Gift City - InCorp Advisory

Foreign Universities in GIFT City

February 15, 2024 by Meet Thakkar

Reading Time: 3 minutes

This framework in GIFT city facilitates set up of Foreign Universities within the city. It aims to provide students with a world-class education and exposure to global standards. It also offers opportunities for collaboration between Indian and foreign universities, including student exchange programs.

The framework mentions entry guidelines for foreign universities and foreign educational institutions to setup their campus/center in GIFT City. The framework has defined the following terms:

“Foreign University” shall mean a university established outside India which is duly accredited to award degrees for courses within and outside its home jurisdiction.
A “Foreign Educational Institution” refers to an educational institution located outside India that is not classified as a university but is duly authorized to provide courses, including research programs, in approved subject areas both within and outside its native jurisdiction.

What is the legal structure?

The following can be the categories of the entity setup for foreign universities in GIFT IFSC:
– Foreign Universities → Set up an International Branch Campus (IBC) in GIFT IFSC
– Foreign Educational Institution → Set up an Offshore Educational Centre (OEC) in GIFT IFSC

If the applicant is a Foreign University, it must have achieved a position within the top 500 in the most recent QS World Universities ranking*, either in global overall ranking and/or subject ranking.
For Foreign Educational Institutions, the applicant should be a well-reputed institution within its home jurisdiction.

* Quacquarelli Symonds (QS) World Universities ranking.

What are the permissible courses for Foreign Universities?

The following courses including research programs are permitted in GIFT IFSC

Financial Management
FinTech
Science
Technology
Engineering
Mathematics
Other topics as approved by IFSCA

What are the criteria for courses to be offered in GIFT city?

Every course or program conducted by a registered entity in GIFT IFSC must mirror the course or program offered by the parent entity in its home jurisdiction.
The degree, diploma, or certificate awarded to International Branch Campus (IBC) or an Offshore Education Centres (OEC) students shall be directly conferred by the parent entity in the same manner as it does for its students in its home jurisdiction. However, IBC or OEC is permitted to make adjustments in the approved course curriculum or content.
The degrees, diplomas, or certificates issued for courses or programs held in GIFT IFSC will be accorded the same recognition and status as if they were conducted by the parent entity in its home jurisdiction.

How to register an International Branch Campus (IBC) or an Offshore Education Centres (OEC)?

Subject to the basic conditions fulfilled for setup the applicant is required to demonstrate financial capability to establish and sustain the proposed activities in GIFT IFSC and the applicant commits to implementing appropriate infrastructure and facilities to conduct courses, including research programs, in permissible subject areas.

The process flow for registration of IBC & OEC in GIFT City

Step 1. Application to MCA for setup of branch of parent (foreign) entity

Step 2. Application to IFSCA for in-principle approval

Step 3. Application to be referred to the committee of experts set up by the GIFT City.

Step 4. Authority may grant in-principal approval and give 180 days to set-up infrastructure, course, fees

Step 5. Application to SEZ Authority to set up IBC or OEC

Step 6. Obtaining SEZ approval

Step 7. Setting up of infrastructure, course and other capabilities for commencement of operation

Step 8. Authority may issue Certificate of Registration upon fulfillment of conditions

Step 9. Commencement of Operation for which the license is granted

What is the fees to be paid to IFSCA & SEZ Regulators?

An IBC or OEC desirous of undertaking permissible activities would be required to pay the following fees:

A) IFSC Authority

Particulars	Amount ( in US$)
Application Fees (one time)	$ 1,000
Initial Registration Fees (one time)	$ 25,000
Annual Fees	$ 10,000
Processing Fees	$ 10,000

B) SEZ Authority

Particulars	Amount (in INR)
Application Fees (one-time)	₹ 5,000
Registration fees (one-time)	₹ 25,000
Recurring fees (Annual)	₹ 5,000

FAQs

1. How can resident students remit funds to Foreign Universities/Foreign Educational institutions established in the GIFT IFSC to study?
Liberalised Remittance Scheme (LRS) allows resident individuals to remit funds in light of the provision of the Circular Dated 22.06.2023. Now, a student is permitted to make remittance to the foreign university established in the IFSC to study. This remittance will be treated as remittance under the purpose ‘studies abroad’ as mentioned in Schedule III of Foreign Exchange Management Rules, 2000.

2. What are the benefits of setting up an IBCs or OECs in an IFSC?
There are several benefits to setting up an IBC or OEC in an IFSC, including:

Access to a large pool of talent and potential students in India
A liberalized regulatory environment
Tax benefits
Relaxed land acquisition norms

3. How does the recognition of degrees from Foreign universities/ Foreign Education Institutions in GIFT City IFSC work internationally?
Degrees acquired through IBCs and OECs within GIFT IFSC will be considered as international degrees. The recognition and status accorded to the degree, diploma, or certificate issued for courses or programs held in GIFT IFSC will be equivalent to those conducted by the Parent Entity in its Home Jurisdiction.

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Legal Requirements for Setting Up a Finance Company in GIFT City

November 30, 2023 by Meet Thakkar

Reading Time: 4 minutes

GIFT City is a global financial and IT services hub, a first of its kind in India. It is designed to compete with globally benchmarked business districts. More than 200 companies have setup in GIFT city, key occupants include major banks, mainstream insurance firms, and info-tech. The finance industry works together with banking to offer financial services and innovative products, contributing significantly to the growth of a financial center. In GIFT City, businesses involved in financing activities like lending, factoring, forfeiting, and leasing of aircraft and ships are allowed to operate under a license as a finance company or unit.

Structure

To better understand how a Finance Company/unit can be formed, let’s have a look at the following standard structures in GIFT City – IFSC.

Permissible Services

A finance company or a finance unit may undertake the following activities:

i. Core Activities

Lending in the form of loans, commitments and guarantees, credit enhancement, securitisation, financial lease, and sale and purchase of portfolios;
Factoring and forfaiting of receivables;
Undertaking investments, including subscribing, acquiring, holding, or transferring securities or such other instruments, as may be permitted by the Authority;
Buy or Sell derivatives;
Global/Regional Corporate Treasury Centres in GIFT City.
Any other core activity as notified by the Authority.

ii. Non-Core Activities

Merchant Banking;
Authorised person;
Registrar and Share Transfer Agent;
Trusteeship Services;
Investment Advisory Services
Portfolio Management Services
Operating lease of any products, including aircraft lease, and ship lease.
International Trade Financing Services Platform;
Distribution of financial products
Function as trading and clearing members or professional clearing member of exchanges and clearing corporations set up in IFSCs;
to act as facilitators of permissible activities
Any other activity without involving a customer interface
any other activity, as may be permitted and classified as a non-core activity by the IFSCA Authority in GIFT City.

Net worth requirement

Sr. No.	Activity	Minimum Owned Fund Required
1.	Undertaking one or more of the non-core activities only	USD 0.2 million
2.	Undertaking one or more core activities with or without non-core activities (except for Global / Regional Corporate Treasury Centres)	USD 3 million
3.	Undertaking activities of Global / Regional Corporate Treasury Centres.	USD 0.2 million

Other financial requirements

A Finance Company or a Finance Unit is required to maintain the following ratios:

Capital Ratio (CR) – Minimum capital ratio at eight percent of its regulatory capital to its risk-weighted assets.
Liquidity Coverage Ratio (LCR) – A Finance Company or a Finance Unit as the case may be, shall maintain LCR on a stand-alone basis.
Exposure Ceiling (EC) – The sum of all the exposures of a Finance Company or a Finance Unit, as the case may be to a single or group of counterparties must not be more than 25% of the available eligible capital base.

Process for setting up of Finance company/unit:

Step 1: Availability of name for finance company (new setup)
Step 2: Identification of office space
Step 3: Obtaining NOC from SEZ Developer
Step 4: Apply for company incorporation
Step 5: Obtain Certificate of Incorporation
Step 6: Application to the Development Commissioner, SEZ.
Step 7: Application to IFSC Authorities (‘IFSCA’)
Step 8: Obtain letter of approval from SEZ Authorities
Step 9: Obtain Letter of Approval from IFSCA
Step 10: Commencement of business and post setup compliances

Benefits for Finance company / unit registered in GIFT City

*Particulars*	*Benefits*
*Income Tax Act*	– 100% tax exemption for 10 consecutive years out of 15 years – MAT / AMT @ 9% of book profits applies to Company/others set up as a unit in IFSC (MAT not applicable to companies in IFSC opting for new tax regime). – Dividend paid to shareholders of the company in IFSC (Taxable in the hands of recipient, Exemption not relevant due to withdrawal of DDT regime). – Interest income paid to non-residents on monies lent to IFSC units is not taxable. – Withholding tax chargeable at the reduced rate of 4%.
*Goods and Service Tax*	– No GST on services: a. Received by unit in IFSC b. Provided by IFSC / SEZ units to offshore clients- GST applicable on services provided to DTA
*Customs Duty*	– Exemption from customs duty for all goods imported into the SEZ used for authorized operations. However, any removal of goods from SEZ into the Domestic Tariff Area (“DTA”) would attract customs duty.

Particulars

Benefits

Income Tax Act

– 100% tax exemption for 10 consecutive years out of 15 years

– MAT / AMT @ 9% of book profits applies to Company/others set up as a unit in IFSC (MAT not applicable to companies in IFSC opting for new tax regime).

– Dividend paid to shareholders of the company in IFSC (Taxable in the hands of recipient, Exemption not relevant due to withdrawal of DDT regime).

– Interest income paid to non-residents on monies lent to IFSC units is not taxable.

– Withholding tax chargeable at the reduced rate of 4%.

Goods and Service Tax

– No GST on services:
a. Received by unit in IFSC
b. Provided by IFSC / SEZ units to offshore clients- GST applicable on services provided to DTA

Customs Duty

– Exemption from customs duty for all goods imported into the SEZ used for authorized operations. However, any removal of goods from SEZ into the Domestic Tariff Area (“DTA”) would attract customs duty.

Regulatory Fees

IFSCA Fees for Finance Company / Unit:

Particulars	Amount
Application Fees (One-time)	$1,000
Registration fees (One-time)	$12,500
Recurring Fees* (Annual)	$12,500

* Fees will be reduced to $ 5,000 in case of Aircraft operating lessors and Ship operating lessors.

SEZ Fees for Finance Company / Unit:

Particulars	Amount (in INR)
Application Fees (One-time)	INR 5,000
Recurring fees (Annual)	INR 5,000

FAQs

Q: How can a Finance Unit be established in an International Financial Services Centre (IFSC) to conduct core activities?
A: In an International Financial Services Centre (IFSC), a Finance Unit can be setup and conduct financial activities without needing a no-objection certificate-NOC, as long as it is regulated by a financial sector regulator in its home jurisdiction. However, If the parent company of the Finance Unit is involved in regulated financial activities, it must obtain an NOC from its home country regulator before setting up a Finance Unit in the IFSC.

Q: Can a Finance Company or Finance Unit engage in cryptocurrency-related activities?
A: As of the current regulations, the specific mention of cryptocurrency-related activities is not provided. However, the Authority has the power to issue clarifications or guidelines.

Q: Can a Finance Company or Finance Unit maintain its balance sheet in a currency other than United States Dollars (USD)?
A: No, every Finance Company or Finance Unit is required to maintain its balance sheet only in United States Dollars (USD). However, they may be permitted to conduct business transactions denominated in INR, subject to settlement in a freely convertible foreign currency.

Q: Can a Finance Company or Finance Unit offer retail banking services, such as savings accounts and fixed deposits, to residents?
A: No, Finance Companies or Finance Units are explicitly prohibited from accepting public deposits from residents, both within and outside IFSCs. They are also not allowed to register with the Authority as Banking Units.

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Fund Management Entities under GIFT IFSC – Regulations 2023

November 10, 2023 by Meet Thakkar

Reading Time: 6 minutes

Gujarat International Financial Tech-City (‘GIFT’) in India is a strategic initiative aimed at promoting offshore financial services activities. It seeks to create a competitive ecosystem that enables India to compete with established global financial services jurisdictions.

A key aspect of this initiative is the development of a robust asset management industry within GIFT IFSC. To support this growth, the Indian government has introduced tax and regulatory incentives. The regulatory framework for fund management in GIFT IFSC is designed to cater to various financial intermediaries and service providers, including asset management companies, funds, banks, insurance, leasing, shared services, exchanges, broking, clearing, depository, and custody providers.

How the FME and Fund will be structured under GIFT IFSC?

The primary objective behind the introduction of FME Regulations by IFSCA was to oversee and regulate the fund managers operating within the IFSC, rather than directly regulating the funds established within it.

FME regulations provide a comprehensive regulatory framework for Fund Managers setting up fund management entities (FME). The Fund Manager shall obtain registration from IFSCA and the conditions to be satisfied for the launching of funds/schemes shall be as per the FME Regulations.

To better understand how a fund can be formed, let’s have a look at the following standard structure:

What are the different types of FME under IFSC regulations?

Key points on Structure:

Particulars	Authorized fund Management Entity	Registered Fund Management Entity (Non-Retail Fund)	Registered Fund Management Entity (for Retail fund)
Meaning	Fund Managers that pool money from accredited investors or other large investors to make venture capital investments.	Fund Managers that pool money from accredited investors or other large investors by way of private placement and make investments in listed or unlisted.	Fund Managers that pool money from retail investors and other accredited or large investors.
Permissible Activities	· Investment in a startup or early-stage venture through a venture capital scheme · Managing family Investment fund, investing in securities, financial product, and such other permitted asset classes.	· Managing Venture Capital and Restricted schemes investing in securities, financial products, and other permitted asset classes · Portfolio Management Services (including Multiple family offices) · Investment Manager of Investment Trust (REIT and InviTs) offered under private placement. · All activities are permitted to Authorized FMEs.	· Managing Retail Schemes investing in securities, financial products, and other permitted asset classes. · Investment manager of Investment trusts (REITs and InviTs) offered to the public. · Managing Exchange Traded fund · All activities as permitted to Authorized FMEs and Registered FMEs (for non-retail funds)
Types of schemes which can be managed	Venture Capital Scheme	Venture Capital Schemes and Restricted Schemes	All Schemes (retail as well as non-retail)
Launch of New Scheme	Immediately upon filing the Private Placement Memorandum (PPM)	PPM to be filed 21 working days prior to launch of the scheme	Offer document to be filed 21 working days prior to launch of scheme. The fund can be launched only after receiving comments from IFSCA and incorporating the same in the offer document.
Type of investor permissible	· Accredited Investor · Minimum investment of USD 2,50,000 except for employees /directors/designated partner of FME it is USD 60,000	· Accredited Investor ·Minimum investment of USD 1,50,000 except for the employees /directors/designated partner of FME it is USD 40,000	· Retail as well as non-retail investor
Legal Structure of FME	Company, LLP, Branch	Company, LLP, Branch	Company or Branch of a company
Minimum net worth	USD 75,000	USD 5,00,000	USD 1,00,000

Key points on Personnel requirements in FME:

Particulars	Authorized Fund Management Entity	Registered Fund Management Entity (Non-Retail Fund)	Registered Fund Management Entity (for Retail fund)
Minimum number of directors	Not applicable	Not applicable	4 (at least 50% to be an independent director)
Minimum Experience of FME	Employ such employees who have relevant experience	Employ such employees who have relevant experience	FME or its holding company shall not have less than 5 years of experience in managing Assets under Management (AUM) of at least USD 200 million with more than 25,000 investors or at least 1 person in control of the FME holding more than 25% shareholding in the FME be carrying on business in financial services for a period of not less than 5 years
Minimum number of KMP	One	Two	Three
Change of KMP	Prior approval of IFSCA required
Minimum Qualification of KMP	Professional qualification or post-graduate degree or post-graduate diploma (minimum 2 years in duration) in finance, law, accountancy, business management, commerce, economics, capital market, banking, insurance or actuarial science from a university or an institution recognised by the Central Government or any State Government or a recognised foreign university or institution or association; or a certification from any organization or institution or association or stock exchange that is recognised/accredited by an Authority or a regulator in India or a Foreign Jurisdiction.
Minimum experience of KMP	Experience of at least 5 years in related activities in the securities market or financial products including as a portfolio manager, broker-dealer, investment advisor, wealth manager, research analyst or fund management.
Substance Requirements in the IFSC	Proposal on the portfolio composition shall be initiated by a person who is based in the office of the FME in the IFSC

What is the process of FME set-up in IFSC?

Following are the steps for setting up FME in GIFT city- IFSC:

Step 1: Availability of name for Fund entity (new setup)

Step 2: Identification of office space in GIFT City – Notified SEZ area

Step 3: Obtaining NOC from SEZ Developer

Step 4: Apply for company / LLP/ trust incorporation

Step 5: Obtain a Certificate of Incorporation

Step 6: Application to the Development Commissioner, GIFT SEZ.

Step 7: Application to IFSC Authorities (‘IFSCA’)

Step 8: Obtain a letter of approval from SEZ Authorities

Step 9: Obtain a letter of Approval from IFSCA

Step 10: Commencement of business and post-setup compliances

What are the benefits for Funds registered in IFSC?

FMEs registered under IFSC regulations will enjoy various benefits listed below:

1. Investment Opportunities

Funds incorporated in GIFT IFSC are permitted to invest in the following securities (which may not be allowed to Funds operating out of India):
Securities Listed in GIFT IFSC
Securities issued by Companies incorporated in GIFT IFSC
Securities issued by Companies incorporated in India or foreign jurisdiction.
Units of other funds in IFSC
Other permissible investments as per Fund Regulations (like LLP, REIT, InvIT, Derivatives, SPV etc.)
Overseas entities (without restriction applicable for domestic Funds)
FME registered in GIFT City IFSC can invest in India subject to FME regulations through the following modes:
Foreign venture capital investment (“FVCI”) route
Foreign portfolio investor (“FPI”) route
Foreign direct investment (“FDI”) route.

2. Taxation benefits

Business income 10 years out of first 15 years tax holiday u/s 80LA of Income Tax Act, 1961.
Minimum Alternate Tax (MAT)/ Alternate Minimum Tax (AMT) is applicable @9% of book profits. However, the same is applies only to companies opting for the old tax regime.
Exemption from STT, CTT, and stamp duty in respect of transactions carried out on IFSC exchanges by registered FMEs.
Supply of services by FME to funds registered in IFSC is exempt from GST levy.
Income accruing to or received by non-resident investors from offshore investments made by a GIFT IFSC would not be taxable in India.
Transfer of units of scheme, investment trust and ETF by non-residents on IFSC exchange would not be subjected to Income Tax.

3. Operational Benefits:

Apart from the above tax and compliance benefits, FMEs registered in IFSC have some operational benefits too which are as under:

Lower operating costs due to subsidies granted by the Gujarat Government,
Availability of skilled labor,
Proximity to the onshore market,
World-class infrastructure, unparalleled connectivity, and transportation access,
Access to multiple markets from IFSC.

What is the regulator’s Fees for setup in IFSC?

1. IFSCA Fees would vary based on the scheme and type of FME setup in GIFT IFSC. Following are the fees structures for various FMEs:

Particulars	Authorised FME	Registered FME (Non-Retail)	Retail FME
Application Fees (one-time)	$ 2,500	$ 2,500	$ 2,500
Registration Fees (one-time)	$ 5,000	$ 7,500	$ 10,000
Recurring Fees (Annual)	$ 2,000	$ 2,000	$ 2,000
Modification of terms & conditions of grant of License / Registration / Authorization / Recognition	$ 1,000	$ 1,500	$ 2,000

2. All FMEs in IFSC need prior SEZ approval and hence, the SEZ authorities’ fees are as under:

Particulars	Amount (in INR)
Application Fees (one-time)	5,000
Registration fees (one-time)	25,000
Recurring fees (Annual)	5,000

FAQs

Q1: Can a Fund Management Entity (FME) offer both Venture Capital Schemes and Restricted Schemes simultaneously?

Yes, an FME can offer both Venture Capital Schemes and Restricted Schemes simultaneously, subject to compliance with the respective regulations and filing requirements. This allows FMEs to diversify their fund management activities and cater to different investor preferences.

Q2: What are the key differences between an Angel Fund and a Venture Capital Scheme, and how do they impact investment strategies?

Angel Funds primarily target early-stage venture capital undertakings, while Venture Capital Schemes cover a broader spectrum of start-ups and emerging companies. The key difference is in the investment threshold and structure.

Angel Funds cater to investors committing at least USD 40,000, whereas Venture Capital Schemes may include investors with different investment levels upto USD 150,000.

Q3: What are the compliance requirements for an FME operating a Registered FME (Retail) category, and how do they differ from other FME categories?

Registered FME (Retail) is eligible to launch Mutual Funds and Exchange Traded Funds for retail investors. They must adhere to specific regulatory and compliance standards related to retail fund management, including disclosure requirements, investor protection measures, and asset allocation guidelines. These requirements differ significantly from those of other FME categories catering to accredited or high-net-worth investors.

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GIFT City: India’s Upcoming Economic and Financial Hub

August 1, 2023 by InCorp Advisory

Reading Time: 3 minutes

India, with its expeditiously growing economy and increasing global influence, is constantly seeking avenues to support its position as an economic and financial powerhouse. In this pursuit, GIFT City has emerged as an unconventional project that aims to transform India’s financial landscape. With its state-of-the-art infrastructure, innovative regulatory framework, and a favourable business environment, GIFT City is poised to become India’s premier international financial center.

In this blog, we will explore the key features and potential of GIFT City as India’s upcoming economic and financial hub.

1. Integrated Ecosystem and Infrastructure:

Spanning over 886 acres, GIFT City offers a holistic and self-sustaining environment for businesses and residents. The city comprises a Central Business District (CBD), a Special Economic Zone (SEZ), and a Domestic Tariff Area (DTA). The SEZ provides tax incentives, streamlined regulations, and facilities for international trade, while the DTA encourages domestic businesses to thrive within a well-regulated framework. With 67% of the built-up area dedicated to commercial spaces, GIFT City fosters a vibrant business ecosystem.

2. Single Regulator- International Financial Services Centers (IFSCs):

GIFT City is home to India’s first International Financial Services Centers (IFSCs). These IFSCs operate under the supervision of the International Financial Services Centers Authority (IFSCA), which acts as a single regulator. The IFSCA promotes innovation, growth, and regulation of financial products, services, and institutions within GIFT City. This regulatory framework provides a secure and conducive environment for financial institutions, attracting major players from both domestic and international markets.

3. Strategic Location and Connectivity:

Situated between Gandhinagar and Ahmedabad, GIFT City benefits from its prime location in Gujarat. It offers excellent connectivity through airports, highways, and railways, facilitating easy access for businesses and professionals. The city’s strategic position as a gateway to international markets positions it as an attractive destination for global investors and businesses looking to expand their operations in India.

4. NSE IFSC-SGX Connect:

The NSE IFSC-SGX Connect is an agreement between Singapore Exchange Limited (SGX) and the NSE’s subsidiary in GIFT City. Under this collaboration, the NSE-IFSC order matching and trading platform processes all orders on NIFTY futures made by Singapore Exchange members. The Connect is expected to enhance market liquidity for derivative trading in GIFT City, attract more foreign investors, and contribute to the overall growth and development of the local financial ecosystem.

5. Technology and Innovation:

GIFT City places a strong emphasis on technology and innovation. The city is equipped with state-of-the-art infrastructure, including advanced telecommunications and information technology systems. This enables businesses to leverage cutting-edge technologies such as artificial intelligence, blockchain, and fintech solutions to drive efficiency, productivity, and competitiveness.

6. Regulatory Flexibility:

The regulatory framework of GIFT City offers flexibility and adaptability to meet the evolving needs of businesses. The IFSCA, as the single regulator, adopts a proactive approach to understand industry requirements and implements regulatory changes efficiently. This enables businesses to navigate the regulatory landscape smoothly and encourages experimentation and innovation within a controlled environment.

7. Vibrant Business Community:

GIFT City aims to foster a vibrant and collaborative business community. The city organizes networking events, conferences, and seminars that bring together industry experts, entrepreneurs, and investors. These platforms facilitate knowledge sharing, idea generation, and business collaborations, creating a dynamic ecosystem that drives innovation and growth.

8. Sustainability and Green Initiatives:

GIFT City is committed to sustainability and eco-friendly practices. The city incorporates green building designs, renewable energy sources, waste management systems, and efficient water conservation measures. By prioritizing environmental sustainability, GIFT City not only contributes to a healthier environment but also attracts environmentally conscious businesses and investors.

9. Global Connectivity:

GIFT City is designed to have strong global connectivity. It aims to establish direct connectivity with international financial centers, enabling seamless cross-border transactions and fostering international collaborations. The city’s connectivity initiatives, such as the NSE IFSC-SGX Connect, enhance its position as a global financial hub and facilitate trade and investment opportunities.

10. Miscellaneous Requirements:

The government of India provides strong support to GIFT City, recognizing its potential to drive economic growth and attract foreign investments. Various policy measures, tax incentives, and regulatory reforms are in place to encourage businesses to establish a presence in GIFT City. This support from the government further strengthens the city’s position as a preferred destination for financial and technological services.

Conclusion

GIFT City is a transformative initiative that aims to position India as a global economic and financial powerhouse. With its integrated ecosystem, regulatory support, and strategic location, GIFT City offers businesses a competitive edge and investors an attractive destination for growth. The city’s emphasis on innovation, connectivity, and social infrastructure sets the stage for its future success. As GIFT City continues to evolve and expand, it will play a crucial role in India’s economic development and serve as a beacon of opportunity for both domestic and international stakeholders.

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Family Investment Fund in IFSC GIFT City

July 26, 2023 by InCorp Advisory

Reading Time: 2 minutes

Family investment fund (FIF) in the International Financial Service Centre (IFSC) would refer to self-managed fund established by single family that operate within the regulatory framework and infrastructure provided by an IFSC.

GIFT IFSC is set-up in Gandhinagar, Gujarat to undertake financial services transactions that are currently carried on outside India by overseas financial institutions and overseas branches/ subsidiaries of Indian financial institutions.

GIFT City IFSC opens a great opportunity to High-net-worth individuals (HNIs) who are currently investing in overseas funds to benefit from the favourable financial environment, access to global markets, and potential tax advantages offered by the IFSC.

What Does Single Family Means?
Legal Form Of FIF
Important Considerations:
Permissible Investment By FIF
Brief Roadmap
Tax Benefits
Why Choose InCorp?
FAQs

What does Single Family Means?

Legal form of FIF

Important Considerations:

FIF shall seek registration as an ‘Authorised FME’.
FIF should maintain a minimum corpus of USD 10 million within 3 years from the date of obtaining certificate of registration.
FIF can undertake all activities related to managing FIF as specified by Authority.
FIF can borrow funds or engage in leveraging activities as per their risk management policy.
FIF could be open ended or close ended depending upon the requirement of family
Resident Individuals may invest in FIF upto USD 2,50,000 per year and Resident Entity may invest upto 50% of their net worth.
FIF set up in IFSC will be considered as an Indian resident for tax purposes and an overseas resident/ offshore unit from an exchange control perspective.

Permissible Investment by FIF

Tax Benefits

FIF would be entitled to 100% income tax exemption for ten consecutive years out of fifteen years.
FIF would be entitled to GST exemptions on services received by unit in IFSC or provided to IFSC / SEZ units, Offshore clients.
FIF may be subject to MAT/AMT, as applicable, and the amount thus paid should be available as credit in subsequent years. Also, TCS at 20% would be applicable from October 1, 2023, using LRS (subject to regulation) for investing in FIF.

Brief Roadmap

Application for name reservation for a setup (Company/LLP) of proposed unit under Gift City-IFSC
Identification of suitable office space at GIFT City
Application for incorporation of Company/Limited Liability Partnership entity with MCA
Application to the SEZ Authority
Application to the IFSCA Authority
ODI/LRS Compliance for transferring funds to GIFT City in case of resident individuals

Why Choose InCorp?

Incorp will assist you in the following services:

Assistance in structuring the FIF as per the requirement
Providing advisory services on regulation & taxation to ensure compliance and optimal structuring
Assistance in preparing necessary documentation required for incorporation of FIF in GIFT City
Assistance in setting up FIF and post setup requirements and compliance if any required by FIF

FAQs

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Navigating The Legal Requirements For Setting Up Business In GIFT City IFSC

June 23, 2023 by InCorp Advisory

Reading Time: 3 minutes

Setting up a business in GIFT City IFSC offers entrepreneurs the benefit of operating within a specialized financial hub with attractive incentives. However, it is crucial to have a thorough awareness of the legal framework and adhere to the relevant standards to achieve a successful and compliance setup.

Entrepreneurs can maximise the advantages of GIFT City IFSC and build a solid base for their commercial activities by skilfully navigating the legal system.

A step-by-step overview of the legal requirements and processes involved in establishing a business in GIFT City IFSC.

1. Business Structure and Registration:

Determining the appropriate legal structure for your business, such as a company, limited liability partnership (LLP), or branch office, is the first step. Registering the business entity with the appropriate regulatory authority, such as the Registrar of Companies (RoC) or the Limited Liability Partnership Registrar, is essential to establish its legal existence.

2. Reserve a Name:

Choosing a unique name for your business is crucial for brand identity. You can check the availability of your proposed name through the online name reservation system provided by the Ministry of Corporate Affairs (MCA). It is important to ensure that the proposed name complies with the guidelines specified by the MCA.

3. Obtaining Prior permissions /Approvals:

Identify the specific type of financial services you intend to provide within GIFT City IFSC and seek the necessary approvals from the relevant regulatory bodies governing those services. For example, banking services require prior approval from the Reserve Bank of India (‘RBI’), while insurance-related activities necessitate approval from the Insurance Regulatory and Development Authority of India (IRDAI).

4. Charter Documents:

Drafting the charter documents like MoA and AoA, partnership deed, Trust deed etc is crucial to define the scope of activities, rights, and obligations of the company and its shareholders. Ensure compliance with the Companies Act, 2013, and any other relevant regulations governing your business.

5. Base Minimum Capital Requirement:

Determine the minimum capital requirement based on the type of financial services you intend to provide. It is important to fulfill the capital infusion requirements before commencing operations to comply with the regulations.

6. Obtaining Necessary approvals:

Depending on the specific activities you plan to undertake within GIFT City IFSC, you will need to apply for licenses and permits from regulatory authorities. These licenses may include those related to securities, insurance, banking, fund management, and other financial services.

7. Periodic Compliance with regulatory authorities:

Complying with the regulations and guidelines set forth by regulatory authorities such as the Securities and Exchange Board of India (SEBI), RBI, IRDAI, etc., is crucial for the smooth operation of your business. Establish robust compliance systems and procedures to ensure adherence to legal and regulatory requirements.

8. Accounting, Taxation and Transfer Pricing:

Understanding the taxation framework applicable to businesses operating within GIFT City IFSC, including direct and indirect taxes, is extremely essential. Compliance with transfer pricing regulations is also necessary if your business engages in cross-border transactions with related entities. IFSC entities enjoy where exemption/relaxation from stringent provisions under various tax laws.

9. Employment and Labor Laws:

Familiarize yourself with the employment and labour laws in India, including those related to hiring, contracts, wages, social security, etc. Ensure compliance with applicable labour laws and maintain necessary documentation to safeguard your business interests and protect the rights of your employees.