Global Investment Funds Accelerate Migration to GIFT City as India's International Financial Centre Gains Momentum

What Happened

Global investment funds and asset managers are demonstrating accelerated interest in establishing bases within GIFT City, located in Ahmedabad, Gujarat. The International Financial Centre has become an attractive destination for foreign institutional investors, hedge funds, private equity firms, and asset management companies seeking to operate in India and across Asia-Pacific markets.

This migration is occurring against the backdrop of India's deliberate policy framework aimed at positioning GIFT City as a competitive alternative to established offshore financial centres such as Singapore, Dubai, and Hong Kong. The Centre has progressively enhanced its infrastructure, regulatory clarity, and tax regime to compete for global capital flows. Recent months have seen a notable uptick in fund registrations and operational licences granted to foreign entities, signalling sustained momentum in the sector.

The development aligns with the Modi government's broader vision of establishing India as a global financial services hub, particularly given Gujarat's strategic importance as the Prime Minister's home state. State-level support, combined with central government backing, has created an enabling ecosystem for financial services businesses.

Why It Matters

The concentration of global investment capital in GIFT City carries several strategic implications for India's financial services landscape and tax architecture. First, it demonstrates that India's regulatory and tax framework—particularly the concessional regime available to international financial centre entities—has achieved sufficient credibility to attract Tier-1 global investors previously concentrated in traditional offshore jurisdictions.

Second, the movement reflects India's evolving role in global capital markets. As Asian economies command greater attention from international portfolios, and given geopolitical considerations affecting traditional hubs, GIFT City presents a legitimate India-based alternative with emerging market access and regulatory certainty.

Third, from a direct tax perspective, the preferential regime available under GIFT City—including lower corporate tax rates (currently 9.5% for certain entities), exemptions on specific income categories, and tax holidays for certain activities—demonstrates how targeted fiscal incentives can catalyse economic activity. The Special Economic Zone (SEZ) and International Financial Services Centre (IFSC) framework creates a differentiated tax treatment versus mainland India, making the proposition commercially compelling.

For India's broader financial services ambitions, this momentum validates the infrastructure investments, regulatory modernisation, and institutional development undertaken over the past decade. However, it also raises questions about revenue opportunity costs and the sustainability of preferential regimes as global tax harmonisation efforts accelerate.

Practical Impact

For finance professionals and compliance teams, the GIFT City expansion has direct operational implications. Fund managers considering India exposure increasingly face a choice between mainland operations (subject to full Indian tax and regulatory regime) versus GIFT City positioning. This requires updated transfer pricing documentation, restructured fund architecture, and revised domicile considerations.

CFOs and tax heads of multinational asset managers must evaluate whether routing Asia-Pacific or India-focused investments through GIFT City entities optimises the effective tax rate and operational efficiency versus traditional structures. Due diligence on regulatory compliance, FEMA considerations, and withholding tax obligations becomes essential.

For Indian financial services firms, the influx of global capital creates both opportunities and competitive pressure. Partnerships, joint ventures, and service delivery arrangements with incoming funds are multiplying. Indian firms must ensure tax-efficient structuring of such arrangements and clarity on GST implications for cross-border services.

Regulatory and compliance professionals should anticipate increased scrutiny around substance requirements—establishing genuine business operations in GIFT City versus merely shifting domicile for tax benefit. The Ministry of Finance and CBDT will likely monitor transactions closely to ensure substance-over-form principles are observed.

Taxpayers must remain alert to ongoing policy evolution; preferential GIFT City regimes may face modification as India's tax base matures and international tax standards (including BEPS and global minimum tax initiatives) evolve. Regular advisory updates and scenario planning around regime sustainability are prudent.

Key Takeaways

• →Global asset managers are increasingly establishing GIFT City operations to access India's emerging market growth and preferential tax regimes (9.5% corporate tax for qualifying entities), creating structuring opportunities and risks for multinational fund managers
• →Finance teams must evaluate whether routing India and Asia-Pacific investments through GIFT City entities versus mainland structures optimises tax position, requiring updated transfer pricing analysis and FEMA compliance assessment
• →The migration reflects India's credibility as a global financial hub but exposes businesses to future policy changes; substance-over-form requirements and alignment with international tax standards (BEPS, Pillar 2) should be monitored closely
• →CFOs and tax directors should review existing fund structures and partnership arrangements with foreign entities to identify GIFT City relocation opportunities while maintaining compliance with regulatory and withholding tax obligations
• →Compliance teams must prepare for intensified CBDT scrutiny around genuine business substance in GIFT City operations; preferential regimes may face modification as India's tax architecture harmonises with global standards

Disclaimer: This update is for general information only and does not constitute legal, tax or professional advice. Regulatory positions may change. Please consult APRA & Associates LLP for advice specific to your business. Contact us.