“Bhavesh, I want to set up a fund to invest in some promising US and European tech startups,” said Mr. Singhania, the head of a large family office, to his Chartered Accountant.
“Should I stick with the usual domestic AIF route, or is this GIFT City I keep hearing about worth the hassle?”
Bhavesh, the CA, leaned forward. “Mr. Singhania, ‘hassle’ is the old way of thinking. With the new IFSCA (Fund Management) Regulations of 2025, GIFT City isn’t just an alternative; it’s a strategic passport for global investing. It’s designed to bring the world’s financial opportunities right to our doorstep, but with a framework that competes with Singapore and Dubai. Let’s break down what’s changed.”
This conversation reflects a major shift in India’s financial landscape. The International Financial Services Centre (IFSC) in GIFT City is rapidly evolving from a concept into a powerful hub for global capital. The latest amendments to the fund management regulations are a game-changer, making it more attractive than ever for setting up Alternative Investment Funds (AIFs).
GIFT City AIFs vs. Domestic AIFs: A World of Difference
For years, Indian fund managers wanting to operate on a global scale had to domicile their funds offshore. GIFT City changes that. The framework under the International Financial Services Centres Authority (IFSCA) is fundamentally different from the domestic regime under SEBI.
| Feature | Domestic AIF (SEBI) | GIFT City AIF (IFSCA) |
|---|---|---|
| Currency | Indian Rupee (INR) | Freely Convertible Foreign Currency (USD, EUR, etc.) |
| Investment Scope | Primarily India-focused | Global (Invest in India, US, Europe, anywhere) |
| Regulator | SEBI (Multiple regulations) | IFSCA (A single, unified regulator for all financial services) |
| Taxation | Standard domestic taxes | 10-year tax holiday, capital gains exemptions, no GST on services |
| Flexibility | Rule-based, more rigid | Principle-based, globally aligned, and highly flexible |
Key Upgrades: What the 2025 Amendments Mean for You
The IFSCA (Fund Management) Regulations, 2025, have further refined the framework, making it even more competitive and user-friendly. Here are the most impactful changes:
- Easier to Get Started: The minimum corpus for Venture Capital Funds (VCFs) has been reduced from USD 5 million to USD 3 million. Open-ended funds can even start with just USD 1 million, giving them 12 months to reach the minimum threshold. This lowers the barrier to entry for new and emerging fund managers.
- More Flexibility in Leadership: The rules for appointing Key Managerial Personnel (KMPs) like the Principal Officer have been relaxed. Experience in consultancy is now recognized, and globally accepted certifications like CFA and FRM are given weightage. The tedious prior approval process for appointments has been replaced with a simple intimation, speeding up operations.
- Family Offices Get a Boost: The definition of a Family Investment Fund (FIF) has been broadened. This allows single-family offices greater flexibility in structuring their investments, whether as trusts, LLPs, or companies, to manage their global wealth from within India.
- Broader Investor Access: The threshold for joint investors (family members) has been relaxed, making it easier for families to pool their capital and participate in these global funds.
The Strategic Advantage: Beyond Tax Breaks
While the tax incentives are compelling, the true genius of the GIFT City framework is its unified regulatory architecture. Having a single regulator, IFSCA, for banking, securities, and insurance eliminates the “jurisdictional friction” that plagues cross-border operations elsewhere. This allows for innovative, multi-strategy funds that can operate with an agility that is difficult to achieve in other domiciles.
For a fund manager like Mr. Singhania, this means he can launch a fund in US dollars, invest in a portfolio of Indian and international securities, and distribute returns to global investors, all from a single, streamlined platform within Indian territory.
Navigating the New Frontier with AI
The move to a principle-based framework offers incredible flexibility, but it also demands a deeper understanding of the regulations to ensure compliance. Professionals like Bhavesh need to stay on top of every circular, amendment, and guideline. This is where technology becomes a crucial partner.
An AI-powered legal and regulatory research tool like ai.vidur.in is indispensable in this new environment. Instead of manually sifting through hundreds of pages of regulations, a professional can simply ask: “What are the new eligibility norms for a retail FME in GIFT City under the 2025 amendments?” or “Compare the KMP requirements for a domestic AIF versus an IFSC AIF.”
Vidur can instantly retrieve the precise clauses, summarize the key changes, and provide the context needed to advise clients accurately and confidently. It transforms hours of research into minutes of insight, allowing professionals to focus on strategic advice rather than getting lost in the weeds of regulatory text. As GIFT City continues its journey to becoming a global financial hub, leveraging AI will be key to unlocking its full potential.
