For Indian founders and fund managers, raising capital has traditionally meant navigating two parallel worlds — domestic structures bound by FEMA and SEBI, or offshore vehicles in Singapore, Mauritius, or the Cayman Islands. Both come with friction: the first restricts global investor access, the second invites scrutiny on substance, treaty abuse, and rising compliance costs.
GIFT IFSC has emerged as the third, increasingly preferred route. It offers an onshore jurisdiction with offshore-equivalent tax and regulatory treatment, governed by a unified regulator (IFSCA). For anyone planning to raise capital in 2026 and beyond — whether through a fund, an FPI, an ODI, or direct ECB — understanding how GIFT IFSC fits into the fund-raising architecture is no longer optional.
What is fund-raising through GIFT IFSC?
Fund-raising through GIFT IFSC means structuring capital-raising activities — funds, listings, debt issuances, or investment vehicles — through entities set up in India’s only International Financial Services Centre, regulated by IFSCA. These entities access global investors while enjoying tax holidays under Section 80LA, GST exemptions, and a non-resident regulatory framework under FEMA.
Why GIFT IFSC has become the preferred fund-raising jurisdiction
The shift is driven by three structural advantages.
First, regulatory unification. Unlike domestic India where SEBI, RBI, IRDAI, and PFRDA operate in silos, IFSCA functions as a single window regulator. For a fund manager, this means one application, one set of compliances, and one dispute resolution channel — a meaningful difference when time-to-market matters.
Second, tax efficiency that survives scrutiny. Section 80LA of the Income Tax Act provides a 100% tax holiday on business income for any 10 consecutive years out of 15 for IFSC units. Combine this with the Category III AIF tax pass-through for non-resident investors, MAT/AMT exemption, and zero GST on services rendered to offshore clients, and the effective tax burden is genuinely competitive with Singapore or Dubai — without the substance risk that comes with pure offshore structures.
Third, currency flexibility. Transactions in IFSC are deemed non-resident under FEMA. Funds can be denominated in USD, EUR, GBP, or any specified foreign currency, making it far easier to attract global LPs who don’t want INR exposure.
What are the main fund-raising routes available in GIFT IFSC?
Five primary structures dominate fund-raising activity in IFSC: AIFs (Categories I, II, and III), Finance Companies for ECB lending, Direct Listing of equity shares by Indian companies on India International Exchange, debt issuances including Masala Bonds and ESG bonds, and Family Investment Funds for HNI capital pooling.
1. Alternative Investment Funds (AIFs) in IFSC
This is the largest category by AUM. AIFs in IFSC are governed by the IFSCA (Fund Management) Regulations, 2025 — a significant overhaul that replaced the earlier 2022 framework. The new regulations introduce a Fund Management Entity (FME) concept with three categories: Authorised, Registered (Non-Retail), and Registered (Retail).
For a typical PE/VC fund raising offshore capital to deploy in India, the Registered (Non-Retail) FME running a Category II Venture Capital Scheme is the workhorse structure. Minimum corpus is USD 3 million, minimum investor ticket is USD 150,000, and the FME must maintain a minimum net worth of USD 500,000.
The strategic benefit: the fund itself is exempt from Indian tax on its non-resident investors’ share of income (subject to conditions), the FME enjoys the 80LA holiday on management and performance fees, and the carry structure can be designed in foreign currency.
2. Finance Company route for ECB and lending-based fund-raising
If the objective is to raise debt capital for Indian operations, an IFSC Finance Company (registered under the IFSCA (Finance Company) Regulations, 2021) can borrow externally and on-lend to Indian group entities. This is increasingly used by large corporate groups to centralise treasury and reduce the cost of ECB compliance — the on-lending from IFSC to a domestic Indian entity follows a streamlined ECB framework.
3. Direct Listing on India International Exchange (India INX) and NSE IFSC
Following the September 2024 notification operationalising the Direct Listing Scheme, unlisted Indian public companies have been permitted, in principle, to list their equity shares on IFSC exchanges such as India INX and NSE IFSC. However, the framework is not yet fully operational. Detailed regulations, eligibility conditions, and listing procedures from IFSCA are still awaited, and until these are notified, direct listings remain a regulatory concept rather than an executable route for capital raising.
4. Debt issuances — Masala Bonds, Green Bonds, and ESG-linked instruments
GIFT IFSC has positioned itself aggressively as a bond listing hub. Indian issuers can list foreign currency-denominated bonds, including sustainability-linked and green bonds, on IFSC exchanges. Listing fees are lower than Singapore or Luxembourg, and the issuance process under the IFSCA (Listing) Regulations, 2021 is meaningfully faster than domestic SEBI ILDM compliance.
5. Family Investment Funds (FIFs) for promoter and HNI capital
For promoter families looking to consolidate global wealth under a regulated structure, the FIF route allows pooling of single-family capital with a minimum corpus of USD 10 million. This is increasingly used as a substitute for offshore family offices in Singapore or Dubai, with the added benefit of being onshore for Indian regulatory purposes.
Compliance and structuring requirements
A few non-negotiables apply across all routes.
The entity must be physically located in GIFT City — virtual presence does not qualify. Substance requirements include qualified personnel, board meetings in IFSC, and decision-making documented locally. KYC and AML compliance follows IFSCA’s framework, which is FATF-aligned and notably stricter than typical offshore jurisdictions. Investor onboarding from FATF non-compliant jurisdictions is restricted, and source-of-funds documentation is mandatory for all subscriptions above prescribed thresholds.
For Section 80LA benefits, the entity must obtain a unit registration from IFSCA, file Form 10CCF, and maintain separate books for IFSC operations. The 10-year holiday window is elective — fund managers typically opt to start the window once revenues stabilise, not at incorporation.
Strategic insights: when GIFT IFSC actually makes sense
GIFT IFSC is not the right answer for every fund-raise. Three filters matter.
Investor base. If 70%+ of the target capital is from non-resident investors, IFSC is structurally superior. If the investor base is predominantly Indian residents, a domestic AIF in Mumbai may be simpler and cheaper.
Investment thesis. Funds investing primarily in Indian assets benefit most from the IFSC structure — tax pass-through, FEMA-friendly treatment, and treaty access work in their favour. Funds investing globally may find Singapore VCC or Mauritius still marginally more efficient depending on target geographies.
Time horizon. The 10-year tax holiday is meaningful only if the fund or business has a long runway. Short-duration vehicles or one-off SPVs may not justify the setup cost (typically USD 50,000–150,000 in legal, registration, and first-year operational costs).
Common mistakes to avoid
Three errors recur in IFSC structuring discussions.
Treating IFSC as a tax shelter rather than a substance jurisdiction — IFSCA inspections are increasingly rigorous, and shell structures will be challenged. Underestimating the FME net-worth and personnel requirements — running a fund without a qualified Principal Officer and Compliance Officer based in GIFT City is a regulatory breach, not an oversight. Mixing IFSC and non-IFSC operations in the same entity — this jeopardises the 80LA claim and creates unnecessary audit complexity.
Who should consider fund-raising through GIFT IFSC?
PE/VC fund managers raising offshore capital for India deployment, large corporate groups centralising treasury and ECB borrowing, unlisted Indian companies seeking direct global listing without going to Nasdaq or SGX, bond issuers looking for a faster, cheaper listing venue than Singapore or Luxembourg, and HNI families consolidating global wealth under a regulated onshore structure.
GIFT IFSC is not the right structure for purely domestic fund-raises, short-duration SPVs, or businesses that cannot sustain genuine substance in GIFT City.
Conclusion
GIFT IFSC has moved past the “interesting experiment” phase. With the FM Regulations 2025, operational direct listing, a maturing exchange ecosystem, and a tax framework that has now survived multiple Finance Acts, it is a credible — and in many cases, superior — alternative to offshore fund-raising structures.
For founders and fund managers planning a capital raise in the next 12–18 months, the question is no longer whether to consider GIFT IFSC, but how to structure the raise to extract maximum value from it. The decision turns on investor mix, investment geography, and willingness to build genuine substance — not on tax arbitrage alone.
FAQs
Is fund-raising through GIFT IFSC tax-free? Not entirely tax-free, but highly tax-efficient. IFSC units enjoy a 100% tax holiday on business income for 10 consecutive years out of 15 under Section 80LA, with GST exemption on services to offshore clients and MAT/AMT relief.
Can an Indian company directly list on GIFT IFSC exchanges? Yes. Following the September 2024 notification, unlisted Indian public companies can directly list equity shares on India INX and NSE IFSC to raise capital from permissible jurisdiction investors.
What is the minimum corpus required to set up an AIF in GIFT IFSC? USD 3 million minimum corpus for most schemes, with a minimum investor ticket size of USD 150,000 for non-retail schemes under the IFSCA (Fund Management) Regulations, 2025.
Can Indian residents invest in GIFT IFSC funds? Yes, but subject to LRS limits (USD 250,000 per financial year per individual) and specific scheme conditions. Resident participation is generally limited; the structure is optimised for non-resident capital.
About the Author
Prashant Kumar is a Company Secretary, Published Author, and a seasoned professional in the field of corporate and financial services regulation. He serves as Company Secretary & Compliance Officer at Global Horizons Capital Advisors (IFSC) Private Limited, based in GIFT City, and advises on corporate, regulatory, and transactional matters.
He specialises in GIFT IFSC structuring, fund setup (FME & AIF), corporate governance, and regulatory compliance, advising fund managers, startups, and institutions on building globally aligned and compliant structures.
He can be reached for professional discussions on GIFT IFSC, fund structuring, and regulatory strategy at +91 9821008011 or prashant.kumar@global-horizons.in.
