Rewrapping The Gift: Introduction Of New Regulations

Overview

Owing to the current shift to cater to global financial institutions and investment funds, the International Financial Services Centre ("IFSC") zone in Gujarat International Finance Tec-City ("GIFT") has seen a notable boost in the number of Fund Management Entities ("FMEs") and funds. As of December 2024, the IFSC Authority ("IFSCA") has registered 139 FMEs and 198 schemes within the GIFT IFSC.¹ This underscores the rising appeal of the GIFT IFSC as a premier destination for financial services, facilitated by its favourable regulatory environment, attractive tax incentives, a supportive regulatory framework, and seamless access to international markets.

Additionally, the IFSCA has introduced the IFSCA (Fund Management) Regulations, 2025 ("FM Regulations 2025") superseding the previous set of regulations introduced in 2022 ("2022 Regulations") and providing further enhancements and simplifying the regulatory landscape by implementing the following key reforms:

Refinements

• Simplified application process: The IFSCA introduced a single window IT-enabled system ("SWITS"). Effective from October 1, 2024, all applicants will be required to submit their applications exclusively through SWITS for obtaining licenses, authorisations and approvals from IFSCA and the relevant authorities of the Special Economic Zones ("SEZ").² Unlike the 2022 Regulations, the FM Regulations 2025 provide a clear procedure for the submission of registration applications, along with detailed declarations and undertakings.³ Furthermore, the IFSCA also released a "SEZ Compliance FAQs Booklet," which fosters greater clarity and understanding of the applicable SEZ laws and regulations and provides comprehensive guidance on the entire lifecycle of a unit in GIFT IFSC, from the initial application process through to the eventual exit of the unit.⁴

• Focus on Family Investment Funds ("FIFs"): The evolving landscape of wealth management among high net-worth individuals has led to a marked increase in establishment and structuring of FIFs and family offices. In line with this trend, the FM Regulations 2025 has broadened the definition of FIF to include any fund that pools capital exclusively from a single family, through one or more investment vehicles.⁵ Significantly, the revised definition of 'single family' now encompasses entities such as a sole proprietorship, partnership firm, company, limited liability partnership, trust, or body corporate, in which an individual or a group of individuals from a single family exercises control and holds, directly or indirectly, a substantial economic interest.⁶ These regulatory revisions in the regulatory framework, coupled with India's relatively lower cost of living, rental expenses, and labour costs as compared to jurisdictions such as Dubai, Mauritius or Singapore, will supplement and offer a more compelling and cost-effective environment for the operations of FIFs and family offices. Consequently, the IFSC GIFT is increasingly emerging as a preferred and economically advantageous jurisdiction for housing such FIFs and family offices.

• Reduced minimum corpus and extended validity of Private Placement Memorandum ("PPM"): The minimum corpus requirement for various schemes, including venture capital schemes and restricted schemes, has been reduced to USD 3 million from USD 5 million.⁷ Further, the validity period for PPM for venture capital schemes and restricted schemes has been extended to 12 months from 6 months.⁸ These adjustments will provide greater flexibility and accessibility for investors, allowing a wider range of entities to participate in such schemes.

• Relaxation on marketing: The FM Regulations 2025 has permitted the FMEs to open a branch or representative office in other jurisdictions for the purpose of marketing their offerings and client service, subject to prior intimation to IFSCA.⁹ This offers a significant strategic advantage by enabling the FMEs to expand their international footprint, engage with a broader investor base, and enhance their client relationships.

Conclusion

The relocation of foreign funds and schemes to GIFT IFSC has witnessed a noticeable uptick, indicating the growing confidence of global investors in the jurisdiction's regulatory and institutional framework. This confidence is reflected in the active participation of investors spanning over 50 countries.¹⁰

In a significant legislative development, the Finance Act, 2025 has extended the timeline for availing the capital gains exemption under section 47(vii-ad) of the Income-tax Act, 1961, from March 31, 2025 to March 31, 2030, pursuant to the relocation of the resultant funds in IFSC. This extension will serve as a key enabler for global fund managers seeking to redomicile their structures to India in a tax-neutral manner, thereby reinforcing GIFT IFSC as a notable alternative to established IFSCs such as Singapore, London, and Dubai.

Additionally, in alignment with India's commitment to achieving net zero emission target by 2070 and with a view to mobilising green private capital to be channelised through the fund management route, the IFSCA has waived the fund filing fees for the first 10 environmental, social and governance ("ESG") funds.¹¹ This targeted incentive reflects IFSCA's dual objective of attracting both foreign and domestic fund managers to GIFT IFSC, while simultaneously embedding ESG considerations into the core of investment decision making. As sustainable finance continues to gain global traction, this initiative positions GIFT IFSC as a progressive and competitive jurisdiction at the forefront of the evolving global financial landscape.

Footnotes

1 IFSCA Bulletin (October – December, 2024) issued by the Division of Economic Policy and Analysis, International Financial Services Centres Authority.

2 Circular dated September 30, 2024, on Single Window IT System.

3 First Schedule, International Financial Services Centres Authority (Fund Management) Regulations, 2025.

4 SEZ Compliance FAQs Booklet (March, 2025) issued by the office of the Administrator, International Financial Services Centres Authority.

5 Regulation 2(1)(l), International Financial Services Centres Authority (Fund Management) Regulations, 2025.

6 Regulation 2(1)(ii), International Financial Services Centres Authority (Fund Management) Regulations, 2025.

7 Regulations 23(1) and 35(2), International Financial Services Centres Authority (Fund Management) Regulations, 2025.

8 Circular dated April 08, 2025, on transition to International Financial Services Centres Authority (Fund Management) Regulations, 2025.

9 Regulation 137, International Financial Services Centres Authority (Fund Management) Regulations, 2025.

10 IFSCA Bulletin (October – December, 2024) issued by the Division of Economic Policy and Analysis, International Financial Services Centres Authority.

11 Press Release dated September 27, 2024, on Incentive provided by International Financial Services Centres Authority for filing of ESG Funds.

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