Why GIFT City matters for India’s next phase of global capital flows

India’s first International Financial Services Centre (IFSC) at GIFT City has quietly evolved from a policy experiment into a credible offshore investment gateway. For Non-Resident Indians (NRIs), who have long grappled with fragmented regulations and paperwork-heavy investment routes, GIFT IFSC now offers a globally aligned alternative, one that combines the rigour of international standards with India’s growth opportunity

From Concept to Scale

The past three years have seen GIFT City’s fund management ecosystem expand rapidly. As of June 2025, 177 fund management entities (FMEs) have been registered with the International Financial Services Centres Authority (IFSCA). These FMEs have launched 272 schemes with cumulative commitments of USD 22.1 billion, reflecting a 40% quarterly growth, while cumulative funds raised have reached USD 10.5 billion. The cumulative investments now stand at USD 11.3 billion, of which nearly 85% has been deployed in India, underscoring its “onshore the offshore” intent. Source: IFSCA

A similar surge is visible across other verticals. The IFSC now hosts 186 fund management entities, 10,500 NRI bank accounts with USD 1.1 billion in deposits, and USD 92 billion in monthly trading turnover on its international exchanges. The Alternative Investment Fund (AIF) ecosystem alone commands a targeted corpus exceeding USD 71 billion. Source: IFSCA

A Distinct Proposition for NRIs

Traditional NRI investment routes—such as onshore mutual funds using Non-Resident External (NRE) or Non-Resident Ordinary (NRO) accounts—are primarily designed for retail participation and not for institutional-scale access. These routes typically require extensive documentation and compliance steps, including Know Your Customer (KYC), Permanent Account Number (PAN), Aadhaar (in certain cases), domestic bank account linkages, Tax Residency Certificate (TRC), and Form 10F to comply with Indian tax laws and avoid higher withholding tax. Importantly, foreign bank accounts in the country of tax residence cannot be used for these investments; only NRE/NRO accounts in India are permitted.

GIFT IFSC changes that dynamic. It allows investments in foreign currency, does not mandate an Indian bank account or PAN for eligible investors, and permits seamless repatriation of funds. Under its fund structure, no tax is deducted at source (TDS), and capital gains are exempt at the fund level, aligning with global norms. Investors are, therefore, only required to meet tax obligations in their country of residence, making the framework cleaner and more efficient.

A Progressive Regulatory Framework

Much of this progress stems from IFSCA’s Fund Management Regulations, 2025, which consolidated and simplified rules for fund management entities. The framework enables a single licence for multiple activities, from AIFs and portfolio management to retail schemes, and introduces mechanisms for co-investment through special purpose vehicles, third-party fund management, and accredited investor participation.

In addition, the authority’s collaboration with Sebi has allowed IFSC-based funds with 100% NRI or OCI contributions, giving diaspora investors a direct conduit into Indian securities through globally recognised fund vehicles. Source: IFSCA

What Lies Ahead

Despite its rapid growth, GIFT City remains a work in progress. Market participants are watching how liquidity deepens in IFSC exchanges, how the ecosystem supports new asset classes such as InvITs and REITs, and how regulatory clarity evolves around variable capital company structures, which could further enhance fund flexibility.

Yet the direction is unmistakable. With a robust legal and tax framework, rising institutional participation, and strong regulatory oversight, GIFT City is positioning itself as India’s international financial hub, and for NRIs, as a gateway to participate in India’s growth with global ease.

Accessibility for All

GIFT City has often been perceived as a hub for High Net-Worth Individuals (HNIs) and large institutions. That perception is changing.

While this approach broadens access, the journey is still evolving. Investor awareness about offshore opportunities remains limited, and regulatory clarity continues to shape the ecosystem. The challenge ahead is to deepen engagement and build confidence so that GIFT City becomes a truly democratic gateway for global investing—not just for the privileged few, but for anyone aligned with India’s growth story.

(Source: IFSCA)

(The author is Head – International Business, Tata Asset Management)