What Makes IFSC GIFT City Compelling for Structuring India-Focused Fund?
IFSC GIFT City is emerging as a preferred jurisdiction for structuring India-focused funds due to its combination of tax efficiency, regulatory simplicity, and global accessibility. With a single unified regulator in the International Financial Services Centres Authority, fund managers benefit from faster approvals and streamlined compliance. The ecosystem offers significant tax advantages, including no capital gains tax on trades done on IFSC exchanges i.e. India INX and NSE IFSC, derivatives traded on Indian domestic exchanges by registered FPIs from GIFT and exemptions from STT, CTT, and GST (within IFSC), along with tax neutrality for non-resident investors. Additionally, funds can be structured in freely convertible currencies and operate within a liberalised capital flow framework. Together, these factors position IFSC GIFT City as an efficient, globally competitive alternative to traditional offshore fund domiciles for investing into India.
When structuring investment funds, the choice of jurisdiction is a strategic decision, not just a technicality; that may have a lasting impact on performance, compliance, and investor sentiment.
Introducing IFSC GIFT City: India’s only International Financial Services Centre (IFSC) that offers the regulatory clarity of global fund domiciles, combined with the geographical and strategic proximity to Indian capital markets. As India's regulatory and financial landscape evolves, we believe, IFSC GIFT City is fast emerging as a compelling jurisdiction for fund managers looking to raise and deploy capital efficiently into India.
Understanding IFSC GIFT City
Sprawling over 2000 acres, the Gujarat International Finance Tec-City (GIFT City) is India’s first IFSC, envisioned to bring offshore-level financial sophistication onshore. Located in Gandhinagar, Gujarat, it operates under a distinct jurisdiction that separates it from the rest of India’s regulatory and tax framework, allowing it to offer globally competitive services within India. This global financial hub houses international exchanges like India INX and NSE IFSC, global and domestic banks, fund administrators, custodians, capital markets, insurance, aviation and ship leasing, payment service providers, global capability centres, and fintechs. These create a self-contained ecosystem where fund managers can structure, manage, and list their vehicles under a single unified regulatory umbrella.
Single Unified Regulator – IFSCA
India’s mainland financial ecosystem requires navigating multiple regulators like SEBI, RBI, and IRDAI. However, IFSC GIFT City benefits from a single, integrated regulator: The International Financial Services Centres Authority (IFSCA). This means one-stop registration to set up regulated operations in GIFT City. The IFSCA also offers a regulatory framework that is aligned with international best practices, making it easier for foreign investors to gain comfort. The time to market for new fund structures is considerably shorter, often measured in weeks instead of months. The regulatory framework prioritises transparency and institutional quality and avoids duplication.
Some of the Advantages to be at GIFT City
1. Tax Neutrality for Category III AIFs:
One key advantage of structuring India-focused Category III Alternative Investment Funds (AIFs) in GIFT City is tax neutrality for Foreign investors (excluding NRIs). Unlike for Indian jurisdiction, there is no tax for Investors, enabling investors to pay taxes only in their home jurisdiction. However, interest, dividends, and other domestic capital gains earned by the fund may still be taxed at the fund level at 10–20% depending on the nature and holding period. This targeted exemption boosts net returns and simplifies cross-border tax planning.
2. No Capital Gains Tax on Derivatives:
India-focused hedge funds and quant strategies rely heavily on derivatives to hedge risk or generate alpha. IFSC GIFT City offers zero capital gains tax on derivative transactions when executed on IFSC exchanges such as India INX or NSE IFSC as well as domestic exchanges in India if done under the FPI registration. The ability to trade futures, options, and other structured products on these platforms without tax leakage makes the location particularly attractive for long-short strategies and high-frequency trading (HFT) models that would otherwise lose efficiency due to domestic taxation.
3. No STT, CTT, or GST on Management Fees:
The cost side of fund management is just as critical. In IFSC GIFT City under-mentioned taxes and charges don’t apply fees when both the provider and the recipient are within the IFSC: -Securities Transaction Tax (STT) -Commodity Transaction Tax (CTT) -GST on management and performance fees These eliminations create a leaner cost structure, allowing fund managers to offer more competitive fee models and reinvest more into portfolio performance and research.
4. Corporate Tax Holiday and Reduced MAT (Minimum Alternate Tax):
Fund managers operating from IFSC GIFT City enjoy a 100% tax holiday on business income for 20 consecutive years out of a block of 25 years (post Finance Bill 2026), along with a reduced MAT/Alternate Minimum Tax of 9% as applicable . These incentives help further lower operational costs.
Operational and Capital Flow Flexibility
A critical enabler for any international fund is operational ease and IFSC GIFT City delivers on this front as well.
1. Freely Convertible Currency Ecosystem:
Funds can be structured in freely convertible foreign currencies, such as USD, EUR, or GBP. This eliminates foreign exchange risk at the fund level and enables seamless global investor participation.
2. Liberalised Repatriation & Investment Framework:
IFSC GIFT City follows a liberalised regime for capital repatriation, giving investors comfort that their capital and returns can be moved freely in and out of the jurisdiction. Additionally, non-resident investors are not required to compulsorily submit PAN, and distributions are not subject to withholding tax when routed via IFSC structures.
3. Access to Global Banking & Custodial Services:
Being an IFSC, GIFT City hosts a growing number of international banks, custodians, and clearing corporations, ensuring that fund operations, from settlement to asset servicing, meet global standards.
Growing Momentum & Industry Adoption
According to the latest IFSCA data, number of Fund Management Entities in IFSC GIFT City as of September 2025 is over 190, with many leading domestic and international asset managers establishing or redomiciling vehicles. The diversity is notable: hedge funds, India-focused long-only equity funds, debt funds, and structured credit funds are all being set up within this ecosystem. For instance, several large domestic AMCs have used IFSC GIFT City to launch feeder funds and cross-border strategies, while global players are exploring it for direct India access. This growing base is evidence of increasing adoption and deepening infrastructure, underscoring that IFSC GIFT City is evolving beyond regulatory experiments into an operational reality.
Alchemy at IFSC GIFT City
Alchemy Investment Management LLP (Alchemy IM) is registered as a non‑retail Fund Management Entity (FME) under IFSCA’s Fund Management Regulations. It was among the first fund managers to migrate its Category III offshore fund (Alchemy India Long Term Fund) into GIFT IFSC, aligning with India’s vision of onshoring its offshore fund activity.
Alchemy IM provides investment management services under a unified IFSC regulatory framework through:
- Commingled Fund
- Separately Managed Account (SMA) Structures
both tailored to qualified non-resident and institutional investors.
To know more, write to us at connect@alchemyim.com
Disclaimer: This blog is for informational purposes only and should not be considered as an offer or solicitation to buy or sell any securities or make any investments. We recommend readers take independent advice before making any investment decisions. Please refer to our Disclaimer and Disclosures for more details.
Frequently Asked Questions (FAQs)
1. Why is IFSC GIFT City preferred for fund structuring in India?
IFSC GIFT City is preferred because it offers tax efficiency, a single unified regulator (IFSCA), faster approvals, and seamless access to global capital—making it comparable to offshore jurisdictions like Singapore or Dubai for India-focused funds.
2. Who regulates funds in IFSC GIFT City?
Funds in IFSC GIFT City are regulated by the International Financial Services Centres Authority (IFSCA), which provides a single-window regulatory framework aligned with global standards.