For decades, the structure of cross-border investment into India was built outside the country. Global fund managers investing in Indian equities typically operated through Singapore or Mauritius. Venture capital funds backing Indian startups were often domiciled in offshore jurisdictions. Non-resident Indians managing family wealth frequently relied on structures in Dubai or the Channel Islands.

These arrangements emerged because India’s regulatory framework historically made cross-border investing through domestic structures complicated. Taxation policies were less competitive, compliance requirements were fragmented across multiple regulators, and operational efficiency was often lower compared to offshore financial hubs.

That landscape is now changing.

At the centre of this shift is GIFT City — Gujarat International Finance Tec-City — home to India’s first International Financial Services Centre (IFSC). What began as an ambitious financial district is gradually evolving into India’s gateway for global capital.

Understanding the GIFT City Model

GIFT City operates under a unique framework.

Although located within India, entities operating inside the IFSC are treated as non-resident units for regulatory purposes and conduct transactions primarily in foreign currencies. Instead of being regulated separately by multiple domestic authorities, financial institutions operating in GIFT City fall under the oversight of a single unified regulator — the International Financial Services Centres Authority (IFSCA).

This structure creates a financial ecosystem that combines India’s legal jurisdiction with the operational flexibility typically associated with offshore financial centres.

The growth of this ecosystem has been rapid.

Within just a few years, the number of financial entities operating in the IFSC has increased dramatically. Banks, fund management companies, insurance providers, capital market intermediaries, and fintech firms have all established a presence in the district.

Thousands of professionals now work within the GIFT City financial ecosystem, and the scale is expected to expand significantly as more global institutions establish operations there.

Financial activity within the IFSC has also grown rapidly. Trading volumes on international exchanges operating in the district have surged, while the number of investment funds domiciled in the centre continues to rise.

The Policy Catalyst

A major turning point came with the policy measures announced in the Union Budget for 2026–27.

One of the most significant changes was the extension of the tax holiday for IFSC units. Previously, financial institutions operating in GIFT City were eligible for a ten-year tax exemption within a fifteen-year window. The new policy significantly expands this benefit by allowing a twenty-year tax holiday within a twenty-five-year window, followed by a competitive tax rate thereafter.

This change materially alters the long-term economics of operating financial services businesses within the IFSC.

The broader tax architecture further enhances the attractiveness of the jurisdiction. Transactions conducted through IFSC exchanges are exempt from several domestic market taxes. Management fees earned from offshore investors are not subject to certain indirect taxes. Capital gains treatment for non-resident investors operating through IFSC structures is also highly competitive.

Perhaps the most significant development is the introduction of tax-neutral fund relocation provisions.

Under the new framework, investment funds currently domiciled in offshore jurisdictions can relocate to GIFT City without triggering capital gains tax liabilities. Historically, such relocations were discouraged because transferring assets from one jurisdiction to another created significant tax obligations. Removing this barrier dramatically improves the feasibility of moving fund structures onshore.

Capital Is Already Moving

The impact of these policy changes is already becoming visible.

Investment funds, wealth managers, and global financial institutions are increasingly evaluating GIFT City as an alternative to traditional offshore structures. A growing number of portfolio management services, alternative investment funds, and global investment vehicles are now being launched directly from the IFSC.

Non-resident investors have been particularly active in this transition.

NRIs across the United States, Europe, and the Middle East are beginning to restructure their investment holdings through GIFT City-based vehicles. For many investors, this allows them to maintain exposure to Indian markets while benefiting from a regulatory and tax framework comparable to international financial centres.

The product ecosystem within GIFT City has also expanded rapidly.

A wide range of investment vehicles are now available through the IFSC, including mutual funds, alternative investment funds, portfolio management services, private credit strategies, venture capital funds, and global feeder funds. The increasing diversity of products makes the jurisdiction more attractive to both institutional and high-net-worth investors.

At the same time, regulatory changes have reduced entry barriers for investors. Minimum investment thresholds for certain investment vehicles have been lowered, allowing a broader segment of global investors to participate.

Why the Onshoring Trend Is Structural

The migration of investment structures toward GIFT City is not simply a short-term response to tax incentives. Several structural forces are reinforcing this trend.

Rising Global Compliance Costs

Maintaining complex offshore structures has become increasingly expensive. Global tax transparency initiatives, stricter reporting requirements, and higher substance requirements across jurisdictions have increased the compliance burden for funds domiciled in traditional offshore locations.

As the cost of maintaining multi-jurisdictional structures rises, operating through a single regulated jurisdiction becomes more attractive.

A Maturing Product Ecosystem

In its early years, GIFT City lacked the breadth of financial products required to serve sophisticated global investors. That gap has gradually narrowed.

Today, the ecosystem includes a wide range of investment vehicles spanning equity strategies, fixed income, alternative assets, and global investments. As the number of fund managers and financial institutions operating within the IFSC grows, the depth of the ecosystem continues to improve.

Clear Policy Direction

Government policy toward GIFT City has been consistent and supportive.

Regulatory simplification, tax incentives, and infrastructure investments all indicate that the development of the IFSC is being treated as a long-term national financial strategy. The objective is not merely to create another financial district, but to bring back financial services activity that historically operated outside India.

The Expanding Indian Diaspora

India’s global diaspora continues to grow, with millions of NRIs living and working across major international financial centres.

Historically, many of these investors accessed Indian markets through informal channels or offshore structures. GIFT City provides a regulated platform through which diaspora capital can be deployed into Indian assets while maintaining international compliance standards.

Recent regulatory changes also allow NRIs and overseas citizens of India to hold larger stakes in funds seeking foreign portfolio investor registration. This further strengthens the role of GIFT City as a gateway for global Indian capital.

Implications for Wealth Management

For high-net-worth investors, GIFT City represents more than a regulatory structure — it is a new framework for global portfolio allocation.

Through the IFSC, investors can access international equities, bonds, exchange-traded funds, and derivatives while operating within an India-regulated financial ecosystem. Investments can be made in multiple currencies through international exchanges operating within the district.

Importantly, these structures allow global diversification without necessarily relying on traditional offshore jurisdictions.

For families managing cross-border wealth, the IFSC also provides an efficient structure for long-term portfolio planning and multi-generational wealth management.

A Strategic Financial Hub in the Making

GIFT City is not attempting to replace Mumbai as India’s domestic financial capital.

Instead, it aims to position itself as the global gateway through which international capital interacts with India’s financial markets. In many ways, the district is competing directly with established offshore hubs that historically served as intermediaries for investment flows into India.

The combination of tax incentives, regulatory simplification, and expanding financial infrastructure is gradually shifting that balance.

As more global funds relocate structures and new investment vehicles are launched within the IFSC, the centre of gravity for India-related offshore finance could begin to move closer to home.

For a country with one of the world’s fastest-growing capital markets and one of the largest global diasporas, the opportunity to bring offshore financial activity onshore is significant.

And with the regulatory and tax framework now in place, that transition may only be beginning.

Disclaimer:
This blog is for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any financial instrument. Views expressed are based on publicly available information and market understanding at the time of writing and are subject to change. Readers should consult their financial advisor before making any investment decisions. Investments in markets are subject to risk.