The GIFT City offers unique investment avenues and has intangible benefits, such as regulatory clarity and proximity with policymakers, but it still has to address concerns around taxation and overseas investing, according to panelists at the VCCircle Family Office Summit 2026 held in Mumbai.
The panel, titled “The GIFT City Opportunity”, included Ashutosh Sharma, head of strategy at the International Financial Services Centres Authority (IFSCA), and Abhimanyu Sofat, head of the family office and chief investment office of the Dempo Group.
There are around 1,200 entities registered in GIFT City. These include 200 fund management entities (FMEs) and 360 funds. But IFSCA’s Sharma pointed out that GIFT City also offers alternative assets such as those investing in platforms that own ships and aircraft.
“GIFT City is not only about capital movement from India and into India but we are also developing these opportunities,” he said.
With overseas investing catching on among high-net-worth individuals, GIFT City also offers a unique channel of overseas portfolio investment (OPI), besides the regular routes of overseas direct investment (ODI) and liberalised remittance scheme (LRS).
Under OPI, an investor can send up to 50% of their net worth overseas for investing. This option is available only in GIFT City and no other competing jurisdiction such as Singapore.
Sharma said a new channel has also been introduced for investors looking to take exposure in the US listed markets, which is the GIFT City Global Access. Under this, domestic investors can take a broker dealer licence to trade in these listed entities.
Tax challenges
Dempo Family Office’s Sofat said that OPI is definitely an advantage that GIFT City has but added that there are still tax concerns.
According to him, Singapore has fully tax exempt entities under Section 13 (o) of their Income Tax Act. In comparison, GIFT City funds have to pay maximum marginal rate (MMR) for exits made under two years and long-term capital gains tax for exits made after that period.
“Fund managers do use lock-ins of two years [to avoid the MMR] but then there is still long-term capital gains tax to pay,” he said.
Therefore, for tax efficiency, family offices often use a two-tiered structure to access overseas opportunities, of a feeder fund based in GIFT City and a master fund in Singapore. But that, Sofat said, entails higher fee at the feeder level and the master level. “It is more cost efficient to invest directly into the Singapore fund,” he said.
When asked whether GIFT City is looking to address these issues, Sharma said that the extra costs from having a feeder-master fund structure does not fall within the purview of the regulator, and that it is governed by the commercial agreement between the limited partners and the fund managers.
On the tax concerns, he said that they are in discussion with the government to resolve those.
He pointed out that taxation parity with other jurisdictions was part of their earliest discussions with the government, and they had managed to iron out several issues over two to three years.
“Taxation is where IFSCA has an advantage, we work very closely with the government on this,” he said, and cited the extension of the tax holiday from five years to ten years as an example of the influence IFSCA can wield over policymaking.
Overseas investing
Meanwhile, high-net-worth individuals are increasingly interested in overseas opportunities but GIFT City may be offering limited avenues for accessing this, since it also has to align with the government's need to reduce dollar outflows.
Overseas markets offer more growth opportunities and come at lower valuations, said Sofat.
“If you want to invest in innovation, then you need to look in China and the US. In the last six months, discussions have largely been around chips and the opportunity for that is in South Korea. Can you do that in India? The answer is no,” he said.
He sees demand for overseas investing going up and more for growth opportunities than for lower valuations.
How can GIFT City balance these two competing demands, of offering such products and curbing dollar outflows?
Sharma said that capital movement, whether it is between India and Singapore or India and GIFT City, is regulated by the Reserve Bank of India (RBI) through Foreign Exchange Management Act (FEMA) Regulations.
“Our representation [to RBI] and the government is that they should look at GIFT City more favourably, and that’s why the ODI regulations were amended and OPI was made available only through GIFT City and not for other jurisdictions,” said Sharma.
Sharma pointed out that GIFT City has intangible benefits such as regulatory clarity.
He said, “People feel comfortable investing through GIFT City purely because they know who they are engaging with and the service they will get from that. They also find that the risk, both regulatory and taxation wise, is predictable because whatever is there has been written in law.”
Global investors who were earlier hesitant to invest through GIFT City are now coming because of the uncertainty around the Double Taxation Avoidance Agreement (DTAA). “With recent discussions around PPT [principal purpose test] test, there is worry that GPs may still be exposed to the jurisdiction [with tax risk] after the LPs exit... how will the GPs fulfil the tax demands, if any rise?”
“With GIFT City, these uncertainties are not there,” Sharma said.
