Guide to setting up Alternative Investment Funds in GIFT City

1. GIFT City’s IFSC is India’s onshore jurisdiction for international financial services, and AIFs here are managed through regulated Fund Management Entities (FMEs) under the IFSCA framework.
2. FMEs are authorised under the IFSCA (Fund Management) Regulations, 2022 to run AIFs and related strategies, including venture capital, private equity, credit, listed strategies, REIT/InvIT and family investment structures.
3. FMEs are classified into Authorised, Registered (Non‑Retail) and Registered (Retail) categories, each with defined permissible activities and minimum net‑worth requirements from USD 75,000 to USD 1,000,000.
4. The GIFT City AIF ecosystem is primarily designed for non‑resident investors and offshore capital pools—institutional investors, family offices, NRIs/OCIs and foreign funds—operating as an international asset management platform from within India.
5. Access to mainland Indian investors is restricted to permitted outbound routes such as the Liberalised Remittance Scheme (LRS) and other FEMA‑compliant frameworks, unless separate onshore approvals (e.g. SEBI) are obtained.
6. FMEs in GIFT City typically operate in permitted foreign currencies via IFSC banking channels, appoint an IFSCA‑registered custodian for AIF assets (with limited exceptions), and are expected to maintain real operational substance in the IFSC.
7. Set‑up costs combine IFSCA fees (USD 2,500 application, USD 5,000–10,000 registration, ~USD 2,000 annual) with capital, SEZ onboarding, office and key personnel, positioning GIFT City as an institutional‑grade fund domicile rather than a light‑touch, low‑substance option.
8. AxiomSync, as an IFSCA‑registered ancillary service provider within the 10 Leaves Group, helps sponsors design, license and operate GIFT City AIF platforms end‑to‑end—from jurisdictional and structuring advice through entity formation, FME/AIF applications, governance and compliance frameworks, to ongoing regulatory support and cross‑border coordination with DIFC, ADGM, Luxembourg and Mauritius structures.

 

What is GIFT City?

Why Setup in GIFT City?

 

GIFT City offers a place to run international financial business without leaving the country. For decades, activities involving foreign currency, overseas investors, or cross-border structures were pushed offshore by default. GIFT City was created to pull that activity back, not by relaxing oversight, but by redesigning the framework altogether.

Since becoming operational, the IFSC has attracted a wide mix of institutions. Banks use it for foreign-currency lending and trade finance. Fund managers run India-linked strategies that would otherwise sit in traditional offshore centres. Insurers, reinsurers, payment firms, fintech platforms, leasing companies, and group treasury centres have followed. The common thread is not sector, but use case: these are activities that need to operate internationally, even when the underlying capital or risk is India-related.

Its location helps, but its real value lies in how it is positioned. Sitting between Ahmedabad and Gandhinagar, GIFT City remains close to India’s economic base while operating under a regime that is clearly separated from domestic financial rules. Indian firms can service non-resident clients and manage cross-border flows without the usual onshore constraints. Foreign institutions can engage with India-linked opportunities without having to navigate the full complexity of India’s domestic regulatory system.

Confidence in the IFSC has also been shaped by how it is regulated. Instead of multiple authorities with overlapping mandates, the entire ecosystem sits under a single regulator, the International Financial Services Centres Authority. For firms used to dealing with regulators in global financial centres, this makes a noticeable difference. Licensing paths are clearer, approvals are faster, and regulatory conversations tend to be more coordinated and predictable.

The regulatory framework itself reflects this intent. Rather than evolving slowly from legacy rules, IFSC regulations were designed with international alignment in mind from the outset. Fund management, banking, insurance, payments, fintech, leasing, and treasury operations are all covered under frameworks that borrow heavily from global practice, while still reflecting Indian policy priorities. For fund managers and fintech firms in particular, this balance between structure and flexibility has been a key draw.

Another reason GIFT City has gained traction is the sheer scale of capital linked to India. The Indian diaspora, NRIs and OCIs, family offices, and global investors are increasingly looking for ways to access Indian assets through structures that meet international governance and compliance expectations. Operating in foreign currency, within a recognisable regulatory environment, makes the IFSC a natural fit for that demand. Tax efficiency plays a role, but it is rarely the only factor.

At the same time, GIFT City is not being shaped around a single product or theme. Alongside traditional banking and funds, the ecosystem has expanded into areas such as private credit, infrastructure and real-asset strategies, aircraft and ship leasing, ESG-linked services, trade finance platforms, and cross-border payments. The range of permitted activity suggests a deliberate attempt to build depth rather than rely on one narrow advantage.

GIFT City was planned as a working financial district, not just a regulatory zone. Offices, housing, hotels, schools, healthcare, and everyday amenities sit within the same development. As more teams relocate, the city is gradually functioning less like a project site and more like a place where institutions can base operations for the long term.

Taken together, these factors explain the appeal of GIFT City. It is not simply a tax play or an experiment in regulatory arbitrage. For many firms, it has become the most straightforward way to run international financial business connected to India, without stepping outside India itself.

Specific advantages of establishing in GIFT City

 

Legal and regulatory framework

• Operates under a single, unified regulator – the International Financial Services Centres Authority (IFSCA)
• Regulatory frameworks aligned with international financial centres rather than domestic Indian rules
• Permits cross-border financial activities in foreign currency
• Allows 100 percent foreign ownership for most financial and ancillary services
• Simplified approval and supervision process compared to multi-regulator environments

Tax and fiscal benefits

• 100 percent income-tax exemption for any 20 consecutive years out of a 25-year block
• No securities transaction tax (STT) or commodities transaction tax (CTT) on IFSC exchange trades
• No GST on services received by IFSC units or on IFSC exchange transactions
• Capital gains exemptions on specified securities listed on IFSC exchanges
• Customs-duty exemptions on goods imported into the IFSC

Counterparty and investor confidence

• Independent statutory regulator with consolidated oversight
• Globally recognisable regulatory structure covering banking, funds, insurance, payments, and fintech
• Clear licensing categories, net-worth requirements, and compliance obligations
• Strong emphasis on AML, governance, and risk management aligned with international standards

Diverse and expanding ecosystem

• Presence of international and Indian banks, fund managers, insurers, fintechs, and leasing companies
• Rapidly growing fund domicile for India-linked offshore funds
• Supportive environment for global capability centres and financial services outsourcing
• Availability of professional services including legal, audit, compliance, and advisory firms

Strategic geographic and economic positioning

• Acts as India’s offshore financial gateway without requiring relocation to a foreign jurisdiction
• Enables participation in inbound and outbound capital flows linked to India
• Supports India’s role in South-South trade and cross-border investment between Asia, the Middle East, and Africa
• Well-positioned to benefit from long-term growth in emerging markets and global reallocation of capital

What is an Alternative Investment Fund, or AIF?

AIFs are privately pooled investment vehicles. They are categorized based on their investment strategy and regulatory treatment:

Category	Description	Tax Treatment
Category I	Socially/economically desirable investments (Venture Capital, SME Funds, Startups).	Tax Pass-Through (eliminating double taxation).
Category II	Funds that do not fall under I or III (Private Equity, Debt Funds, FOF). Cannot undertake leverage.	Tax Pass-Through.
Category III	Funds employing complex trading strategies and leverage (Hedge Funds, PIPE).	Fund-Level Taxation, but non-resident investors are exempt from tax on transfers of offshore securities.

 

What are the primary benefits of setting up AIFs in GIFT City?

 

• Access to Global Capital: Attracts foreign investors while enabling Indian residents to invest overseas within permitted limits under LRS, OPI, and ODI frameworks.

• Diversified Investment Opportunities: Allows investment across multiple asset classes, including real estate, offshore entities (listed and unlisted), and hedge fund strategies.

• International Investment Platform: Provides a globally aligned structure within India for managing cross-border investments efficiently.

• Enhanced Investor Appeal: Combines regulatory clarity, flexibility, and access to global markets, making GIFT IFSC an attractive destination for sophisticated investors.

 

Tax and regulatory benefits for AIFs

 

1. Tax pass-through for AIFs
   Category I and Category II AIFs in GIFT IFSC enjoy tax pass-through status, eliminating double taxation.
2. Tax exemption for foreign investors
   Income earned by foreign investors (without Indian-source income) from AIFs is not taxable in India.
3. No PAN or tax filing requirement
   Non-resident investors are exempt from obtaining a PAN and filing tax returns in India, subject to conditions.
4. No GST, STT or CTT
   Transactions on IFSC exchanges are free from GST, STT and CTT.
5. Manager fee GST exemption
   Fees charged by Fund Managers (FMEs) in IFSC are exempt from GST.
6. Tax relief for Category III AIFs
   While resident investors are subject to tax on income from Category III AIFs, non-resident investors are exempt from tax on transfers of Indian securities (excluding shares of Indian companies) and offshore securities.
7. Exemptions for retail and ETFs
   Profits attributable to non-resident unit holders in retail funds and Exchange Traded Funds (ETFs) in IFSC are tax‑exempt.
8. Core Settlement Guarantee Funds
   Specified income of such funds set up by recognised clearing corporations in IFSC is tax‑exempt.
9. Source-of-funds relaxation
   Venture capital funds regulated by IFSCA are exempt from explaining or being taxed on the source of credited funds.

Permissible investments under FMEs

Type of Scheme	Permissible Investments
Venture Capital (VC) Schemes	Investments primarily in unlisted securities of start-ups, emerging ventures, or those focusing on new products, services or intellectual property. Additional investments allowed in listed securities, LLPs, mutual funds, AIFs and money market instruments.
Restricted Schemes (Non-Retail)	Investments in startups, SMEs, infrastructure, ESG/social ventures. Includes derivatives, physical assets (up to 20% of corpus), REITs/InvITs, special situation funds.
Retail Schemes	Investments in listed and unlisted securities, ETFs, mutual funds, derivatives, debt instruments.

 

What are the conditions for funds under the different schemes of the IFSC?

The table below summarises the conditions.

Particulars	Venture Capital Schemes	Restricted Schemes (Non‑retail)	Retail Schemes
Legal structure	Company, LLP or Trust	Company, LLP or Trust	Company / Trust
Borrowing and leverage	Permissible without limit, subject to disclosure in the PPM and consent of 2/3rd of the investors by value	Permissible without limit, subject to disclosure in the PPM and consent of 2/3rd of the investors by value	Borrowing permissible only to meet temporary liquidity needs, subject to prescribed conditions
Type of fund / scheme	Close‑ended	Open‑ended or Close‑ended	Open‑ended or Close‑ended
Investment in unlisted entities	No restrictions; primarily on investment in unlisted securities	– Open‑ended scheme: Max 25% of the corpus – Close‑ended scheme: No restrictions	– Open‑ended scheme: Max 15% of the asset under management (AUM) – Close‑ended scheme: No restrictions; min investment USD 10,000 (approx. INR 8 lakh) in case investment in unlisted securities exceeds 15% of the AUM
Co‑investment by FME or its associate	Permissible, subject to conditions	Permissible, subject to conditions	NA
Corpus	Min: USD 3 million – Max: USD 200 million	Min: USD 3 million – Max: NA	Min: USD 3 million* (for open‑ended retail, corpus may be reached within a prescribed period – from footnote)
Eligible investors	– Accredited investors – None (to be defined by IFSCA) – Other than accredited investors: – Investors investing above USD 250,000 (approx. INR 2 crore) – Employees / Directors / Designated Partners / Partners of FME – USD 60,000–USD 60,000 (approx. INR 48 lakh)	– Accredited investors – None (to be defined by IFSCA) – Other than accredited investors: – Investors investing above USD 150,000 (approx. INR 1.20 crore) – Employees / Directors / Designated Partners / Partners of FME – USD 40,000 (approx. INR 32 lakh)	– Open‑ended scheme: No restrictions (subject to retail rules) – Close‑ended scheme: see minimum investment condition above when unlisted exposure > 15% AUM
Minimum number of investors	NA	NA	Min 20 investors
Maximum number of investors per scheme	≤ 50 investors	1,000 investors or such higher limit as may be prescribed by IFSCA	No restrictions
Maximum holding by a single investor	None	25%	No specific cap mentioned in the page snippet
Joint investment / specific relationships	Provision for joint investments by 2 individuals with specified relationships is provided	No such specific provision mentioned	–
Direct retail investors via distribution channel	Possible	Possible if all are accredited investors	Not applicable (NA)
Taxation	To be construed as Category I AIF	To be construed as Category I / II / III AIF depending upon investment theme	To be taxed depending upon the investment theme
Scheme type and tenure	– Open‑ended scheme: Not applicable – Close‑ended scheme: Minimum tenure of 3 years	– Open‑ended scheme: No restrictions – Close‑ended scheme: Minimum tenure of 1 year	– Open‑ended scheme: No restrictions – Close‑ended scheme: Minimum tenure of 1 year
“Skin‑in‑the‑game” contribution by FME or its associate The ‘skin‑in‑the‑game’ ranges set out above represent minimum and maximum contribution bands for the FME or its associate. The subsequent regulatory update allows the FME/associate to hold a larger overall interest in the scheme (up to 100% of the corpus), as long as diversification and non‑resident criteria are satisfied. Investment in associates by non‑retail schemes remains subject to prior approval of investors representing at least 75% of the corpus by value, consistent with the updated related‑party transaction framework. In retail schemes, the cap of 25% of AUM on investment in associates continues to apply in addition to the general concentration and suitability norms applicable to retail investors.	If targeted corpus (TC) is less than USD 30 million (approx. INR 240 crore): FME/associate contribution: At least 2.5% of TC and not exceeding 10% of TC. If TC is more than USD 30 million: Contribution: At least USD 750,000 (approx. INR 6 crore) and not exceeding 10% of TC.	In the case of a closed‑ended scheme: If TC is less than USD 30 million: At least 2.5% of TC and not exceeding 10% of TC. If TC is more than USD 30 million: At least USD 750,000 and not exceeding 10% of TC. In the case of an open‑ended scheme: If TC is less than USD 30 million: At least 5% of TC and not exceeding 10% of TC. If TC is more than USD 30 million: At least USD 1.5 million (approx. INR 12 crore) and not exceeding 10% of TC.	Lower of 1% of the AUM or USD 200,000 (approx. INR 1.6 crore).
Investment in associates	Permissible, subject to prior approval of 75% of investors in the scheme by value	Permissible, subject to prior approval of 75% of investors in the scheme by value	Maximum 25% of the AUM

For open‑ended schemes under retail, investment activities may commence on achieving a corpus of USD 1 million, provided the minimum corpus of USD 3 million is achieved within 12 months.

For close‑ended retail schemes, listing of units on a recognised stock exchange is now optional, rather than mandatory, where the minimum investment from each investor is at least USD 10,000. Managers can therefore calibrate listing decisions to investor profile and distribution strategy, while continuing to comply with disclosure and governance requirements.

Footnotes

• The above conditions reflect the baseline position under the IFSCA (Fund Management) Regulations, 2022. Subsequent Board updates have introduced additional flexibility for contributions and related‑party transactions, without altering the corpus, investor‑number or minimum investment thresholds set out in this table.
• Following the regulatory updates, an FME or its associate may now invest up to 100% of the corpus of a non‑retail scheme, provided the FME/associate and their UBOs are non‑residents of India and the scheme does not invest more than one‑third of its corpus in any single company or its associates.
• For non‑retail schemes, transactions in securities with associates, other schemes of the FME, or ‘major investors’ (holding at least 50% of the corpus) require prior approval from investors representing at least 75% of the corpus by value. The major investor concerned is excluded from voting where the transaction involves it.
• In fund‑of‑funds schemes, independent valuation of the scheme is not required where the underlying fund has itself been independently valued in accordance with applicable regulations.
• For open‑ended retail schemes, investment activities may commence once a corpus of USD 1 million is reached, provided the minimum corpus of USD 3 million is achieved within 12 months from launch.
• For sectoral and thematic retail schemes, the cap on investment in a single company may be linked to the weight of that company in the relevant representative index or 15% of the scheme portfolio, whichever is higher.

Who is the Fund Manager of an AIF?

For an AIF in GIFT City, the Fund Manager is the person (or team) engaged by the Fund Management Entity (FME) to run the fund’s investment strategy. The manager is responsible for:

• Implementing the investment mandate set out in the fund documents.
• Taking day‑to‑day buy, sell and asset‑allocation decisions across the asset classes and instruments the AIF is permitted to invest in.
• Ensuring that investment decisions stay within the IFSCA regulations and the risk, leverage and concentration limits disclosed to investors.

In practice, the Fund Manager is the primary decision‑maker for the AIF’s portfolio, while the FME provides the regulated platform, governance framework and ongoing interface with IFSCA.

Can a GIFT City AIF take money from mainland India investors?

An AIF set up in GIFT City is primarily designed to pool and manage non‑resident capital, even though the fund vehicle is located in India. Its ability to raise money from Domestic Tariff Area (DTA) investors is shaped both by IFSCA’s fund regulations and India’s foreign‑exchange rules.

Broadly:

• The AIF can freely raise and manage capital from non‑resident investors, including NRIs/OCIs investing from overseas and foreign institutions.

• Indian‑resident individuals and entities can participate only through permitted outbound routes, such as the Liberalised Remittance Scheme (LRS) or other notified overseas investment frameworks, and only where the route allows investment into IFSC funds.

• The AIF cannot be marketed or structured as a simple “onshore” product for INR‑denominated money unless a separate onshore regulatory framework (for example, under SEBI for domestic AIFs) is complied with.

From a regulatory standpoint, when an Indian resident invests into a GIFT City AIF, that exposure is treated as an offshore investment by the investor, even though the fund is situated within India’s borders.

Can a GIFT City AIF serve investors and strategies outside India?

Yes – that is one of the key reasons for using the GIFT City platform.

An AIF established in the IFSC can:

• Raise capital from non‑resident investors across jurisdictions, subject to their home‑country rules.
• Run both India‑linked and non‑India strategies, depending on the category and scheme structure (for example, India‑focused private equity, global credit, or fund‑of‑funds portfolios).
• Invest, hold and distribute in permitted foreign currencies, using IFSC banking channels.

Because IFSC units are treated as non‑residents for exchange‑control purposes, an AIF in GIFT City effectively operates as an offshore fund platform within India. It can be used to channel inbound capital into India, route India‑linked strategies that would otherwise sit in traditional offshore centres, and also support outbound portfolios targeting opportunities outside India, all under a single, IFSCA‑supervised regime.

 

What legal structures can AIFs use in GIFT City?

In GIFT City IFSC, Alternative Investment Funds are not tied to a single fund form. Subject to the IFSCA (Fund Management) Regulations and the AIF framework issued for the IFSC, an AIF can typically be established using one of the following legal structures:

1. Trust structure
   • The most common structure, particularly for Category I and Category II AIFs.
   • The AIF is constituted by a trust deed, with the Fund Management Entity (FME) acting as the investment manager and a separate trustee (or trustee company) appointed to hold assets on behalf of investors.
   • Works well where the investor base includes institutions, family offices and HNIs that are familiar with the domestic AIF trust model.
2. Company structure
   • The fund is set up as a company incorporated in the IFSC, usually as a company limited by shares.
   • The FME is appointed to manage the investment portfolio under an investment management agreement, while the company issues shares or units to investors.
   • This format is often used where investors or sponsors prefer a corporate fund vehicle for governance, board representation or treaty‑driven structuring reasons.
3. Limited Liability Partnership (LLP) structure
   • In certain cases, an AIF can be housed in an LLP, with the FME or an affiliate acting as the designated partner responsible for management.
   • This is more common for closed user‑group strategies or sponsor‑driven funds where a partnership‑style profit‑sharing and governance model is preferred.

Across these structures, the FME remains the regulated manager and is responsible for portfolio management and compliance, while the AIF vehicle (trust, company or LLP) is the pooled fund through which investors participate. The choice between them is usually driven by:

• the category and strategy of the AIF (Category I, II or III; open‑ended vs close‑ended);
• investor profile and tax considerations; and
• how the fund is intended to sit within the sponsor’s broader international structure.

 

Aspect	Trust AIF	Company AIF	LLP AIF
Basic form	Private trust constituted by trust deed	Company limited by shares incorporated in IFSC	Limited Liability Partnership registered in IFSC
Typical AIF categories	Common for Category I and II; also used for Category III	Used across categories where corporate form is preferred	More niche; usually for closed, sponsor‑driven funds
Key parties	Settlor, Trustee / Trustee company, FME as investment manager, unit holders	Board of directors, shareholders/unit holders, FME as investment manager	Designated partners (incl. sponsor / FME affiliate), other partners / investors
Governance style	Trust deed + investment management agreement; trustee oversight over FME	Companies Act governance with board, shareholder rights and IM agreement	Partnership agreement sets rights and obligations; more contractual and flexible
Investor familiarity	Closely aligned with domestic Indian AIF market; familiar to Indian institutions, family offices and HNIs	Often more familiar to global institutional investors and corporate groups	Best suited where investors are comfortable with partnership economics and documentation
Tax / structuring use case	Frequently used for pass‑through / pooling structures for India‑linked strategies	Used where corporate form assists treaty access, governance optics or listing / exit planning	Used when profit‑sharing and economics are tailored for a small group of sponsors / partners
When typically preferred	Broad NRI / HNI / institutional participation in India‑linked or diversified strategies	Institutional or cross‑border sponsor platforms; groups that want a “fund company” sitting in GIFT City	Sponsor‑heavy strategies, club deals or GP/manager co‑investment platforms

 

What currencies are permitted for transactions?

All units operating in the International Financial Services Centre (IFSC) at GIFT City are required to conduct their business activities in permissible foreign currencies, other than the Indian Rupee. To this end, such units are required to open and maintain foreign currency accounts with banks operating within the IFSC at GIFT City.

Financial institutions established in the IFSC, being treated as persons resident outside India for exchange-control purposes, are permitted to open and maintain a Special Non-Resident Rupee (SNRR) account with a bank in India, outside the IFSC, in accordance with the Foreign Exchange Management (Deposits) Regulations, 2016. Such SNRR accounts may be used solely for meeting expenses denominated in Indian Rupees and incurred outside GIFT City and the IFSC.

The International Financial Services Centres Authority has notified the following specified foreign currencies as permissible for undertaking business in the IFSC at GIFT City:

US Dollar (USD), Euro (EUR), Pound Sterling (GBP), Japanese Yen (JPY), Swiss Franc (CHF), Singapore Dollar (SGD), Australian Dollar (AUD), Canadian Dollar (CAD), Hong Kong Dollar (HKD), UAE Dirham (AED), Russian Rouble (RUB), Swedish Krona (SEK), Danish Krone (DKK), Norwegian Krone (NOK), and New Zealand Dollar (NZD).

 

What are the key tax benefits available to AIFs in GIFT City?

 

The tax framework in GIFT City is best understood as a set of targeted concessions rather than a standalone tax regime. Entities operating in the IFSC remain within India’s income-tax system, but specific incentives are layered on top to make international financial activity viable onshore. The focus is on foreign-currency business, cross-border services, and India-linked offshore activity that would otherwise sit outside the country.

One of the central incentives is the income-tax holiday available to IFSC units. Eligible entities can claim a full exemption from income tax for ten consecutive years, chosen by the taxpayer, within a broader fifteen-year window. This flexibility allows firms to defer the exemption until operations stabilise or profitability improves, rather than being forced to use it from day one. The exemption applies only to income earned from approved IFSC activities and does not extend to unrelated or domestic operations.

Capital markets activity in the IFSC benefits from a separate set of concessions. Capital gains arising from transfers of specified securities listed on IFSC exchanges are exempt from tax, subject to prescribed conditions. In addition, transactions executed on IFSC exchanges are not subject to securities transaction tax or commodities transaction tax. For trading desks, funds, and institutional investors, this materially reduces transaction costs and aligns the IFSC more closely with offshore exchanges.

The regime also addresses cross-border funding efficiency. Interest payments made by IFSC units to non-resident lenders are subject to concessional withholding tax rates, improving the economics of offshore borrowing. This is particularly relevant for banking units, leasing companies, and treasury centres that rely on international debt markets.

For funds established in the IFSC, the tax framework is designed to minimise leakage at the fund level. Certain funds benefit from tax-neutral or pass-through treatment, and eligible non-resident investors may be exempt from capital gains tax on transfers of fund units, subject to conditions. This makes GIFT City a workable domicile for India-focused offshore funds without forcing managers or investors into complex multi-jurisdictional structures.

Indirect taxes are also addressed. IFSC units are generally exempt from GST on services received for authorised operations, and transactions carried out on IFSC exchanges are similarly relieved from indirect tax. Where services are provided to overseas clients, they are typically treated as exports for GST purposes, provided the statutory conditions are met. This reduces the operating cost base for firms using the IFSC as an export hub for financial or professional services.

Finally, for tax and exchange-control purposes, IFSC units are largely treated as non-residents. This classification supports the foreign-currency operating model and complements the direct-tax incentives by allowing greater flexibility in cross-border structuring, treasury activity, and group support arrangements.

Summary of key tax benefits in GIFT City

Area	Tax treatment for GIFT City AIFs and their platforms
Income tax	Eligible IFSC fund platforms can claim a 100% income‑tax exemption on specified business income for any 20 consecutive years within a 25‑year block, allowing the sponsor to align the holiday with the ramp‑up of AIF activity.
Capital gains	Capital gains arising from transfers of specified securities listed on IFSC exchanges can be exempt from tax, subject to prescribed conditions. This reduces leakage for AIFs that trade listed instruments through IFSC markets.
STT / CTT	No Securities Transaction Tax (STT) or Commodities Transaction Tax (CTT) applies to transactions executed on recognised IFSC exchanges, lowering transaction costs for trading‑oriented AIF strategies.
Withholding tax	Certain interest payments made by IFSC units to non‑resident lenders benefit from concessional withholding tax rates, improving the economics of fund‑level or SPV‑level borrowing used in AIF structures.
Funds / investors	Qualifying IFSC AIFs can access tax‑neutral or pass‑through treatment, with income largely taxed in the hands of eligible non‑resident investors; in some cases, capital gains of such investors on units of IFSC funds may be exempt, subject to conditions.
GST / indirect tax	IFSC units are generally exempt from GST on services received for authorised operations, and transactions on IFSC exchanges are also relieved from indirect tax, reducing the operating and trading cost base of AIFs.
Export of services	Management and advisory services provided from the IFSC to overseas funds or investors are typically treated as exports of services for GST purposes, and may be zero‑rated when statutory conditions are met.
Residency status	IFSC units are broadly treated as non‑residents for tax and exchange‑control purposes, which supports foreign‑currency operations and facilitates cross‑border investment structures for AIFs and their investors.

How much does it cost to set up a Fund Management Entity in GIFT City?

The cost of establishing an AIF in GIFT City depends on three main factors: the AIF category and scheme type (Category I, II or III; venture capital, restricted or retail), the Fund Management Entity (FME) category that will manage it, and the degree of operational substance you choose to build in the IFSC.

Because an IFSC AIF must sit on a regulated FME with prescribed net‑worth requirements, regulatory fees and governance standards, the overall cost profile is closer to that of an international fund domicile than a simple onshore product. In practice, sponsors are investing in a credible, well‑capitalised platform that can support multiple funds and strategies over time, rather than a single‑use vehicle.

1. IFSCA application, registration, and annual fees (official)

These are the core fees payable to IFSCA for the FME licence and for launching AIF schemes.

1. FME application and registration.

• Application fee: USD 2,500.

• Registration fee (category‑wise): amount varies by FME category (Authorised, Registered Non‑Retail, Registered Retail).

• Application fee for Regulatory / Innovation Sandbox, fund lab and similar initiatives (where used): USD 2,500.

• Annual supervisory fee (from year 2 onwards): USD 2,000 per year.

 

Particulars	Fees
Application & registration fee
a) Application fee	USD 2,500
b) Registration fee (category‑wise)	USD 5,000 (Authorized FME) to USD 10,000 (Retail FME)
c) Application fee for Regulatory / Innovation Sandbox, Fund lab, etc.	USD 2,500
d) Annual fee (2nd year onwards)	USD 3,000
Fee for filing placement memorandum / offer document
a) Venture Capital Scheme (Part A of Chapter III)	USD 7,500
b) Angel Funds	USD 3,000
c) Restricted Scheme (Part B of Chapter III):
(i) Category I AIF	USD 7,500
(ii) Category II AIF	USD 10,000
(iii) Category III AIF	USD ,15,000
d) Retail Scheme (Part C of Chapter III)	USD 15,000
e) ETF (Chapter IV)	0.05% of the offer size
f) Investment Trust (Part B of Chapter VI)	USD 5,000
g) FME undertaking portfolio management activity (Part A of Chapter VI)	USD 5,000
h) Angel Fund – filing of intimation regarding investment	USD 500

One‑time setup costs for an AIF platform

2. Entity incorporation and SEZ onboarding

To run AIFs from GIFT City, the sponsor must first establish the FME entity in the IFSC and complete SEZ onboarding. Typical one‑off costs are:

• Incorporation and structuring of the IFSC entity (usually a company): USD 2,000 – 5,000.

• SEZ approvals, Provisional Letter of Approval (PLOA) and associated documentation: USD 3,000 – 6,000.

Indicative total, one‑time (excluding regulatory capital and AIF launch fees): USD 5,000 – 11,000.

3. Office space and operational presence

FMEs are expected to maintain a meaningful presence in GIFT City, including key personnel:

• Grade-A office rent: USD 12 – 18 per sq ft per month.
• Typical office setup: USD 10,000 – 25,000 per year.
• Fit-out and infrastructure: USD 15,000 – 40,000 (one-time).
  4. Professional and advisory costs (one-time)

FME applications are more complex than ancillary registrations and require detailed regulatory documentation:

• Advisory and application support: USD 15,000 – 40,000+
  
  (depending on structure, strategy, and regulatory engagement)
• 5. Ongoing annual operating costs

Once the FME and AIF are live, typical recurring costs include:

• IFSCA annual fee: ~USD 2,000.
• Audit, accounting and compliance support: USD 10,000 – 25,000.
• Key personnel (fund manager, compliance, operations and support staff): USD 80,000 – 200,000+ per year, depending on team size and seniority.
• Custodian, fund administration and other third‑party service providers: variable, driven by AUM and transaction volume.
• Technology, systems and infrastructure (including risk, reporting and investor‑portal tools): USD 10,000 – 30,000 per year.

Taken together, a realistic annual run‑rate for a functioning AIF platform in GIFT City, once staffed and operating, is in the region of USD 120,000 – 300,000+, depending on scale, number of funds and the level of in‑house versus outsourced capability.

“All cost figures are indicative only and are based on applicable IFSCA regulations, publicly available fee schedules, and prevailing market practice as of 2025. Actual costs may vary depending on the nature, scale, and regulatory classification of the business.”

 

How can AxiomSync help you establish and maintain your presence in the GIFT City?

 

AxiomSync is a registered Ancillary Service Provider with the International Financial Services Centres Authority (IFSCA) and forms part of the 10 Leaves Group, a cross-jurisdictional legal, compliance, and financial advisory platform headquartered in Dubai, UAE. The group maintains established regulatory and operational capabilities across DIFC, ADGM, Luxembourg, Mauritius, and India, enabling it to support clients with international structures that intersect multiple regulatory regimes.

With a team of over 50 specialised professionals spanning compliance, legal advisory, risk management, regulatory licensing, and operational setup, AxiomSync provides end-to-end support to firms seeking to establish, license, and operate businesses from GIFT City IFSC. Its services are designed to align with the IFSCA regulatory framework while remaining practical, implementation-focused, and scalable.

1. Jurisdictional assessment and structuring advisory

Before incorporation or licensing, AxiomSync supports clients in determining whether GIFT City is the appropriate jurisdiction for their proposed business model. This includes comparative analysis against other international financial centres such as DIFC and ADGM, assessment of regulatory fit, tax considerations, and operational substance requirements.

Services include:

• Business-model suitability assessment for GIFT City.
• Regulatory perimeter analysis under IFSCA regulations.
• Cross-jurisdiction structuring involving DIFC, ADGM, Luxembourg, or Mauritius.
• Holding, fund, treasury, or platform structuring for India-linked international activity.

This upfront advisory ensures that clients enter the IFSC with a structure that is viable both commercially and regulatorily.

2. Entity formation and SEZ setup support

AxiomSync manages the complete entity setup process within GIFT City, coordinating incorporation, SEZ approvals, and statutory registrations through the SWIT portal and related authorities.

This includes:

• Assistance with office identification and SEZ documentation.
• Provisional Letter of Approval (PLOA) support.
• Company or LLP incorporation in India for IFSC purposes.
• Execution of bond-cum-legal undertaking with SEZ and customs authorities.
• GST and Import Export Code (IEC) registrations, where applicable.

The focus is on ensuring that legal formation, SEZ compliance, and regulatory readiness progress in parallel.

3. IFSCA licensing and regulatory authorisation

As an IFSCA-registered Ancillary Service Provider, AxiomSync provides hands-on regulatory licensing support across all major IFSC business categories.

This includes assistance with:

• IFSC Banking Unit-related advisory (non-bank participants and group interfaces).
• Finance Company registrations (including lending, trade finance, factoring, forfaiting, leasing, ITFS participation).
• Fund Management Entity (FME) registration and fund launches.
• Capital Market Intermediary licensing (brokers, advisers, custodians, distributors).
• Payment Services authorisation and sandbox participation.
• Insurance and reinsurance office applications.

Support covers preparation of regulatory applications, business plans, financial projections, governance frameworks, and ongoing engagement with the IFSCA through the application lifecycle.

4. Governance, compliance, and AML framework design

AxiomSync designs and implements IFSCA-aligned governance and compliance frameworks tailored to the client’s regulatory category and risk profile.

Services include:

• Drafting of compliance manuals and regulatory policies aligned with applicable IFSCA regulations
• AML, CFT, and KYC frameworks compliant with IFSCA AML Guidelines
• Risk management frameworks and internal control policies
• Board and management governance structures
• Outsourcing, data protection, and business continuity policies

These frameworks are designed not just for approval, but for actual operational use, inspection readiness, and scalability.

5. Ongoing compliance and regulatory support

Beyond licensing, AxiomSync provides ongoing compliance support to IFSC entities operating in GIFT City, either on a retained or modular basis.

This includes:

• Outsourced or co-sourced Compliance Officer and AML Officer support
• Regulatory reporting and filing assistance
• Support during IFSCA supervisory reviews and inspections
• Ongoing monitoring of regulatory changes and impact assessments
• Periodic compliance health checks and gap analyses

This allows clients to maintain regulatory continuity without over-building in-house teams in the early stages.

6. Cross-border legal and regulatory coordination

Many GIFT City structures sit alongside entities in other jurisdictions. Through the 10 Leaves Group, AxiomSync coordinates cross-border legal and compliance alignment across DIFC, ADGM, Luxembourg, Mauritius, and India.

This includes:

• Group-level compliance and governance harmonisation.
• Regulatory mapping across multiple jurisdictions.
• Support for India-linked global fund and treasury structures.
• Assistance with regulator-to-regulator consistency and disclosures.

This capability is particularly relevant for multinational groups, fund sponsors, family offices, and fintech platforms operating across regions.

7. Operational readiness and scaling support

Once licensed, AxiomSync assists clients in moving from regulatory approval to live operations and growth.

This includes:

• Support with IFSC banking relationships and operational accounts.
• Assistance with onboarding service providers and vendors.
• Regulatory input on new products, services, or geographic expansion.
• Preparation for audits, investor due diligence, and counterparties.

The objective is to ensure that IFSC entities are not only compliant on paper, but operationally credible and scalable.

Positioning within the GIFT City ecosystem

Through its registration with the IFSCA and its integration within the wider 10 Leaves Group, AxiomSync operates as a long-term advisory partner rather than a one-time setup provider. Its role is to bridge regulatory intent with commercial reality, helping clients navigate the IFSC framework with clarity, discipline, and foresight.