Gift City offers tax heavens, access to foreign funds and thereby diversification of portfolio and streamlined regulations making the whole investment process smooth. All this makes Gift City a game-changer in unlocking global investment opportunities.

PMS Bazaar conducted its second edition of the Dubai Alternative Investment Summit (DAIS) on February 17, 2024. As part of this event, the company invited various industry experts to share their insights on the Indian alternative industry. One such expert, Vijay Morarka, Senior Manager at Deloitte Haskins & Sells, presented the benefits of setting up funds within GIFT City (India's International Financial Services Centre). This included tax benefits, streamlined regulations and the ability to attract foreign investors. His topic on the event day was: Exploring tax and regulatory aspects for investing in GIFT IFSC 

Vijay Morarka from Deloitte Haskins & Sells presented comprehensive detail regarding tax and regulatory frameworks for funds established within the International Financial Services Centre (IFSC) and also emphasised the benefits for investors investing via GIFT IFSC.

About Gift City

Starting with the basics, Morarka briefed about the background of GIFT IFSC and outlined its objective - to attract foreign investors to set up funds or businesses (in India’s IFSC). Already a success, he pointed out that over 100 funds with more than $20 billion committed as of September 2023. He further highlighted diverse opportunities available across various segments in the financial services industry including banking, asset management, insurance and capital markets.

Moving on to regulations, Morarka presented the transformative 2022 fund management regulations that streamlined operations. This shift towards regulating entire fund management entities instead of individual funds allows for flexibility in managing multiple funds under a single registration. Notably, a risk-based approach tailors regulations to the type of fund, ensuring appropriate oversight. That is, higher regulatory oversight is applicable for fund management entities managing retail funds than those managing non-retail funds or venture capital funds.

Benefits for all: AMCs and investors

For those interested in setting up funds within GIFT, Morarka emphasised the mandatory requirement of a fund management entity. This entity, established by a sub-entity in India or abroad, allows for launching multiple funds and directly managing portfolios for foreign investors. He also laid out the applicable conditions for funds set up in the IFSC. He also specified that permissible investment instruments have the flexibility to invest globally but there are specific restrictions for resident Indian investors to prevent round-tripping.

Delving deeper, Morarka explained the structures of various fund types, including Category 3 AIFs investing primarily in listed Indian equities, feeder funds, stressed asset funds, and Category II AIFs. Each structure offers unique tax benefits, such as exemptions from capital gains tax and lower rates on dividends and interest income.

Summarising the advantages, Morarka listed tax benefits for funds and fund management entities. These include exemptions from various taxes, leading to significant cost reductions. Additionally, fund management entities enjoy a 10-year tax holiday, and investors benefit from lower operating costs, significant tax savings, and the ability to relocate funds from other jurisdictions until March 2025 with complete tax exemption. He also highlighted the tax benefits offered by IFSC for foreign investors. Here, he explained the convenience for foreign investors to directly trade securities on IFSC exchanges without triggering Indian tax implications and exemption from capital gains tax for certain transactions.

Briefly discussing portfolio management services in the IFSC, Morarka concluded his presentation by outlining the process for setting up a fund and a fund management entity within GIFT City.

Watch the entire presentation for more insights on investing in Gift City:

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