Indian asset managers that once ran their offshore fund businesses out of Dubai or Singapore are increasingly relocating them to GIFT City. The pull is a combination of a stable IFSCA-regulated framework, tax incentives specifically aimed at financial institutions, and unmatched proximity to the domestic capital market they are ultimately investing into.
This article explains why mutual fund and retail-facing fund businesses are choosing GIFT City, the regulatory route for setting up such a scheme, and the tax and cost advantages driving the migration.
Why mutual fund businesses are moving to GIFT City
Mutual funds pool investor capital into diversified, professionally managed portfolios, and asset managers historically ran offshore feeder or standalone fund structures from established hubs abroad. GIFT City, built specifically to rival those hubs while sitting inside India's own regulatory and tax perimeter, now offers a credible domestic alternative. A stable, single regulator — the International Financial Services Centres Authority (IFSCA) — replaces the need to satisfy multiple overseas regulators, while physical and regulatory proximity to Indian markets allows faster decision-making on India-focused strategies.
Government and regulatory drivers
Several policy levers are aligned in GIFT City's favour:
- Ten-year tax holiday — entities operating in GIFT City can avail a consecutive ten-year profit-linked tax exemption within a fifteen-year block, as currently structured under the applicable provisions.
- No transfer tax on inbound funds — capital moved from overseas jurisdictions into GIFT City structures does not attract transfer taxes, simplifying fund flows.
- Capital gains exemptions — specified securities listed on IFSC exchanges, when transferred by a non-resident or a Category III AIF located in the IFSC, can qualify for capital gains tax exemption, subject to conditions.
- Independent regulator — IFSCA's unified oversight of funds, banking, insurance and capital markets reduces the regulatory overlap fund managers would otherwise face across RBI, SEBI and IRDAI-equivalent regimes.
Cost advantages relative to Dubai and Singapore
Beyond tax, the operating cost base in GIFT City compares favourably with established offshore centres:
| Cost head | GIFT City positioning |
|---|---|
| Office rent | Materially lower than prime locations in Singapore or Dubai |
| Manpower | Competitive salary levels for qualified fund management and compliance professionals |
| Tax on profits | Ten-year holiday within a fifteen-year window, as currently prescribed |
| Fund transfer costs | No transfer tax on funds moved in from overseas jurisdictions |
Cost modelling should still be done on a case-by-case basis using a proper setup and running-cost estimate — our setup cost calculator and annual compliance cost calculator are built for exactly this comparison exercise before you commit to relocating a fund business.
How mutual fund and retail schemes are structured in GIFT IFSC
Retail-facing fund activity in GIFT IFSC is carried out through a Fund Management Entity (FME) registered with IFSCA, typically under the retail category where the scheme is intended for a broader investor base rather than accredited or institutional investors only. This is distinct from the Alternative Investment Fund (AIF) route more commonly used for private equity, venture capital and hedge-fund-style strategies. If your business is weighing an AIF instead of a retail mutual fund structure, our guides on setting up an AIF in GIFT City and AIF structures and taxation lay out that alternative in detail.
FME registration itself follows the process and eligibility framework described in our companion pieces on setting up an FME in GIFT City and FME categories and eligibility, with retail schemes generally carrying a higher net worth threshold than venture capital-focused categories, reflecting the wider investor base and consumer protection expectations attached to retail money.
What a scheme migration or launch typically involves
- Registering the FME entity with IFSCA, including satisfying net worth, key managerial personnel and governance requirements for the retail category.
- Establishing the scheme documentation — offer document, trust or contractual structure, and custodian and fund accounting arrangements consistent with IFSCA norms.
- Setting up the underlying corporate presence in GIFT City — see our guide on company registration in GIFT City for the SEZ and IFSCA entity approval steps that precede scheme launch.
- Building out local staffing for portfolio management, compliance and operations, since IFSCA expects genuine substance rather than a purely nominal presence.
- Putting in place ongoing reporting to IFSCA covering AUM, investor base and scheme performance.
Momentum: why asset managers are actually moving
Several large Indian asset managers have already relocated or announced relocation of offshore fund books to GIFT City, citing the stable regulatory regime and proximity to Indian markets as decisive factors, alongside the cost advantage over Hong Kong, Mauritius, Dubai and Singapore-based structures. According to figures reported by IFSCA, dozens of fund managers with substantial aggregate commitments have established a presence in GIFT City over a multi-year period — a scale of activity that has meaningfully changed how Indian AMCs think about where to domicile their offshore books. Given the pace of change, always check the latest IFSCA data releases rather than relying on a single year's snapshot when building an investment case.
Where mutual fund businesses fit in the wider GIFT IFSC ecosystem
A retail fund business rarely operates in isolation. Many groups running an FME in GIFT City also run adjacent lines — a PMS desk (see setting up a PMS in GIFT City), a private equity or venture capital vertical (private equity and venture capital in GIFT City), or ancillary service arrangements under our fund management entity directory. Understanding the overall GIFT IFSC regulatory and tax framework before committing to a specific scheme structure avoids costly re-structuring later.
Frequently asked questions
Is a mutual fund business in GIFT City the same as an AIF?
No. Retail mutual fund-style schemes are typically run under a retail FME registration aimed at a broad investor base, while AIFs are a separate category generally used for private equity, venture capital and hedge-fund strategies aimed at accredited or institutional investors.
Do GIFT City fund managers get the same tax holiday as other GIFT City entities?
FMEs operating in GIFT City can generally avail the same profit-linked tax holiday available to other qualifying units, subject to conditions in the applicable tax provisions; specifics should be confirmed with a tax advisor given how frequently these provisions are refined.
Can a foreign asset manager set up a mutual fund business in GIFT City directly?
Yes, subject to IFSCA registration as an FME and meeting the applicable net worth, governance and fit-and-proper requirements; foreign managers commonly do this alongside setting up an Indian corporate presence as described in our company registration guide.
What is driving Indian AMCs to shift offshore funds to GIFT City rather than keep them in Mauritius or Singapore?
A combination of lower operating costs, a stable single regulator, tax incentives on fund transfers and capital gains, and closer proximity to the Indian market being invested into.
Does a retail fund scheme in GIFT City need a separate custodian?
Yes — retail schemes require appropriate custodian and fund accounting arrangements consistent with IFSCA's investor protection expectations, distinct from the fund manager itself.
How long does it take to register an FME and launch a retail scheme?
Timelines vary with entity readiness and scheme complexity; as a general rule, entity registration and IFSCA authorisation together with scheme documentation can take several months, and should be planned well ahead of any target launch date.
Next steps
Relocating or launching a mutual fund business in GIFT City touches entity structuring, IFSCA authorisation, scheme documentation and ongoing compliance all at once. GIFT City Gateway's regulatory filing team can walk you through the retail FME route end to end — get in touch to discuss your fund's specific structure.
Practical checklist before you commit
Before relocating or launching a mutual fund business in GIFT City, it is worth working through a short internal checklist:
- Confirm which FME category — retail, non-retail or venture capital — genuinely matches your target investor base and product design, since the net worth and governance thresholds differ meaningfully across categories.
- Map the tax position for both the fund entity and the underlying investors, including how capital gains and repatriation provisions apply to the specific jurisdictions your investors sit in.
- Assess staffing needs realistically — IFSCA expects genuine decision-making substance in GIFT City, not a shell presence supported entirely from another jurisdiction.
- Build a realistic budget covering entity setup, scheme documentation, custodian fees and ongoing regulatory filings, rather than relying only on headline tax savings to justify the move.
- Plan the transition timeline conservatively, particularly if you are migrating an existing offshore fund book with live investor commitments that need to be communicated and managed through the move.
Firms that get this planning stage right tend to have materially smoother IFSCA review cycles, since the business plan submitted at registration stage already reflects a coherent, realistic operating model rather than an aspirational one.
