How to Set Up an Alternative Investment Fund in GIFT City, Gujarat
How to Set Up an Alternative Investment Fund
in GIFT City, Gujarat
GIFT City’s International Financial Services Centre (IFSC) has emerged as India’s most compelling jurisdiction for offshore Alternative Investment Funds. With a progressive regulatory framework under IFSCA, significant tax concessions, and access to global capital markets — this complete 2025 guide explains everything you need to know to establish and operate an AIF in GIFT IFSC.
GIFT IFSC — India’s World-Class Offshore Financial Hub
Gujarat International Finance Tec-City (GIFT City) is India’s first and only operational International Financial Services Centre (IFSC), built on the model of globally benchmarked financial centres like Singapore’s MAS, Dubai’s DIFC, and London’s financial district. Located in Gandhinagar, Gujarat, GIFT City’s IFSC is designed to handle financial services transactions that have historically been conducted outside India by foreign financial institutions and overseas branches of Indian financial institutions.
For Alternative Investment Fund managers and sponsors, GIFT City represents a unique proposition: the regulatory sophistication and tax advantages of an offshore financial centre — combined with the strategic proximity to India’s enormous domestic capital markets and the credibility of an IFSCA-regulated environment. Since the introduction of the IFSCA (Fund Management) Regulations, 2022 and their comprehensive successor, the IFSCA (Fund Management) Regulations, 2025, the GIFT IFSC fund ecosystem has grown explosively — with 194 Fund Management Entities (FMEs) now managing over 310 AIF schemes targeting a corpus of over USD 12 billion.
Unrestricted global asset diversification
AIFs in GIFT IFSC can invest across global asset classes — international equities, debt, commodities, real estate, infrastructure, and private equity — without the restrictions that apply to domestic Indian funds.
Manager-centric, progressive regulation
IFSCA regulates the Fund Management Entity (FME), not the individual funds — enabling one registration to cover multiple fund launches with significantly reduced per-fund regulatory burden.
Significant tax concessions in SEZ framework
GIFT IFSC operates within a Special Economic Zone (SEZ) framework with substantial income tax exemptions, GST exemptions on services, and no dividend distribution tax — making it one of India’s most tax-efficient fund jurisdictions.
100% NRI/OCI contribution now permitted
The 2025 regulations allow 100% NRI/OCI contribution to FPI corpus in GIFT IFSC — a landmark change from the earlier 50% cap, dramatically expanding the NRI and diaspora investor participation opportunity.
The Fund Management Entity (FME) — The Central Pillar of GIFT AIF Structure
One of the most transformative aspects of the IFSCA regulatory framework is its manager-centric approach. Rather than registering individual funds with IFSCA, the primary regulated entity is the Fund Management Entity (FME) — the investment manager that establishes, manages, and operates the fund schemes. This approach provides considerable flexibility: once an FME is registered, it can launch multiple fund schemes of varying types across AIF categories without obtaining separate registrations for each scheme.
The IFSCA (Fund Management) Regulations, 2025 classify FMEs into three distinct categories based on the nature of investors served, permitted activities, and the regulatory oversight intensity applied. Each category has specific net worth requirements, eligibility conditions, and activity permissions:
Authorised FME
- Pools money from accredited investors or investors above USD 250,000
- Invests in start-ups and early-stage ventures through Venture Capital Schemes
- Can manage Family Investment Funds (FIFs) for single-family structures
- Green channel route for VC scheme launch — open for subscription immediately upon filing
- Max 50 investors per VC Scheme
Registered FME (Non-Retail)
- Engages accredited investors or those above USD 150,000 capital commitment
- Launches Restricted Schemes (Cat I, II, III AIFs) by private placement
- Offers Portfolio Management Services (PMS) — min USD 75,000 per client
- Can launch Special Situation Funds (SSFs) for stressed assets
- Green channel for Restricted Scheme filings
Registered FME (Retail)
- Open to all investors — including retail / general public
- Facilitates public offers of Mutual Funds, ETFs, and Investment Trusts
- Minimum 5 years fund management experience required
- Must have managed AUM of at least USD 200 million with 25,000+ investors
- Mandatory independent directors on board
Types of AIF Schemes Available in GIFT IFSC
Under the IFSCA Fund Management Regulations, 2025, FMEs registered in GIFT IFSC can launch several categories of fund schemes — each aligned with India’s domestic AIF classification framework while incorporating IFSC-specific flexibility and investor access provisions:
Social, Infrastructure & Venture Funds
Invests in social ventures, infrastructure, SMEs, and start-ups. Tax pass-through status for Indian income tax purposes. 100% tax holiday available for 10 consecutive years within the first 15 years. Close-ended structure mandatory.
Private Equity, Debt & Real Estate
Mainstream alternative strategies — PE funds, debt funds, real estate funds, distressed assets. Tax pass-through status. No leverage except for day-to-day operations. Construed as Cat II AIF under Income Tax Act, FEMA, and other relevant statutes.
Hedge Funds & Complex Strategies
Complex trading strategies, derivatives, leverage — hedge funds, PIPE funds. Special income attribution mechanism for non-resident investors. Can be launched as open-ended or close-ended. Category III AIFs in IFSC can access Indian capital markets through FPI registration.
Venture Capital Schemes (VCS) — Green Channel Route
A uniquely attractive feature of GIFT IFSC’s regulatory architecture is the Green Channel for Venture Capital Schemes. Under this route, an Authorised FME can file a Placement Memorandum (PPM) with IFSCA and open the scheme for subscription by investors immediately upon filing — without waiting for IFSCA approval. This dramatically reduces the fund launch timeline for early-stage and start-up focused funds, making GIFT IFSC highly competitive with offshore VC hubs like Cayman Islands and Mauritius. The PPM validity period is 6 months from the date of filing.
Special Situation Funds (SSFs) — New Under 2025 Regulations
The IFSCA (Fund Management) Regulations, 2025 introduce Special Situation Funds as a dedicated fund category for investing in stressed assets — including non-performing loans (NPLs), securities of companies under insolvency proceedings, and other distressed instruments. SSFs must be launched as close-ended schemes with a minimum tenure of 3 years, and cannot borrow or engage in leveraging activities except in limited circumstances. Corpzo advises fund managers on structuring SSF vehicles in GIFT IFSC for optimal risk-adjusted positioning.
Family Investment Funds (FIFs)
The 2025 regulations formalise a regulatory framework for Family Investment Funds — designed for members of a single family seeking to pool and professionally manage their wealth. A FIF can be set up by a single family that holds at least 90% economic interest and controls the entity. FIFs in GIFT IFSC must raise a minimum of USD 10 million within three years. Importantly, FIFs are classified as Cat I, II, or III AIFs depending on their investment strategy and do not require a separate FME registration — though they may optionally appoint one. This structure is particularly attractive for UHNI families, business families, and NRI family offices seeking to invest across global markets.
Tax Benefits for AIFs in GIFT City IFSC — A Compelling Advantage
The tax framework applicable to AIFs operating in GIFT City IFSC is one of the most compelling aspects of the jurisdiction — combining income tax exemptions, GST waivers, and capital gains concessions that are simply not available to domestic Indian AIFs or to funds operating in standard offshore jurisdictions:
| Tax Benefit | Category I & II AIF | Category III AIF | Applicability |
|---|---|---|---|
| Income Tax on Fund Income | Pass-through to investors | Attribution mechanism for non-resident investors | All AIFs in IFSC |
| Income Tax Holiday | 100% for 10 years (out of first 15) | 100% for 10 years (out of first 15) | Business income of AIF |
| GST on Manager Services | Fully Exempt | Fully Exempt | Services by FME to Scheme |
| Dividend Distribution Tax | Not Applicable | Not Applicable | All AIFs in IFSC |
| STT / CTT | Not Applicable | Not Applicable | Transactions in IFSC |
| Interest to Non-Residents | Fully Exempt | Fully Exempt | Borrowed money |
| Capital Gains on Transfer of Securities | Pass-through (investor taxed) | Attribution-based for NR investors | All AIFs |
| Stamp Duty | Exempt on securities issuance | Exempt on securities issuance | IFSC transactions |
How to Set Up an AIF in GIFT City — Complete Process
Setting up an AIF in GIFT City IFSC is a structured, largely online process administered through the IFSCA portal. Here is the complete step-by-step roadmap — from initial planning to fund launch — as managed by Corpzo’s GIFT City compliance team:
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1Strategic PlanningDefine Fund Strategy, Category & FME Type The first step is determining the fund’s investment strategy (VC, PE, hedge, debt, infrastructure, FIF, etc.), which determines the applicable AIF category (I, II, or III) and the appropriate FME registration category (Authorised, Registered Non-Retail, or Registered Retail). This decision affects net worth requirements, eligible investor profile, minimum investment thresholds, tax treatment, and compliance obligations. Corpzo facilitates a detailed pre-incorporation strategy session covering all structural, regulatory, and tax dimensions before any filing begins.
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2Entity SetupIncorporate the FME Entity in GIFT IFSC The Fund Management Entity must be incorporated within GIFT City IFSC as a company, limited liability partnership (LLP), or branch of an existing entity. For companies and LLPs, incorporation is through the MCA’s MCA21 portal with GIFT City as the registered office address. The FME must establish physical presence in GIFT IFSC — IFSCA mandates adequate office space, facilities, and manpower as substance requirements. Foreign entities seeking to set up a branch FME in GIFT IFSC must comply with FEMA regulations for establishing a branch in India.
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3KMP AppointmentAppoint Key Managerial Personnel (KMPs) A minimum of two KMPs must be appointed — both resident in India — with the requisite professional qualifications and fund management experience. KMPs must have a professional degree in finance, law, accountancy, business management, economics, capital markets, banking, insurance, or actuarial science from a recognised institution. Demonstrated experience in managing alternative assets and investor capital is verified by IFSCA during the registration process. Corpzo assists with KMP identification, appointment documentation, and IFSCA fit-and-proper assessment preparation.
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4IFSCA RegistrationApply for FME Registration with IFSCA File the FME registration application with the International Financial Services Centres Authority through the IFSCA Online Registration System. The application must include: the FME’s constitutional documents (MoA/AoA or LLP agreement), details of KMPs and directors, proof of net worth maintenance, organisational structure and ownership details, business plan and proposed fund strategy, fit-and-proper declarations of all key persons, GIFT IFSC office space proof, and the applicable registration fee. IFSCA reviews the application and may seek additional information or clarifications before granting the Certificate of Registration.
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5Fund ConstitutionAppoint Fiduciaries & Constitute the Fund/Scheme Prior to filing the scheme document, the FME must appoint fiduciaries — the Board of Directors (for a company structure), Designated Partners (for an LLP), or Trustees (for a trust structure). All fiduciaries must meet IFSCA’s fit-and-proper requirements. For retail schemes, fiduciary appointments require prior IFSCA approval. Corpzo drafts the Trust Deed or LLP Agreement governing the fund vehicle and coordinates the appointment and due diligence of all fiduciaries.
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6DocumentationDraft & File Placement Memorandum (PPM) / Offer Document The Placement Memorandum (PPM) is the fund’s core offering document — equivalent to a prospectus for the specific scheme. It must contain: investment objective and strategy, targeted investor profile, proposed corpus and tenure, investment methodology and risk management framework, fee structure (management fees, performance fees, hurdle rate), KMP details, conflict of interest policy, exit mechanisms, and all material disclosures. For Restricted Schemes and VC Schemes, the PPM is filed with IFSCA under the green channel and can be opened for subscription immediately upon IFSCA acknowledgment. Corpzo drafts customised PPMs for all AIF categories.
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7Ancillary RegistrationsSEBI FPI Registration (for India-Focused AIFs) AIFs in GIFT IFSC that intend to invest in Indian capital markets (listed securities, derivatives, debt instruments) must additionally register with SEBI as a Foreign Portfolio Investor (FPI) — either Category I or Category II. The IFSCA FME registration and FPI registration are complementary: the IFSCA registration governs the fund’s operations within IFSC, while the FPI registration enables cross-border investment into Indian domestic markets. For NRI/OCI investors, 100% contribution to FPI corpus is now permitted following the 2025 regulatory liberalisation.
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8Fund LaunchLaunch the Scheme & Commence Fundraising With FME registration granted and the PPM filed, the scheme is formally launched. For VC Schemes and Restricted Schemes (Non-Retail), the green channel route allows fundraising to begin immediately upon IFSCA acknowledgment. The FME can now reach out to eligible investors — accredited investors, institutions, family offices, and global LPs — for capital commitments. IFSCA mandates ongoing reporting: quarterly portfolio statements to investors, annual audited accounts, and periodic NAV disclosures for applicable scheme types.
Key Documents Required for AIF Setup in GIFT City
For FME Registration with IFSCA:
- ✓Completed IFSCA FME Registration Application
- ✓Certificate of Incorporation / LLP Agreement of the FME entity
- ✓Memorandum and Articles of Association (for company FMEs)
- ✓KYC documents and educational / experience credentials of all KMPs
- ✓Fit and Proper declarations of all directors / designated partners / KMPs
- ✓Net worth certificate (audited) confirming minimum net worth
- ✓GIFT IFSC office lease agreement / proof of physical presence
- ✓Business plan and proposed fund investment strategy
- ✓Organisational chart and shareholding structure
- ✓Compliance manual and KYC/AML policy
- ✓Applicable IFSCA registration fees (paid online)
For Scheme / Fund Launch:
- ✓Trust Deed / LLP Agreement / Articles of Incorporation of the fund vehicle
- ✓Placement Memorandum (PPM) — customised for fund category and investor type
- ✓Trustee / Board / Designated Partner appointment documents and KYC
- ✓Custodian appointment agreement (mandatory for Cat III and Cat I/II above USD 70 million corpus)
- ✓Contribution agreements / Investor subscription documents
- ✓Investment Management Agreement between FME and the fund
- ✓KYC documentation of all investors (per IFSCA AML/CFT standards)
- ✓SEBI FPI registration (if investing in Indian capital markets)
GIFT City AIF vs Domestic SEBI AIF — Why GIFT Wins for Global Strategies
| Parameter | GIFT IFSC AIF | Domestic SEBI AIF |
|---|---|---|
| Regulator | IFSCA | SEBI |
| Currency of Operations | USD / Foreign Currency | INR |
| Registration Framework | FME registration (covers multiple schemes) | Per-fund AIF registration |
| Venture Capital Green Channel | Yes — immediate subscription | No green channel |
| Income Tax Holiday | 10 years (out of first 15) | None |
| GST on Management Fee | Exempt | 18% GST applicable |
| STT / CTT on Transactions | Not applicable in IFSC | Applicable |
| NRI/OCI Investor Participation | 100% NRI/OCI contribution allowed | Restrictions apply |
| Foreign Investor Access | Direct access as IFSC entity | Through FPI route only |
| Minimum Investment (VC) | USD 250,000 (accredited investors) | INR 1 crore |
| Global Asset Classes | Unrestricted global diversification | Primarily India-focused |
| Family Investment Fund | Dedicated FIF framework available | Not available |
Why Fund Managers Choose Corpzo for GIFT City AIF Setup
Corpzo.com is India’s trusted compliance solution advisor with deep expertise in GIFT City IFSC regulatory matters — including FME registration, fund structuring, PPM drafting, SEBI FPI registration, and ongoing fund compliance under IFSCA’s evolving framework.
Deep IFSCA regulatory knowledge
Corpzo’s team tracks every IFSCA regulatory development — from the 2022 framework to the comprehensive 2025 regulations — ensuring your fund structure is always current, compliant, and optimally positioned under the latest rules.
Optimal fund architecture design
Corpzo advises on the most tax-efficient and regulatory-optimal fund structure for each client’s strategy — whether VC, PE, hedge, debt, FIF, or SSF — before a single document is drafted or a filing is made.
From concept to fund launch
FME entity incorporation, IFSCA registration, Trust Deed and PPM drafting, fiduciary appointment, SEBI FPI registration, and investor KYC framework setup — Corpzo manages the entire pipeline under one roof.
Post-launch compliance management
IFSCA mandates continuous obligations: quarterly investor reporting, NAV disclosures, annual audits, regulatory filings, and KMP certification. Corpzo’s annual compliance package ensures your FME remains in good standing at all times.
GIFT City AIF — Common Questions Answered
Ready to Launch Your AIF in GIFT City?
Corpzo’s GIFT City compliance team manages every step of your AIF setup — from FME incorporation and IFSCA registration to PPM drafting and SEBI FPI filing — with precision, speed, and full regulatory compliance.
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