GIFT City: The Emerging Global Financial Hub

As the number of AIFs and FMEs grows, GIFT City is fast becoming a breeding ground for financial innovation. With IFSCA exploring frameworks for tokenisation of real-world assets, funds operating here may soon design regulated digital instruments — financial products that could function much like cryptocurrencies but within a compliant and transparent regulatory regime.

This convergence of fund management, fintech, and global capital access positions GIFT City as India’s answer to Singapore and London — a truly global financial hub for the next generation of investment products.

What is a Fund Management Entity (FME)?

At the core of every fund lies a Fund Management Entity (FME) — the entity licensed by the International Financial Services Centres Authority (IFSCA) to manage investments within GIFT City’s IFSC (International Financial Services Centre).
An FME can be set up as a company, LLP, or branch of a foreign entity and is responsible for fund raising, portfolio management, risk management, and compliance.

Types of Fund Management Entities (FMEs) in GIFT City

The International Financial Services Centres Authority (IFSCA) follows a risk-based classification for Fund Management Entities (FMEs), defining four main categories — each with distinct investor access, permissible activities, and capital thresholds. The higher the category, the broader the range of activities and investor participation allowed.

• PMS – Portfolio Management Services 
• ETFs – Exchange-Traded Funds 
• REITs – Real Estate Investment Trusts 
• InvITs – Infrastructure Investment Trusts 

The PMS minimum investment requirement — USD 75,000 under IFSCA 2025 — applies to individual client portfolios, separate from fund-level investor commitments.

Registering a Fund in GIFT City

Setting up a Fund Management Entity (FME) or Alternative Investment Fund (AIF) in GIFT City follows a structured, regulator-driven process under the IFSCA framework.

Step 1: Identify and Secure Office Space 

Choose and finalise suitable office premises within the GIFT City IFSC zone, as physical presence is mandatory. The space must comply with SEZ norms and be dedicated for authorised operations, forming the business’s registered base for IFSCA approval. 

Step 2: Incorporate the Legal Entity 

Register your business as a Company or LLP through the MCA portal using the SPICe+ forms. File linked applications for GSTIN, EPFO, ESIC, and bank account setup, along with e-MoA and e-AoA. This creates the legal foundation for operating in GIFT IFSC. 

Step 3: Obtain Provisional Letter of Allotment (PLOA) 

Once space is finalised, apply for a Provisional Letter of Allotment (PLOA) through the GIFT City developer. The PLOA confirms your space allocation and is essential for the subsequent SEZ and IFSCA approval stages. 

Step 4: Apply via the SWIT Portal 

Use the Single Window IT (SWIT) Portal to apply simultaneously for SEZ Unit Approval and IFSCA Authorisation. Upload incorporation documents, business plan, board resolutions, and promoter KYC — the unified portal streamlines both regulatory approvals. 

Step 5: Obtain SEZ Unit Approval (if applicable) 

For operations within the SEZ zone of GIFT City, submit a Letter of Intent and Form F to the Development Commissioner. This approval designates your business as an authorised SEZ unit eligible for SEZ benefits and tax incentives. 

Step 6: Register with IFSCA 

Financial entities such as FMEs, AIFs, PMS providers, or fintech units must register with the International Financial Services Centres Authority (IFSCA) under the relevant vertical (Funds, Capital Markets, Banking, or Insurance). Compliance with minimum capital, fit-and-proper criteria, and staffing standards is mandatory. 

Step 7: Execute Lease and Establish Physical Presence 

After approval, execute the lease deed for your GIFT City office space and set up required infrastructure — IT systems, secure access, and local staff. This operational setup is crucial for maintaining “substance” within the IFSC jurisdiction. 

Step 8: Open IFSC Bank Account and Commence Operations 

Open a bank account with an IFSC-registered banking unit (such as SBI, ICICI, or HDFC IFSC branches). Once the Letter of Approval (LOA) and IFSCA registration are in place, the fund can begin operations, raise capital, and start managing investments under the IFSC framework. 

Investor Eligibility and Fundraising Routes in GIFT City

Who Can Invest in IFSC AIFs 

Funds established in GIFT City are primarily designed to attract foreign and non-resident investors, offering them a transparent and tax-efficient investment platform regulated by the International Financial Services Centres Authority (IFSCA). 

Eligible participants typically include: 

• Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) 
• Foreign Portfolio Investors (FPIs/FIIs) 
• Sovereign Wealth Funds, Pension Funds, and Institutional Investors 
• Overseas Family Offices and Global Fund-of-Funds 

Resident Indian retail participation is generally restricted but may be permitted under specific regulatory approvals or frameworks notified by IFSCA. Consequently, most IFSC-based funds are structured to channel foreign capital inflows into Indian and global opportunities. 

Accredited and Eligible Investors

Investment participation is governed by IFSCA’s Accreditation Framework, which ensures that only financially sophisticated or high-net-worth investors access non-retail fund products. 

Registered FMEs can raise funds from accredited investors or investors contributing above prescribed thresholds. 

Updated Minimum Investment Requirements 

• Venture Capital Schemes (Part A): Minimum investment USD 250,000 per investor; USD 60,000 for employees, directors or designated partners of the FME; accredited investors are exempt from the minimum. 
• Restricted (Non-Retail) Schemes (Part B): Minimum investment USD 150,000 per investor; USD 40,000 for employees, directors or designated partners of the FME; accredited investors are exempt.While industry stakeholders have sought a reduction in the USD 150,000 minimum investment cap, IFSCA has retained this threshold to ensure participation remains limited to sophisticated investors

• Retail Schemes (Part C): Minimum participation typically USD 10,000, subject to scheme-specific disclosures and diversification limits. 
• Portfolio Management Services (PMS): Minimum investment per client – USD 75,000 (accredited investors are exempt). 
• Accreditation criteria: Defined net worth, financial expertise, and experience benchmarks as set by IFSCA. 
  • Income Test: Annual gross income ≥ USD 200,000 (or joint USD 300,000 with spouse). 
  • Net Asset Test: ≥ USD 1 million in net assets, of which ≥ USD 500,000 are financial assets (excluding primary residence). 
  • Institutional and sovereign investors such as sovereign wealth funds, pension funds, and multilateral agencies are deemed accredited. 

This framework aligns investor suitability with fund risk profiles, safeguarding investor interests and market integrity.  

Fundraising through Private Placement Memorandum (PPM)

Capital is typically raised through a Private Placement Memorandum (PPM) — a legally binding disclosure document that provides comprehensive details on: 

• Investment strategy and target sectors 
• Risk factors and expected returns 
• Fund structure, management fees, and redemption terms 
• Investor rights, exit mechanisms, and governance standards 

The PPM serves as the fund’s primary offering document for onboarding eligible investors such as NRIs, FPIs, and institutional participants.
Retail-oriented schemes, on the other hand, must file an approved offer document with IFSCA before public distribution. 

Participation by Key Individuals

Directors, partners, and employees of FMEs may invest in their own funds at reduced minimum thresholds — USD 60,000 for VC schemes and USD 40,000 for Restricted schemes — aligning their interests with those of investors and reinforcing confidence in fund governance and management quality. 

Types of Funds under IFSCA Framework

Each scheme operates under clear limits on diversification, sector exposure, and portfolio composition — ensuring investor protection and regulatory transparency.

Tax and Regulatory Advantages of GIFT City (IFSC) 

1. Direct Tax Benefits 

• 100% Income Tax Exemption – Section 80LA 

IFSC units deriving income solely from eligible business enjoy 100% tax exemption for any 10 consecutive years out of 15 from commencement. 

• Reduced MAT/AMT – Sections 115JB & 115JC 

MAT: 9% (instead of 15%) for IFSC units earning in foreign exchange. 

AMT: Not applicable to non-corporate assessees in IFSC. 

• Exemption on Dividends & Income – Section 10(4D) 

Income from transfer of capital assets, interest, dividend, or securities by IFSC-specified funds is fully exempt. 

• No Capital Gains Tax for Non-Residents – Section 10(4E) 

Applicable on offshore derivatives, NDFs, OTC derivatives if transacted in IFSC in foreign currency. 

• No Tax on Aircraft/Ship Leasing Income – Section 10(4F) 

Exempts income of non-resident lessors leasing to IFSC units, if in foreign currency. 

• Exemption for Investment Funds – Section 10(23FB) 

Income of AIFs (Category I/II) located in IFSC is exempt if all unit holders are non-residents. 

• Special Regime for Foreign Investors – Section 115AD 
  • Interest from bonds listed on IFSC exchange taxed at 5%. 
  • No capital gains tax on certain transactions for FIIs/FPIs. 

2. Indirect Tax & Duty Benefits 

• GST Benefits 

Zero GST on exports: Services from IFSC to foreign clients are treated as exports; ITC refundable. 

No GST on intra-IFSC supplies: Services between IFSC units or to SEZ units are zero-rated. 

No IGST on imports: Exempt under SEZ notifications for capital goods, inputs, and input services. 

• Customs Duty Exemptions 

No Basic Customs Duty (BCD) on imports for authorized operations with proper documentation. 

No Export Duty on goods/services exported from IFSC. 

• Stamp Duty Exemptions 

100% exemption on instruments executed by or in favor of IFSC units: loan agreements, lease deeds, share transfers, service agreements, as per Gujarat Stamps Act amendments for GIFT City. 

Current Statistics  

Statistics for Fund Management –  

• 116 Fund Management Entities (FMEs) registered 
• 143 Funds launched 
• Total commitments raised: USD 11.69 billion 
• Investments made: USD 4.5 billion across Indian and foreign jurisdictions 
• Category I & II AIFs: USD 7.73 billion in commitments 
• Category III AIFs: USD 3.77 billion in commitments 

These figures show steady quarterly growth, with both venture capital and global fund strategies gaining traction within the IFSC ecosystem. 

In Summary 

Setting up a fund in GIFT City enables global investors and fund managers to participate in India’s growth using world-class regulation, low taxation, and a future-ready innovation platform. Whether structured as a traditional AIF or a tokenised asset fund, GIFT City provides the infrastructure, credibility, and opportunity to redefine financial wealth creation.