| Authored by R & D Law Chambers LLP | Practice led by Ravish Bhatt. Dual-qualified lawyer (India and England & Wales) | Bar Council of Gujarat, Enrolment G/504/2008 | SRA (non-practising) Registration No. 492 477 | ADIT, Chartered Institute of Taxation, LondonPublished: 6 August 2026 | Last reviewed: 6 August 2026 | Estimated reading time: 11 minutes |
| This article states the position under the IFSCA (Fund Management) Regulations, 2025, which replaced the 2022 Regulations, together with the third-party fund management amendment made during 2025, and the Income-tax Act, 2025 as amended by the Finance Act, 2026. References to the IFSC tax deduction are to section 147 of the Income-tax Act, 2025 (formerly section 80LA of the Income-tax Act, 1961, repealed with effect from 1 April 2026). |
| Short answer. Registration as a Fund Management Entity is not the only way to run a fund from GIFT IFSC. Since 2025 an established Registered FME may manage schemes on behalf of a third-party manager, which allows a foreign manager to launch in the IFSC without building its own regulated entity. Whether to register or to use a platform is the first decision, and it is usually taken by default rather than on analysis. |
Index of Topics
- The decision most managers skip
- The three FME categories and what each permits
- The platform alternative: third-party fund management
- What the 2025 Regulations changed
- Eligibility, personnel and substance
- Scheme types and corpus thresholds
- Tax treatment of the manager and the fund
- A realistic sequence and timeline
- Frequently asked questions
- How R & D Law Chambers works on these matters
1. The Decision Most Managers Skip
| Short answer. Whether to become a regulated Fund Management Entity at all. Registration brings capital, personnel and substance obligations that run for the life of the entity. For a manager launching a single fund, or testing an India-adjacent strategy, the third-party fund management route introduced in 2025 may deliver the same commercial outcome without the regulated footprint. |
The conventional advice on GIFT IFSC fund management runs straight to the application: choose a category, meet the net worth, appoint the personnel, take the space, file. That advice is not wrong. It is simply premature, because it answers a question the manager has not yet been asked to consider.
An FME registration is a permanent regulated relationship. It carries continuing net worth, key managerial personnel, infrastructure, governance, reporting and compliance obligations. Those are proportionate for a manager building a durable IFSC platform across multiple schemes and vintages. They are heavy for a manager whose immediate objective is to launch one restricted scheme of modest size and see whether the strategy raises capital.
Since 2025 there has been an alternative, and it is materially under-used because it is new and because most published guidance predates it.
2. The Three FME Categories and What Each Permits
| Short answer. Any entity carrying on fund management in the IFSC must hold a certificate of registration as a Fund Management Entity and operate as one of three categories: Authorised FME, Registered FME (Non-Retail), or Registered FME (Retail). The categories are cumulative in permitted activity, with each higher category able to undertake what the categories below it may do. |
| Category | Permitted activity |
|---|---|
| Authorised FME | Venture capital schemes launched by private placement, and family investment funds investing in securities, financial products and other permitted asset classes. The entry category. |
| Registered FME (Non-Retail) | Restricted schemes raising capital by private placement from accredited investors or investors above a specified threshold. Portfolio management services, including for a multi-family office. Investment manager for private placement of REITs and InvITs. May also undertake everything permitted to an Authorised FME. |
| Registered FME (Retail) | Retail schemes open to investors generally, exchange traded funds, and investment manager for public offers of REITs and InvITs. May also undertake everything permitted to the categories below. Board composition requirements are stricter, including a minimum of four directors with at least half independent. |
Minimum net worth is prescribed by category under the Regulations and rises with the breadth of permitted activity. The figures should be taken from the current text of the Regulations at the time of application rather than from secondary commentary, because they have been revised and because the requirement is continuing rather than a one-off entry test.
The category choice is not merely a question of present intention. Moving up a category later is possible but involves a fresh application and fresh compliance, so a manager who expects to launch retail products within three years should weigh registering at that level from the outset against the cost of carrying the higher obligations before the products exist.
3. The Platform Alternative: Third-Party Fund Management
| Short answer. An amendment to the Fund Management Regulations during 2025 permits a Registered FME, on obtaining authorisation from IFSCA, to launch and manage schemes on behalf of another entity acting as third-party fund manager. This is the platform-play model familiar from other financial centres, and it allows a manager to run a scheme in GIFT IFSC without holding its own FME registration. |
The conditions attach principally to the FME providing the service rather than to the manager using it. The servicing FME must maintain an additional net worth of USD 500,000 on a continuing basis, over and above the minimum net worth required for its other permitted activities, whether those are conducted inside or outside the IFSC. It must appoint a dedicated principal officer for each scheme managed under the arrangement, and maintain a risk management framework appropriate to the service.
The scheme perimeter is defined. A restricted scheme launched under a third-party fund management arrangement may have a corpus of up to USD 50 million. Read together with the minimum corpus of USD 3 million for a restricted scheme, the arrangement operates in a band between those two figures. That band is the answer to who this route is for: it suits first-time and mid-sized funds, and it does not suit a manager raising several hundred million dollars, who will need its own registration.
For a foreign manager, the attraction is specific. It converts a regulated establishment project, with its capital, hiring and premises commitments, into a contractual arrangement with an established IFSC platform. The trade-off is equally specific: the manager is dependent on the servicing FME’s regulatory standing and operational quality, and the commercial terms of that relationship become the critical document. Diligence on the platform, and the negotiation of the management arrangement, do the work that regulatory application work would otherwise do.
4. What the 2025 Regulations Changed
| Short answer. The IFSCA (Fund Management) Regulations, 2025 replaced the 2022 Regulations. The reforms lowered several entry thresholds and lengthened others: minimum scheme corpus fell from USD 5 million to USD 3 million, the validity of a private placement memorandum doubled from six months to twelve, and the minimum investment threshold for portfolio management services fell from USD 150,000 to USD 75,000. |
These are not cosmetic revisions. The reduction in minimum corpus from USD 5 million to USD 3 million lowers the point at which a fund becomes viable, which matters most to first-time managers and to early-stage venture strategies where the initial close is the hardest. The extension of placement memorandum validity from six to twelve months removes a real problem, because a six-month window frequently expired mid-raise and forced a refiling for no reason connected to investor protection.
The reduction in the portfolio management services threshold from USD 150,000 to USD 75,000 widens the investor base for managed accounts substantially. Against that, obligations scale with size: an FME managing assets of at least USD 1 billion, excluding fund-of-funds schemes, must appoint an additional key managerial person within six months of the end of the financial year.
The direction of the 2025 reforms is consistent. Entry has been made easier and ongoing obligation has been calibrated to scale. A manager working from guidance written against the 2022 Regulations is planning against thresholds that are now higher than the law requires.
5. Eligibility, Personnel and Substance
| Short answer. An applicant must satisfy fit and proper requirements, demonstrate relevant track record, and maintain infrastructure and personnel in the IFSC. Where the applicant itself lacks the assets under management and investor experience criteria, the experience of significant shareholders may be assessed instead, against a higher net worth requirement for the entity. |
That last mechanism is worth understanding because it is how most new entities qualify. A newly incorporated IFSC subsidiary has no track record of its own. The Regulations accommodate this by allowing the significant shareholders’ experience to be evaluated, at the price of a higher net worth requirement. The choice between demonstrating entity-level experience and accepting the higher capital requirement is a real structuring decision, and it should be made deliberately rather than discovered during the application.
On infrastructure, the Regulations require adequate space, equipment, communication facilities and manpower for providing fund management services, including dedicated and secured space accessible to the FME’s authorised persons. Applicants routinely underestimate this. Dedicated secured space is not a shared desk, and the requirement is assessed on what is actually in place rather than what is planned.
Key managerial personnel must be appointed and must be resident and available. This is the requirement that most often determines the real timeline of an FME application, because suitable personnel with the necessary background are in demand and notice periods are long. Personnel search should begin before the application, not after.
6. Scheme Types and Corpus Thresholds
| Short answer. Non-retail schemes comprise venture capital schemes and restricted schemes, both raised by private placement. Retail schemes are open to investors generally and may only be launched by a Registered FME (Retail). Minimum corpus for restricted and retail schemes is USD 3 million; venture capital schemes carry their own corpus and investor number limits under the Regulations. |
The scheme type determines the FME category required, not the other way round, and this is the sequence in which the analysis should run. A manager should identify the scheme it intends to launch, the investors it intends to admit and the corpus it intends to raise, and only then determine which registration category those choices require. Choosing a category first and fitting the product to it afterwards produces either an over-registered entity carrying unnecessary obligations or an under-registered one that cannot launch what it has promised investors.
Where the intended scheme is a restricted scheme within the USD 3 million to USD 50 million band, the third-party fund management route in section 3 becomes a direct alternative to registration, and the two should be costed against each other before either is pursued.
7. Tax Treatment of the Manager and the Fund
| Short answer. An IFSC unit may claim a full deduction of eligible business income for twenty consecutive years out of twenty-five under section 147 of the Income-tax Act, 2025, with income thereafter taxed at fifteen per cent. That relief attaches to the manager as an IFSC unit. It is separate from, and does not determine, the tax position of the fund or of its investors. |
Two points of precision. The provision is section 147 of the Income-tax Act, 2025. The Income-tax Act, 1961 was repealed with effect from 1 April 2026, and section 80LA, under which this deduction was historically claimed, is no longer operative law. Guidance still citing section 80LA as current has not been updated since April.
The Finance Act, 2026 extended the deduction from ten consecutive years out of fifteen to twenty out of twenty-five and fixed the post-deduction rate at fifteen per cent. It also introduced a condition for units commencing operations on or after 1 April 2026, that the unit must not be formed by splitting up, reconstruction, reorganisation or transfer of a business already existing in India. A domestic manager restructuring an existing Indian asset management business into an IFSC unit should treat that condition as a design constraint, not a compliance detail.
On the fund and the investors, the distinction that matters is between Indian-source income and offshore income. IFSC fund structures deliver genuine relief on offshore securities, IFSC-traded products and certain derivative and treasury flows. They do not exempt non-resident investors from Indian tax on Indian-source income, and they do not confer treaty access, because an IFSC unit is not treated as a separate tax resident for treaty purposes. A manager marketing an IFSC fund to investors on the basis of an India equity tax advantage is marketing something the structure does not provide.
8. A Realistic Sequence and Timeline
| Short answer. Work backwards from the scheme, not forwards from the application. Define the product, investors and corpus; test registration against the platform alternative; then select the category, begin the personnel search, and prepare the application and scheme documents in parallel. |
- Define the scheme: type, target investors, corpus, jurisdiction of investors, and asset classes. Everything downstream follows from this.
- Test the platform alternative against registration on cost, timeline, control and scale, particularly where the scheme sits in the USD 3 million to USD 50 million band.
- If registering, select the category against the scheme and the three-year product plan, not against present intention alone.
- Begin the key managerial personnel search immediately. This, not regulatory processing, usually determines the real timeline.
- Resolve the track record question: entity-level experience, or significant shareholder experience with the higher net worth.
- Secure dedicated and secured space meeting the infrastructure requirement, on terms that survive the application period.
- Prepare the registration application and the scheme documents together, so that the placement memorandum and the registration are consistent and the twelve-month validity window is used efficiently.
9. Frequently Asked Questions
Do I need to register as an FME to run a fund from GIFT City?
Any entity carrying on fund management in the IFSC must hold a certificate of registration as a Fund Management Entity. However, since 2025 a Registered FME authorised by IFSCA may launch and manage schemes on behalf of a third-party fund manager, which allows a manager to run a scheme in the IFSC without holding its own registration. Restricted schemes under that arrangement may have a corpus of up to USD 50 million.
What are the FME categories?
Three: Authorised FME, Registered FME (Non-Retail) and Registered FME (Retail). Permitted activities are cumulative, with each higher category able to undertake what the categories below it may do. Minimum net worth is prescribed by category and rises with the breadth of permitted activity.
What is the minimum corpus for a scheme in GIFT IFSC?
USD 3 million for restricted and retail schemes, reduced from USD 5 million by the IFSCA (Fund Management) Regulations, 2025. Venture capital schemes carry their own corpus and investor number requirements under the Regulations.
Can a foreign fund manager set up in GIFT City?
Yes. Where a newly incorporated IFSC entity has no track record of its own, the Regulations permit the experience of significant shareholders to be evaluated instead, against a higher net worth requirement for the entity. Foreign managers should also consider the third-party fund management route, which avoids establishing a regulated entity.
How long is a private placement memorandum valid?
Twelve months, extended from six months by the 2025 Regulations. The change removed a recurring problem, because a six-month window frequently expired during a fundraise and required refiling.
Does an IFSC fund structure reduce Indian tax for foreign investors?
On offshore securities, IFSC-traded products and certain derivative and treasury flows, yes. On Indian-source income, no. An IFSC unit is not treated as a separate tax resident for treaty purposes, so an IFSC structure confers no treaty access and does not exempt Indian-source gains.
10. How R & D Law Chambers Works on These Matters
We advise on Indian law for businesses in India and internationally, wherever a matter has an India connection. On fund management mandates in GIFT IFSC we work from the scheme backwards: what is being raised, from whom, and at what scale, and only then which regulatory route delivers it at the lowest cost in capital, time and continuing obligation.
Related services
- Fund Structuring in GIFT IFSC: legal, tax and regulatory design for funds and managers.
- Fund Documentation & Legal Structuring for FMEs: placement memoranda, constitutional documents and investor agreements.
- Regulatory & Compliance Advisory in GIFT IFSC: authorisation, governance architecture and continuing compliance.
- Transaction & Contractual Advisory: management arrangements, platform agreements and cross-border documentation.
| This article is for informational purposes only and does not constitute legal or tax advice. The views expressed are those of the author. Specific legal or tax matters should be referred to qualified advisers. Practice led by Ravish Bhatt, dual-qualified lawyer (India and England & Wales), Bar Council of Gujarat (Enrolment G/504/2008), SRA (non-practising) Registration No. 492 477, ADIT (CIOT, London). |