clarity for fund managers examining Gift City as an option. Funds / schemes set up in GIFT City, depending on the category under which they are regulated by IFSCA, are entitled to special tax treatment under the ITA. For example, Category I and Category II AIFs are tax-transparent and income is taxed in the hands of the non-resident investors as if they have made the investment directly. Tax is to be withheld at rates applicable to such income as per ITA or rates under applicable double tax avoidance agreement between India and home jurisdiction of the non-resident investor. Further, non-resident investors in Category I and II AIFs are exempt from requirement of obtaining tax registration number (PAN) in India or make tax return filings if certain conditions are satisfied.

Entities set up in GIFT City also further benefit from nil tax withholding on specified payments, exemptions from securities and commodity transaction taxes, nil stamp duty on trades on stock exchanges within GIFT City, and zero-rated GST on IFSC-to-IFSC and offshore-facing services.

GIFT City – An Evolving Regime

GIFT City represents a consciously designed and adaptive international financial jurisdiction, with the IFSCA pursuing continuous regulatory refinement to enhance ease of doing business and maintain its competitiveness with established global centres.

In contrast to mature jurisdictions where reform tends to be incremental, IFSCA has been a pragmatic regulator and has ensured swift evolution of IFSC framework by responding swiftly to market feedback and emerging capital requirements.

Recently, IFSCA introduced a consultation paper to amend the FM Regulations by proposing reforms to make scheme operations more flexible, reduce operational burdens, ease compliance requirements, and strengthen governance and reporting standards. Furthermore, IFSCA has also proposed a regulatory framework for blended finance to facilitate use of catalytic capital from public or philanthropic sources to improve the risk–return profile of investments, thereby mobilizing private capital for projects that advance sustainable development. Under this blended finance framework, Restricted Schemes and VCS would be able to adopt differential distribution waterfall through different approaches such as subordination in timing of returns, quantum of returns, including first-loss protection and/or higher or differential hurdles to private capital investors to offset higher risks.

Another regulatory reform in the pipeline is the introduction of framework of Variable Capital Companies that aims to provide a flexible corporate form with multiple ring-fenced sub-funds, dynamic capital adjustment, and single-shareholder formation, in line with models adopted in leading financial centres such as Singapore and Luxembourg.

Conclusion and Outlook

GIFT City is steadily strengthening its position as an emerging gateway for conducting financial services, technology, and allied support services. In a very short span of time, GIFT City has attracted significant capital inflows, reflected in its steady rise in global financial centre rankings, reaching 43^rd globally in the latest Global Financial Centres Index and ranked among the top 15 Asia Pacific financial centers alongside established hubs such as Singapore, Hong Kong, Sydney. It has also been recognised among the ‘Top 15 Centers Likely to Become More Significant’.

With reforms like Variable Capital Companies and light-touch FM Regulations on the way, GIFT City is poised to offer greater flexibility, robust investor protection, and a business-friendly regulatory framework that positions it as a compelling long-term platform for global funds.