Ravish Bhatt | Partner, R & D Law Chambers LLP | giftcitylawyers.com
Five years ago, the question “GIFT City or Singapore?” was not a serious one for most international fund managers. GIFT City was a policy ambition. Singapore was an established global financial centre with USD 4.7 trillion in managed assets, a deep private banking ecosystem, and a treaty network spanning 108 jurisdictions.
That question is now genuinely worth answering. GIFT City’s cumulative capital commitments reached USD 22 billion by June 2025, growing to USD 26.3 billion by September 2025 with a 117% year-on-year increase. By September 2025, 194 Fund Management Entities were registered with IFSCA managing 310 schemes. The Supreme Court’s 15 January 2026 judgment in Authority for Advance Rulings v. Tiger Global International II Holdings accelerated that question further, by demonstrating that the treaty based structures most India-focused funds had relied on carry a legal risk that GIFT City’s statute-based regime does not.
This article gives the comparison fairly including where Singapore still wins and explains why, for India-linked capital, GIFT City’s advantages are increasingly decisive.
What GIFT City Offers That Singapore Cannot
1. Statute-based tax certainty, not treaty dependence
The core of GIFT City’s tax advantage is that it does not depend on a tax treaty. The exemptions available to a qualifying GIFT City Category III AIF and its non-resident investors are domestic statutory entitlements.
Section 10(4D) of the Income Tax Act 1961 (and its successor in Schedule VI of the Income Tax Act 2025) exempts income of a “specified fund” a Category III AIF in the IFSC where all units other than the sponsor and manager are held by non-residents from income tax, to the extent attributable to non-resident unit-holders. Exempt income includes transfers of securities other than shares of an Indian company; securities issued by non-residents not otherwise accruing in India; offshore derivative instruments; and securitisation trust income.
Section 10(23FBC) separately provides that income accruing to, or arising from, the transfer of units of a specified fund is exempt in the hands of the non-resident investor. This means the non-resident investor in a GIFT City qualifying fund pays no Indian tax on fund distributions or redemption proceeds and does not need to invoke a treaty, demonstrate treaty residency, or satisfy any substance standard beyond being a non-resident.
| The Tiger Global context: The Supreme Court’s January 2026 judgment held that a Tax Residency Certificate alone does not establish treaty entitlement, GAAR can override treaty benefits, and the substance of the arrangement from inception determines treaty eligibility. Section 10(4D) and Section 10(23FBC) are not treaty benefits. They are positive statutory exemptions that do not engage GAAR in the same way as treaty-based positions. A Singapore-based fund claiming the India-Singapore treaty exemption on capital gains must satisfy the treaty’s beneficial-ownership and substance requirements to an elevated post-Tiger Global standard. A GIFT City specified fund accessing Section 10(4D) does not. |
The important carve-out: capital gains on shares of an Indian company are not exempt at the fund level. These remain taxable under Section 115AD of the 1961 Act at concessional Foreign Portfolio Investor rates is currently 12.5% for long-term capital gains on listed securities. Managers running heavily India listed equity strategies must model this explicitly; the Section 10(4D) advantage narrows for such funds compared to a pure cross-border or non-India-equity strategy.
2. Section 9A safe harbour and elimination of POEM risk
Section 9A of the Income Tax Act 1961 provides that fund-management activity by an eligible fund manager in India including in GIFT City on behalf of an eligible offshore fund does not constitute a “business connection” of the offshore fund in India, and does not render the offshore fund an Indian tax resident on Place of Effective Management (POEM) grounds. The Finance Act 2025 extended the Section 9A sunset to 31 March 2030 and relaxed several conditions for IFSC-based fund managers.
For Indian promoters and fund managers, this is transformative. Before Section 9A, an Indian manager running an offshore fund from India risked making that fund an Indian tax resident through POEM analysis, or creating a business connection that subjected the fund’s income to Indian taxation. Section 9A removes that risk entirely, provided the fund and manager satisfy the specified conditions. GIFT City, as an IFSC, benefits from specific CBDT relaxations on several of those conditions.
No Singapore domiciled structure offers this to an Indian manager managing from India. Section 9A is available precisely because the management is in GIFT City, Gujarat, India.
3. The FME’s own income: the Section 80LA / Section 147 holiday
The Fund Management Entity’s income from approved fund management activities qualifies for a 100% income tax deduction for any 10 consecutive tax years within a 15-year block under Section 80LA of the 1961 Act / Section 147 of the Income Tax Act 2025. The Finance Bill 2026 proposes extending this to 20 consecutive years within a 25-year block, with a concessional 15% rate thereafter aligned with the OECD Pillar Two minimum, which matters for FMEs whose parent groups are subject to Pillar Two in implementing jurisdictions.
This holiday applies to the FME’s management fees and, significantly, to carried interest treated as business income of the FME. A fund manager running a USD 500 million fund at a 2% management fee and 20% carry could shelter substantial fee income under this deduction during the holiday period is an advantage that has no equivalent in Singapore’s fund-manager tax regime.
4. FEMA deemed foreign territory: operational parity with offshore
Under RBI’s FEMA Notification No. FEMA.339/2015-RB dated 2 March 2015, IFSC units are treated as “persons resident outside India” for foreign exchange purposes. An IFSC fund and FME operate in freely convertible foreign currencies, repatriate capital and returns without restriction, and are not subject to the mandatory Authorised Dealer routing and exchange-control conditions applicable to mainland Indian entities.
Combined with Indian tax residency (which preserves the Section 9A, 10(4D) and 80LA benefits), this creates a position that Singapore cannot replicate: onshore for Indian tax-benefit purposes, offshore for Indian foreign-exchange purposes.
The Comparison: GIFT City vs Singapore
| Factor | GIFT City IFSC | Singapore |
| Primary tax benefit route | Domestic statute (Sections 10(4D), 10(23FBC), 9A, 80LA/147) | Treaty network (108 DTAs) + fund incentives (13O/13U) |
| Treaty dependency post-Tiger Global | Low: statute-based exemptions not subject to GAAR treaty-benefit denial in the same way | Higher: India-Singapore treaty benefits now subject to elevated substance/beneficial-ownership scrutiny |
| Capital gains on Indian shares (fund level) | Taxable at concessional Section 115AD FPI rates (LTCG 12.5%) | Potentially exempt under India-Singapore DTAA Article 13 if substance conditions satisfied which is now subject to Tiger Global standard |
| FME income / carry | 100% holiday for 10/20 years under Section 80LA/147 | Taxed at 17% corporate rate; partial incentive under 13O/13U for qualifying funds |
| POEM/business connection risk for Indian managers | Eliminated by Section 9A for qualifying structures | Arises if Indian decision-makers are key to management requires careful Singapore substance build |
| Regulatory body | Single: IFSCA (unified powers of RBI, SEBI, IRDAI, PFRDA) | MAS + ACRA + IRAS (separately); more developed but multi-authority |
| Minimum corpus (AIF) | USD 3 million | No prescribed minimum for VCC; depends on fund type and MAS licensing category |
| FX regime | Deemed offshore under FEMA; free foreign-currency operation | Fully offshore; free foreign-currency operation |
| India market access | Direct: FME manages India investments from onshore IFSC; no business-connection risk | Indirect: sub-advisory to Indian manager, or FPI route; POEM discipline required |
| Treaty network for non-India investments | Limited: fund is Indian resident; treaties available where India has DTAAs | Extensive: 108 DTAs; Singapore is treaty-efficient for pan-Asian capital |
| Setup cost (indicative) | USD 35,000 to 60,000 one-time | USD 50,000 to 150,000+ one-time; SGD 300,000 to 1,500,000+ annual running for licensed managers |
| Talent and residential infrastructure | Developing; dependent on Ahmedabad/Gandhinagar | Mature; full residential, social and professional ecosystem |
| Arbitration | Developing (GIMAC for maritime; GIFT City general arbitration centre proposed but not yet operational) | SIAC (established, globally recognised); SICC for international commercial disputes |
| Private banking depth | Limited; early-stage offering | Deep; major global private banks with full product suite |
| Exchange liquidity (Indian derivatives) | GIFT Nifty (migrated from SGX, July 2023); growing but still developing secondary liquidity | Historical leader in GIFT Nifty (SGX Nifty) pre-migration; now secondary to GIFT City for this product |
Why the Growth Numbers Tell a Specific Story
The growth in GIFT City’s fund ecosystem is real but it requires reading carefully. The 117% year-on-year increase in commitments to USD 26.3 billion by September 2025, and the rise to 194 FMEs managing 310 schemes, reflects primarily India-focused capital from Indian promoters and NRIs who have found the GIFT City structure materially more efficient than offshore alternatives for India-linked strategies.
Nishith Desai Associates, whose GIFT City Express newsletter tracks the market closely, notes that Indian NRIs are “quietly redirecting wealth to GIFT City, moving away from Singapore and Mauritius structures” driven by the Section 9A POEM protection, the 80LA holiday on the FME’s income, and, post-Tiger Global, the statutory rather than treaty basis of the exemptions available to offshore investors.
The Third-Party Fund Management framework notified in July 2025 opens a parallel track for international managers who are not yet ready to build full GIFT City presence. A restricted scheme with a USD 3 million to USD 50 million corpus, managed by a GIFT City platform FME on behalf of an overseas manager regulated in its home jurisdiction, provides exposure to GIFT City’s regulatory and tax architecture without the overhead of a standalone FME setup. This is the most significant structural development for international managers since the 2022 regulations.
Where Singapore Remains the Better Choice
A balanced answer requires stating this directly. Singapore remains the better choice where:
The strategy is pan-Asian, not India-specific. For a fund deploying across South-East Asia, North Asia and India, Singapore’s 108-DTA treaty network, regional financial infrastructure, and established institutional relationships with ASEAN investors are not replicated by GIFT City. An India-ASEAN-Japan-Korea fund is a Singapore fund, not a GIFT City fund.
The investor base requires Singapore domicile. Certain institutional LPs; sovereign wealth funds, insurance companies, pension funds in specific jurisdictions have internal policies or regulatory constraints that require fund domicile in established jurisdictions. Until GIFT City builds equivalent track record and regulatory recognition in those LP communities, Singapore remains necessary for some fundraising mandates.
Private banking and secondary liquidity are material. For strategies that require sophisticated financing, repo facilities, prime brokerage, or secondary-market liquidity from major global private banks, Singapore’s depth is not yet matched by GIFT City’s early-stage private banking offering.
The arbitration clause matters. For funds where the governing law and dispute resolution framework is a material LP concerns particularly for US, European and Middle Eastern institutional investors as Singapore’s SIAC and SICC ecosystem provides a level of comfort that GIFT City’s proposed arbitration centre (not yet operational for general commercial disputes) does not yet deliver.
The Hybrid That Most Sophisticated Managers Are Running
The emerging best practice among managers with both India-facing and pan-Asian capital is not a binary choice. It is a deliberate structure: a Singapore-domiciled master vehicle for pan-Asian LP relationships, treaty reach, and institutional familiarity; and a GIFT City FME or specified fund for India-facing capital that benefits from Section 9A, Section 10(4D), and Section 80LA without the treaty risk that Tiger Global has elevated.
This is not hedging. It is matching the domicile to the purpose. GIFT City does what Singapore cannot for India-linked capital managed from India. Singapore does what GIFT City cannot for pan-Asian treaty reach and institutional depth. A manager who understands both can structure around both.
The direction of travel is clear. GIFT City’s regulatory framework is iterating faster than any comparable emerging financial centre. The January 2026 amendments, the TPFM framework, the Budget 2026 tax holiday extension, and the PIAO Act for aircraft leasing are all signals of a government and regulator committed to making the jurisdiction work at institutional scale. Singapore built its ecosystem over decades. GIFT City is compressing that timeline and post-Tiger Global, the competitive case for Indian statute based structures is the strongest it has ever been.
Our GIFT City IFSC practice covers fund structuring, FME registration, documentation, ongoing IFSCA compliance, and cross-border tax structuring for India-linked strategies. For further information see www.giftcitylawyers.com. For international tax, treaty entitlement analysis, APA and MAP advisory see https://rdlawchambers.com/our-services/
| Disclaimer: This article is for general informational purposes and does not constitute legal, regulatory or tax advice. Tax provisions referenced are under the Income Tax Act 1961 unless stated otherwise, carried forward in the Income Tax Act 2025. Regulatory figures are as at the dates indicated. Readers should seek specific professional advice before acting on any matter discussed herein. References to Finance Bill 2026 proposals are subject to enactment. |