Family Investment Funds in GIFT City IFSC

A Regulatory Primer under the IFSCA (Fund Management) Regulations, 2025

Note- The FM Regulations, 2025 are a live, evolving framework the IFSCA has, since notification, issued multiple amendments and clarificatory circulars (on matters such as key managerial personnel, placement memorandum validity, and third-party fund management arrangements), and any FIF structuring exercise should be undertaken with reference to the regulations and circulars in force on the date of the transaction, as published on the IFSCA's website.

Introduction

The Gujarat International Finance Tec-City (GIFT City) houses India's first and only International Financial Services Centre (IFSC), regulated by the International Financial Services Centres Authority (IFSCA). Over the last few years, GIFT City has steadily positioned itself as a credible alternative to established family-office jurisdictions such as Singapore, Dubai and London, largely on the strength of a dedicated regulatory product for private wealth the Family Investment Fund (“FIF”). Prominent Indian business families have explored FIF structures in GIFT City, as widely reported in the financial press, and in April 2026, the IFSCA recorded its first registration of a foreign family investment fund, underlining growing international interest in the regime.

This article sets out the current legal position governing FIFs, as it stands under the IFSCA (Fund Management) Regulations, 2025, which replaced the original 2022 framework.

Legislative Background

The FIF framework was first introduced by the IFSCA on April 19, 2022, under the IFSCA (Fund Management) Regulations, 2022. Following a review of the fund management ecosystem in GIFT-IFSC, the IFSCA notified the IFSCA (Fund Management) Regulations, 2025 on February 19, 2025, repealing and replacing the 2022 Regulations. The 2025 Regulations have since been amended further, including through the IFSCA (Fund Management) (Second Amendment) Regulations, 2026 during its 29^th Authority Meeting on July 24, 2026, and are supplemented by a series of circulars and FAQs issued by the IFSCA from time to time to further promote ease of doing business and enhance disclosures. The FIF regime itself, in substance, has been carried forward into the 2025 framework, with the IFSCA continuing to treat a fund management entity (“FME”) set up by a single family to manage its own investments as a distinct, lighter-touch category of registration.

Practitioners should note that the FM Regulations, 2025 are a live, evolving framework the IFSCA has, since notification, issued multiple amendments and clarificatory circulars (on matters such as key managerial personnel, placement memorandum validity, and third-party fund management arrangements), and any FIF structuring exercise should be undertaken with reference to the regulations and circulars in force on the date of the transaction, as published on the IFSCA's website.What is a Family Investment Fund

Under the fund management framework, a Family Investment Fund is, in essence, a self-managed investment vehicle that is permitted to pool money only from a “single family,” and which is registered with the IFSCA as an FME. Unlike other categories of funds in the IFSC which pool capital from multiple, unrelated investors and are subject to more extensive investor-protection safeguards, an FIF is built around the premise that the persons contributing capital and the persons managing that capital belong to the same family unit. This self-managed character is what allows the IFSCA to permit a comparatively lighter compliance framework for FIFs as against other categories of registered FMEs.

Definition of "Single Family"

The concept of “single family” is central to the FIF regime and has evolved since 2022. As originally framed, a single family meant a group of individuals who are lineal descendants of a common ancestor, together with their spouses (including widows and widowers, whether remarried or not) and children (including step-children, adopted children and ex-nuptial children).

By way of a clarificatory circular dated March 1, 2023 (Circular No. F. No. 333/IFSCA/FIF/2022-23), the IFSCA expanded this definition to bring within its scope entities including a sole proprietorship, a partnership firm, a company, a limited liability partnership, a trust, or any other body corporate provided that the relevant individual or group of individuals belonging to a single family exercises control over, and holds “substantial economic interest” in, such entity. “Substantial economic interest” has been clarified to mean not less than ninety per cent (90%) economic interest, whether by way of shareholding or control in a company, share of profits in a partnership or LLP, or beneficial or proportionate interest in a trust. This clarification is significant in practice, as it allows a family to route its FIF contributions through an existing holding company, LLP or family trust, rather than requiring each family member to remit funds individually.

The circular also permits an FIF to accept limited contributions from persons outside the single family such as its employees, directors, the FME, or other service providers where such contributions are made solely to grant an economic interest (for instance, as recognition for services rendered), subject to a cap of twenty per cent (20%) of the FIF's profits, and subject to full disclosure of the associated investment risks to such contributors.

Permissible Legal Structures

An FIF may be established in one of the following forms:

i. a company;

ii. a limited liability partnership (LLP); or

iii. a trust, structured specifically as a contributory trust.

The choice of vehicle has a bearing on governance, succession planning and the manner in which the family's economic interest is held, and is usually decided in consultation with the family's overall wealth-structuring objectives.

Registration, Corpus and Net-Worth Requirements

An entity proposing to set up an FIF must obtain a certificate of registration from the IFSCA as an FME, under the “Authorised FME” category applicable to fund management entities set up by a single family. The registration process, in practice, also involves parallel approvals for establishing a physical presence in the IFSC including identification of office space, a Letter of Approval, approval from the Development Commissioner of the Special Economic Zone in which GIFT-IFSC is located, and execution and registration of a lease deed for office premises.

Notably, the IFSCA has consistently exempted FIFs from the general net-worth requirements that apply to other categories of FMEs, in recognition of the fact that an FIF does not raise money from third-party investors. In place of a net-worth criterion, an FIF is required to build up a minimum corpus of USD 10 million within three years from the date of its registration. An FIF may be structured as either an open-ended or a close-ended scheme, depending on the family's investment horizon and liquidity requirements.

Investment Universe

An FIF is intended to function as a vehicle for diversified, global wealth deployment. Depending on its placement memorandum and internal risk-management policy, an FIF may invest across listed and unlisted securities, and other permitted asset classes, including real estate, bullion and art, both in India and overseas. FIFs are also permitted to make leveraged investments, subject to their risk-management framework, which gives families more flexibility than is typically available under a conventional portfolio-management arrangement.

Funding an FIF: Routes Available to Indian Contributors

Since an FIF is domiciled in the IFSC which, for exchange control purposes, is treated as being outside India remittances into an FIF by resident Indian individuals and entities are governed by India's foreign exchange framework, principally the Liberalised Remittance Scheme (“LRS”) administered by the Reserve Bank of India, and the Foreign Exchange Management (Overseas Investment) Rules, 2022 (“FEMA OI Rules”).

i. Individual family members contributing directly to an FIF may remit funds under the LRS, subject to the standing annual ceiling of USD 250,000 per individual per financial year.

ii. Indian entities including companies, partnership firms and LLPs contributing to an FIF as an Overseas Portfolio Investment are, under Schedule II to the FEMA OI Rules, permitted to invest an amount not exceeding fifty per cent (50%) of the entity's net worth as on the date of its last audited balance sheet. For a partnership firm or LLP, “net worth” for this purpose is computed as the aggregate capital contribution of partners and undistributed profits, net of accumulated losses and unamortised deferred or miscellaneous expenditure, as per the last audited balance sheet.

A related development of practical significance is the Reserve Bank of India’s clarification, by way of A.P. (DIR Series) Circular No. 09 dated June 7, 2024, that unlisted Indian entities may also invest in an IFSC fund as Overseas Portfolio Investment. Prior to this circular, there was operational ambiguity as to whether unlisted Indian holding companies and LLPs, structures commonly used by families to hold their FIF contributions, could route OPI into unlisted investment vehicles set up in an IFSC, since OPI was conventionally understood to be available only in relation to listed foreign securities or comparably regulated overseas funds. The circular substituted paragraph 24(1) of the Foreign Exchange Management (Overseas Investment) Directions, 2022 to provide that “a person resident in India, being an Indian entity or a resident individual, may make investment (including sponsor contribution) in units or any other instrument (by whatever name called) issued by an investment fund or vehicle set up in an IFSC, as OPI”, thereby placing unlisted Indian entities on the same footing as listed companies and resident individuals for this purpose. This is of particular relevance to FIF structuring, as it allows a family’s unlisted holding company or LLP to fund the FIF directly under the OPI route, without the family having to rely solely on individual members’ LRS limits to build up the fund’s corpus.

Remittances by individuals under the LRS also attract Tax Collection at Source (“TCS”) under Section 206C(1G) of the Income-tax Act, 1961. Remittances (other than for specified purposes such as education financed by an education loan) attract TCS at 20%. Pursuant to the Finance Act, 2025, the threshold below which no TCS is collected on LRS remittances was raised, with effect from April 1, 2025, from ₹7 lakh to ₹10 lakh per financial year, a relief that reduces the TCS drag for smaller, incremental contributions into an FIF, though it does not alter the 20% rate applicable once the threshold is crossed.

The TCS framework applicable to LRS remittances has since been restructured under the Union Budget 2026, with effect from April 1, 2026. TCS on remittances for education and medical treatment has been reduced from 5% to 2% on amounts exceeding the ₹10 lakh threshold, and TCS on overseas tour packages has been consolidated into a flat rate of 2% without any exemption threshold. Materially for FIF structuring, however, the rate applicable to capital remittances, including contributions to an FIF, remains unchanged at 20% on the cumulative amount exceeding ₹10 lakh in a financial year. Families relying on the individual LRS route to fund an FIF should accordingly continue to factor the 20% upfront TCS into their capital call timelines, notwithstanding the relief extended to other remittance categories.

Where the fund invests back into India for instance, by acquiring equity in an Indian company, such investments must separately comply with India's Foreign Direct Investment policy, including applicable sectoral caps and pricing guidelines.

Growth of the FIF and Fund Management Ecosystem

The broader fund management ecosystem at GIFT-IFSC, of which the FIF regime forms a part, has grown steadily. As per IFSCA's own published statistics, the GIFT-IFSC fund management space had, as of June 30, 2026, over 235 registered FMEs managing over 400 schemes, with cumulative investor commitments exceeding USD 45 billion. Within this ecosystem, the FIF route has also seen renewed interest from overseas family offices; in April 2026, IFSCA recorded what it described as the first registration of a foreign family investment fund under the FM Regulations, 2025signalling that the regime is beginning to attract international, and not merely Indian-origin, wealth.

Structuring the FIF for Succession Planning

Beyond the immediate objective of pooling and deploying family wealth, an FIF is often used by families as one component of a broader succession-planning architecture. A common structure involves setting up the FIF as a corporate entity (company or LLP), funded and controlled by the single family, with the shares or economic interests in that corporate FIF vehicle in turn being held by a private family trust. This layering allows a family patriarch or matriarch to use the family trust to address questions of inter-generational succession, ring-fencing of assets, and orderly transition of control, while the FIF itself continues to focus on investment management and portfolio deployment. Any such structure needs to be carefully drafted so that the trust deed, the FIF's constitutional documents and its placement memorandum are internally consistent, and that the “single family” and “substantial economic interest” tests under the IFSCA's clarificatory circular continue to be satisfied at each layer of the structure.

Conclusion

The FIF framework remains one of the more distinctive features of the IFSCA's fund management architecture, offering Indian and, increasingly, foreign families a regulated, IFSC-domiciled vehicle through which to consolidate and globally deploy their wealth, while retaining self-management and a comparatively lighter compliance burden than other categories of registered funds. That said, the regime interacts closely with India's exchange control laws, and the applicable regulations, circulars and remittance thresholds have all seen change since the FIF concept was first introduced in 2022. Families considering an FIF structure, and those already operating one, would be well advised to periodically review their structure against the regulations and circulars currently in force, and to take specific advice before remitting funds or executing the constitutional documents of the proposed vehicle.

References

1. International Financial Services Centres Authority (Fund Management) Regulations, 2025, notified February 19, 2025 (as subsequently amended, including by the IFSCA (Fund Management) (Amendment) Regulations, 2026), see in particular Regulation 2 (definition of “family investment fund”) and Regulation 4 (Authorised FME category for single-family structures), ifsca.gov.in.

2. International Financial Services Centres Authority (Fund Management) Regulations, 2022 (since repealed and replaced) ifsca.gov.in.

3. IFSCA Circular F. No. 333/IFSCA/FIF/2022-23 dated March 1, 2023, “Clarifications in relation to Family Investment Funds” ifsca.gov.in.

4. Foreign Exchange Management (Overseas Investment) Rules, 2022, and Foreign Exchange Management (Overseas Investment) Directions, 2022, Reserve Bank of India.

5. Master Direction on Liberalised Remittance Scheme, Reserve Bank of India.

6. Finance Act, 2025 (amendment to Section 206C(1G), Income-tax Act, 1961, relating to Tax Collection at Source on remittances under the Liberalised Remittance Scheme), as further restructured by the Union Budget 2026, effective April 1, 2026.

7. IFSCA, Statistics for Fund Management Activities in GIFT-IFSC as on June 30, 2026, ifsca.gov.in; see also “GIFT-IFSC based funds’ commitment crosses $45 billion, shows data”, Business Standard, September 3, 2026, business-standard.com.

8. “IFSCA clears first foreign family investment fund registration in Gift City”, Business Standard, April 20, 2026, business-standard.com.

9. “Murthy, Premji family office to set up family investment fund at GIFT City”, Business Standard, September 2023, business-standard.com (cited as an illustration of reported family-office interest in the FIF regime; individual client mandates have not been independently verified by the Firm).

10. Reserve Bank of India, A.P. (DIR Series) Circular No. 09 dated June 7, 2024, substituting paragraph 24(1) (and paragraph 1(ix)(e)) of the Foreign Exchange Management (Overseas Investment) Directions, 2022, rbi.org.in.

Disclaimer: This article is intended for general informational purposes only and does not constitute legal, tax or investment advice. Readers are advised to verify the regulations, circulars and thresholds referred to herein against the current text published on the IFSCA's official website (ifsca.gov.in) and to obtain specific advice before acting on any of the above.

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