The growth of family offices in India presents a unique opportunity for wealthy families to contribute to the country's infrastructure development. Family businesses, comprising a significant portion of India's GDP, offer a long-term investment perspective that aligns with the gestation period of infrastructure projects. Leveraging their expertise and networks can lead to well-informed decisions and efficient execution. While there has been a trend of establishing overseas family offices, recent regulatory advisories discourage such structures, leading families to explore alternative options like Family Investment Funds (“FIFs”) in GIFT City. GIFT City's development as an International Financial Services Center offers a streamlined process for FIF setup, providing a powerful tool for diversified global investments. This article explores the role of family offices in development of Indian Infrastructure and highlights the aspect of setting up of FIFs in GIFT City along with the tax benefits, regulatory stability, governance that are the key factors in determining the success of this growing financial hub.

Growth of Family Offices

Families with significant wealth can contribute to India’s infrastructural growth in several ways. In India, family businesses account for 79% of its GDP. Such businesses often have a long-term perspective on their investments, which aligns with the nature of infrastructure projects which have a high gestation period. Many business families have access to expertise in various sectors. Their knowledge and networks can be leveraged to ensure well-informed decisions and efficient execution of infrastructure projects. Moreover, the 10 th Global Family Business Survey by PwC shows that 71% of Indian family businesses show a strong desire to adapt to new-age methods such as digital transformation and data analytics, though this is more likely to come from outside than within the family.

India has witnessed a trend of setting up of overseas family offices due to the benefits available in those jurisdictions. Ultra-high net worth individuals are proactively exploring the family office route to manage their wealth and make investments globally. However, the Reserve Bank of India has recently in a call with authorised dealer (“AD”) banks said the intent behind the relaxation in laws was not to have wealthy individuals set up overseas family offices. It has instructed banks to not facilitate such structures as it is not permitted under current regulations. AD banks are treating this as an informal advisory while further clarification from RBI is awaited.

In the light of such advisory, it stands to reason that families are looking for alternative structures and FIFs in the GIFT City can provide such an opportunity.

GIFT City: The gift that keeps on giving!

In an attempt to "onshore the offshore”, the IFSC (“International Financial Services Center”) regime is establishing itself as a one-stop shop for both domestic and offshore financial services businesses. With numerous pro-IFSC initiatives implemented by regulators and the government, the long-awaited development of the Gujarat International Finance Tec-City (“GIFT City”) as a robust IFSC on par with international financial centres around the world is becoming a reality.

The GIFT City is situated in the Gandhinagar district in Gujarat, India. As of June 2023, it is home to several multi-national banks including HSBC, JP Morgan, and Barclays; various fintech entities, two international stock exchanges as well as India’s first international bullion exchange. The governing authority is the IFSC Authority (“IFSCA”). Perhaps no initiative has been as significant as the recent introduction of the IFSCA (Fund Management) Regulations, 2022 (“FME Regulations”).

FIFs in GIFT City: A Parallel to Family Offices

The FME Regulations define a FIF as a self-managed fund-pooling capital only from a single family. In a departure from the previous fund regime in IFSC, which was based on the SEBI (Alternative Investment Funds) Regulations, 2012, the FME Regulations regulates the fund managers i.e., fund management entity (“FME”) while prescribing operating guidelines for the funds.

A FIF must seek registration as an authorised FME. A FIF can invest in securities, financial products and other permitted asset classes. Some salient details are summarised below:

StructureLLP (most preferable), private company or trust
Investment RestrictionsIndian securities (due to roundtripping concerns)
Minimum CorpusRequired to maintain a minimum corpus of $10 Mn in three years from date of registration
Human Resource RequirementCan be open ended (having no fixed maturity period) or close ended (having a fixed maturity period), depending upon the requirements of the family.
InvestorsShould be members of single family, i.e., lineal descendants of common ancestors (including spouse).
Can also include non-individuals where the ‘single family’ exercises control and hold a minimum of 90% of economic interest, such as sole proprietorship firms, partnership firms, LLPs, trusts, companies or corporate bodies.
Types of SchemesCan be open ended (having no fixed maturity period) or close ended (having a fixed maturity period), depending upon the requirements of the family.
BorrowingAn FIF may borrow or engage in leveraging activities as per its defined risk management policy; they have full access to banks in GIFT City for this

A FIF can set-up any other investment vehicles in the form of companies, LLPs, trusts or any other form as may be specified by the IFSCA, subject to IFSCA’s approval and payment of applicable fees. Such additional vehicles shall be considered as part of the FIF when considering whether regulatory under the FME Regulations are being met.

Procedure for setting up a FIF

The entity must first register as a unit in the GIFT City. While the entity can be a private limited company, LLP or trust, the easiest and most advisable is setting up a LLP. Whichever entity is selected, it must be incorporated in GIFT City. Other incorporation formalities would be creating a bank account (overseas bank account). The entity must procure Special Economic Zone (SEZ) approval. It can then apply for registration as an authorized FME.

Amongst infrastructure requirements, it is important that the entity has adequate office space which is dedicated, secure and accessible only by authorised persons of the FME. Generally, infrastructure requirements are commensurate to the size of the FME’s operations in the IFSC. With a single window clearance for these steps, the process is quite streamlined and will take almost 3 to 4 months in total. Fees payable includes application fees ($2500), registration fees ($5000) and annual fees ($2000).

Investment opportunities

The FIF is a powerful tool for developing a diversified portfolio and availing of global opportunities. Permissible investments through FIFs include listed / unlisted securities, including those listed on any stock exchange in India or offshore; money market instruments; debt instruments, which are either asset-backed or mortgage-backed securities; other investment schemes set up in India and offshore; derivatives including commodity derivatives; units of mutual funds and AIFs in India and foreign jurisdiction as well as investment in LLPs, and physical assets such as real estate, bullion, art, etc. Further, there are no net worth requirements.

Another important flexibility in respect of FIFs it that although they are not permitted to seek investment from individuals or entities other than the members of a ‘single family’, they can share economic interest with their employees and directors, as per their internal policy, in order to reward such individuals and to closely align their interests with those of the FIFs. There is a permissible limit of 20% of a FIF’s profits that can be distributed to such persons.

Exchange Control Considerations

Any financial institution or any branch of such institution operating from the GIFT City will be treated as a person resident outside India. Thus, it is an offshore financial center from an exchange control perspective.

Under the overseas investment (“OI”) regime, Indian entities such as companies, LLPs, partnership firms, as well as individuals can invest in foreign listed and unlisted entities, are subject to applicable restrictions. These will govern investment in the GIFT City too. There are two routes: Overseas Direct Investment (“ODI”) and Overseas Portfolio Investment (“OPI” ).

Under the ODI route, investment can be by way of acquisition of unlisted shares in a foreign entity, or through subscription in a foreign entity or investment in 10% or more of the equity capital of a listed foreign entity or investment with control where investment is less than 10%. On the other hand, the OPI route allows for investment in foreign securities other than those through the ODI Route, with an exclusion of unlisted debt instruments or any security issued by a person resident in India who is not in an IFSC.

In case of a listed company, the investment should not exceed 50% of net worth on the date of last audited balance sheet. The perceived higher limit of 50% of net worth under the OPI route as compared to the Liberalised Remittance Scheme (“LRS”) route is one of the key reasons family offices are considering outbound investment through a GIFT City as opposed to offshore family offices.

However, there is still some ambiguity if transferring funds to a Family Investment Fund (FIF) in GIFT City qualifies as an Overseas Direct Investment (ODI) transaction because the family that owns the money has control over the fund. However, ODI is intended for establishing subsidiaries, joint ventures for business operations, or strategic investments. In contrast, a FIF doesn't engage in genuine financial services business; it merely holds investments on behalf of a single family.

Resident Indians can invest up to USD 250,000 through the LRS route the IFSC. Residents can open a foreign currency account in IFSC. A recent relaxation permits remittances under LRS to be retained beyond a 15-day window although there are still some end-use restrictions.

Tax Considerations

Entities operating within IFSC are bound by the same GST laws as applicable to the domestic entities, except for specific exemptions which provides a ‘nil’ rate of tax on services by an intermediary of financial services located in IFSC to a customer located outside India.

As a SEZ, the GIFT City provides several tax benefits and exemptions. A FIF may enjoy a complete exemption from income tax for ten consecutive years within a fifteen-year period, provided that its investments qualify as a requisite 'business'. This will depend on a number of factors, key among which are frequency of trading and how the FIF has been accounting the income in their books. If such investments are shown as ‘stock-in-trade’ it becomes easier to show gains as business income while if they are shown as assets or investments, the gains made would generally be classified as capital gains. However, this is subject to a deeper tax analysis and specialized tax advice should be sought.


Through the FIF regime, the GIFT City providing Indian families a streamlined and competitive environment for fund management in a dynamically growing global financial hub. It is certainly more cost-efficient to set up a family office by way of FIF in GIFT City as compared to Singapore or Mauritius as it entails a lower cost of administration, set up and daily operations. Moreover, the geographical advantage is unmatched. Investors will also welcome any further tax breaks or tax incentives that the government can provide along the lines that Singapore did to woo family offices.

Regulatory certainty and predictability of governance will play big roles in the growth of GIFT City. Wealthy investors and families of the calibre that the GIFT City seeks to attract will certainly be wary of deploying substantial capital where the legal, regulatory or administrative set-up may be saddled by unexpected surprises. However, if the regulatory body continues to embrace progressiveness and competitiveness, the GIFT City has the potential to grow into a powerful global financial hub in the future.

With FIF proposals pending with IFSCA, it remains to be seen if the fear of a possible flight of capital from India (and consequent pressure on the rupee) will prevent both RBI and IFSCA from taking a final decision. A clear go-ahead from the executive will give much-needed confidence to both the industry and regulators.


The views of the authors in this article are personal and do not constitute legal / professional advice of any firm or organisation.

About the Authors

Ipshita Bhuwania, Senior Associate at Tier-1 Law firm.
Sunidhi Singh, Final Year Law Student at Symbiosis Law School, Noida.

Editorial Team

Managing Editor: Naman Anand
Editors-in-Chief: Abeer Tiwari & Muskaan Singh
Senior Editor: Harshita Tyagi
Associate Editor: Sunidhi Singh
Junior Editor: Ishaan Sharma

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