GIFT City and IFSC: what it means for startups and funds

GIFT City (Gujarat International Finance Tec-City) is India's first International Financial Services Centre, or IFSC. An IFSC is a zone inside a country where financial business is done mainly in foreign currency and mostly with people and firms from other countries. Think of it as a small piece of India that is treated like an overseas financial hub such as Singapore or Dubai.

The idea is simple. Many Indian companies and funds raise money, list shares or manage investments abroad because the rules and costs there are easier. The government wanted some of that activity to happen on Indian soil, under Indian law, so jobs and fees stay in the country. GIFT City is the place built for it, near Ahmedabad in Gujarat.

The International Financial Services Centres Authority (IFSCA) is the single regulator for the zone. It was set up under a 2019 law and began work in 2020. Before it existed, a firm in the zone could have faced the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI) and others at once. IFSCA brings banking, capital markets, funds and insurance for the zone under one roof.

This matters for founders because the rulebook inside GIFT City is not the same as the rulebook outside it. A fund registered with IFSCA follows IFSCA's regulations, not SEBI's alternative investment fund rules. A company that wants to use the zone must check which set of rules applies to each activity.

The benefits come in three groups: tax, currency and ease of doing business. Units in the zone have been offered a long income-tax holiday. The Union Budget 2026-27 lengthened the window from ten years out of fifteen to twenty consecutive years out of twenty-five, from 1 April 2026, with business income taxed at a concessional 15% after that. The exact conditions differ by type of unit, so read the law before planning around it.

On currency, business is done in foreign currencies such as the US dollar, and the zone is treated as outside India for foreign-exchange purposes. That makes it simpler for a fund to take money from overseas investors without converting each cheque. On process, the zone offers a single window for approvals and a regulator that is used to dealing with global fund managers.

• Tax: a long income-tax holiday for eligible units, and some relief on capital gains and GST for services to overseas clients.
• Currency: dealings in foreign currency, with funds able to hold dollar accounts inside India.
• Regulation: one regulator, IFSCA, and rules written for global financial firms.
• Infrastructure: two international exchanges, India INX and NSE International Exchange, are based there.

Venture capital and private equity funds are the biggest startup link. A fund manager can set up a fund inside GIFT City, raise money from foreign investors in dollars, and invest in Indian startups. Some global investors prefer this to a fund in Mauritius or Singapore because the structure is regulated in India and the manager can sit closer to the deals.

IFSCA has rules for fund management entities, which are the firms that manage the money, and for different fund types, including venture capital schemes and family investment funds for wealthy families. Several Indian fund managers run a GIFT City vehicle next to their Indian fund. This is why a news story about a fund's close may mention a GIFT City entity next to its main Indian one.

Most startups never open an office in GIFT City. The links are indirect. A startup may take money from a fund that is based there. A startup that has moved its parent company abroad (see reverse flipping) may bring a holding or treasury arm back to the zone. A fintech may test a product in the IFSCA sandbox, a controlled space where a new idea can run under relaxed rules for a limited time.

There is also the question of listing. Under rules notified in January 2024, Indian public companies can list directly on the exchanges in GIFT City (NSE International Exchange and India INX), without first listing abroad through depository receipts. A later-stage startup that wants dollar-linked investors may look at a listing there, though most still choose the main Indian exchanges for their first IPO. Treat this as an option, not a trend: very few startups have used it.

A GIFT City entity is not a shortcut around Indian law. Money that flows between the zone and the rest of India still faces foreign-exchange rules, overseas investment limits and tax tests on where a company is really managed. A unit must usually have real people, space and operations in the zone, not just a letterbox.

The zone is also still young. Rules change often, some business lines have few users, and market depth is thin compared with Singapore. Costs for staff and compliance can outweigh the tax saving for a small fund. Advisers usually suggest it for funds above a certain size, or for firms with a clear overseas investor base.

When a story says a fund, bank or startup is 'setting up in GIFT City', ask three questions. What activity is it: a fund, a bank desk, a treasury, a listing? Who is the money coming from: overseas investors or Indian ones? And is it an extra vehicle next to an Indian structure, or a replacement for one? Most of the time it is an extra vehicle.

Rules, tax rates and thresholds change. This guide describes the position as of October 2026 and is general information, not tax or legal advice. Check the IFSCA website and a qualified professional before you set up anything in the zone.