GIFT City AIF Setup (2026): FME Registration to Fund Launch

To set up a GIFT City AIF, you first register a Fund Management Entity (FME) with the International Financial Services Centres Authority (IFSCA). You then file the fund’s placement memorandum (PPM) with IFSCA. IFSCA calls a private fund of this kind a “restricted scheme” and files it as a Category I, II or III AIF; the fund opens for subscription as soon as IFSCA takes the PPM on record. The rules are in the IFSCA (Fund Management) Regulations, 2025 (“FM Regulations”), as amended up to 10 September 2026.

The legal framework for a GIFT City AIF

The FM Regulations (notification dated 10 February 2025) came into force on publication in the Official Gazette (Reg. 1(2)) and replaced the 2022 regulations (Reg. 148(1)). IFSCA gives two Gazette dates: 13 February 2025 (consolidated text) and 19 February 2025 (press release). Registrations and pending applications under the 2022 regulations are treated as made under the 2025 Regulations (Reg. 148(3)–(5)). For the wider picture, see the IFSCA regime.

Three amendments matter. Part D on third-party fund management came in on 30 July 2025 in the consolidated text (Regs. 107A–107M). The First Amendment (30 January 2026) changed KMP experience, PPM extensions and the custodian deadline. The Second Amendment (in force 10 September 2026) changed sponsor commitment, NAV timing, pre-first-close money and the annual report deadline. This guide follows the consolidated text.

AIF or restricted scheme: the terminology

The FM Regulations do not use the SEBI label “AIF” for the fund itself. A “restricted scheme” is offered by private placement only to accredited investors, or to investors putting in at least USD 150,000, with no more than 1,000 investors (Reg. 2(1)(ee)). It is filed with IFSCA as a Category I, II or III Alternative Investment Fund (Reg. 30(1)) and is regulated under the FM Regulations, not registered under SEBI’s AIF Regulations. To compare the two regimes, see SEBI AIF or GIFT City fund.

Step 1: register the FME

An FME must be set up in the IFSC as a company, an LLP or a branch of one (Reg. 5(1)). Only an entity already regulated for similar activities in India or abroad may use a branch. A restricted scheme can be launched only by a Registered FME (Non-Retail or Retail). A venture capital scheme, also filed as a Category I AIF, can be launched by any FME, including an Authorised FME (Regs. 18, 19(1)).

A Registered FME (Retail) cannot be an LLP, and needs at least four directors, half of them independent (Reg. 5(4)). Net worth must be maintained at all times, on top of any needed for other activities, and a branch may hold it at parent level (Reg. 8). If it falls short, the FME may not launch schemes or take on new clients until it is restored (circular, 16 Feb 2024). Changing category needs IFSCA’s prior approval (Reg. 13(2)).

Retail track record (Reg. 6(2)(a)). Route (i): the FME, its holding company or their subsidiaries have five years’ experience managing at least USD 200 million for more than 25,000 investors. Route (ii): persons holding at least 25% in control have five years’ fund-management experience for at least 1,000 investors on at least USD 50 million, and the FME has net worth of USD 2 million. IFSCA may set other criteria for new-generation fintech companies.

Managers that do not build their own FME have a separate route, described in launching a GIFT City AIF without your own FME.

Step 2: choose the scheme type

The table sets out the main private schemes. For the differences between Category I, II and III, see Category I, II and III AIFs in GIFT City.

Each scheme is a vehicle of its own, separate from the FME. Since 10 September 2026 a VC scheme may make a follow-on investment in a company past 10 years if it fits the PPM, an excluded investor cannot join the round, and the scheme’s post-issue beneficial interest does not exceed its pre-issue interest (Reg. 23(3), proviso).

Retail schemes (Regs. 42–52) and ETFs (Regs. 61–71) are separate types. Special situation funds are a sub-category of restricted scheme with their own rules (Regs. 53–60). Investor eligibility is covered in who can invest in your GIFT City fund. A single family can run a family investment fund through an Authorised FME; see family investment fund in GIFT City.

Before first close. From 10 September 2026, money received before first close must sit in capital-preserving, liquid instruments disclosed in the PPM. For open-ended schemes this applies until USD 1m is raised (second provisos to Regs. 22(1) and 34(1)).

PPM extensions. A VC or restricted scheme that misses its minimum corpus within 12 months can extend in 6-month steps. It must apply while the PPM is valid and pay 25% of the fresh-scheme filing fee for the first extension and 50% for each later one (Regs. 19(3), 31(3), 35(2)). A circular of 11 September 2026 lets IFSCA extend an expired PPM on a late application, for an extension fee and a late fee.

Senior and junior units. From 10 September 2026 a VC or restricted scheme may issue senior and junior units (Regs. 23(5), 35(6)). Under the circular of 25 September 2026 there is one senior class, and junior holders may bear first loss or accept lower returns. The minimum junior subscription is USD 2 million (USD 1 million for an accredited investor; none for grants). The PPM must show the payout waterfall, and an independent valuer computes NAV per class.

Sponsor contribution in a GIFT City AIF

The Second Amendment rewrote Regs. 28(1) and 40(1) from 10 September 2026.

The 10% ceiling does not apply in two cases:

1. The FME and its investing associate are non-residents with no Indian-resident ultimate beneficial owner (UBO), and no more than one-third of the corpus is invested in one investee company and its associates.
2. New from 10 September 2026: the FME or associate is resident in India or has an Indian-resident UBO, the scheme invests only in IFSC or foreign-jurisdiction assets, and the contribution does not exceed 25% of the corpus.

The contribution must keep pace with investor money, be made within 45 days and be maintained (Regs. 28(2)–(3), 40(2)–(3)). It is waived if two-thirds of investors by value agree, if two-thirds are accredited investors, or for a passive fund of funds that discloses its allocation. Restricted schemes also get a waiver for index schemes and funds of index funds or passive ETFs (Regs. 28(4), 40(4)). No contribution is mandatory for a scheme relocated to the IFSC from abroad (first proviso to Regs. 28(1), 40(1)).

Related-party dealings. Investing in an associate needs prior approval of 75% of investors by value (Regs. 23(2), 35(3)). A restricted scheme needs the same approval to buy or sell securities from associates, other schemes of the FME or its associates, or an investor committed to 50% or more of the corpus (Reg. 35(4)). That investor is excluded from the vote when it is the counterparty. A fund of funds that discloses the underlying schemes and any association in its PPM may not need approval (Reg. 35(4), provisos). A third-party fund manager is deemed an associate (Reg. 107G(2)).

KMP, substance and service providers

Every KMP must be based in the IFSC and hold a relevant postgraduate or professional qualification, or a CFA or FRM. A principal officer with 15 years’ fund-management experience needs only a degree (Reg. 7(5)). From 30 January 2026 the default experience is 5 years in an “eligible institution”, which includes regulated entities in the IFSC, India or abroad and the finance, legal or secretarial departments of any company. A compliance officer needs 3 years if professionally qualified, or 2 years post-qualification with an IFSCA-specified certification (Reg. 7(5)(b)). An FME with AUM of USD 1bn or more, excluding fund of funds, must add a fund-management KMP within 6 months of the year-end (Reg. 7(4)). The deadline for the ICSI certification course moved to 31 December 2026 (circular, 29 Sep 2026).

The FME needs a dedicated, secured IFSC office with staff and systems to match its operations (Reg. 10).

• Custodian. Retail schemes, open-ended restricted schemes and any other scheme with AUM above USD 70m need an independent IFSC custodian, unless local law requires otherwise. Such schemes have 24 months from 30 January 2026 to comply and may use a regulated Indian or foreign custodian until then (Reg. 132, Explanation II; FAQ Q165). A custodian is not mandatory for a fund of funds whose underlying schemes have appointed independent custodians (Reg. 132, proviso).
• Before the first investor signs. The fiduciaries must make sure the scheme has an auditor, an independent valuer and any required custodian, and appoint an IFSCA-registered fund administrator or be satisfied that the FME can do the work itself (Third Schedule, Part B, item (ixa), from 10 September 2026).
• Fiduciaries. The FME appoints directors, designated partners or trustees before filing (Reg. 17(2)). A fiduciary may not also provide fund administration, valuation, audit, lending or financing to the same scheme (circular, 10 Apr 2026).

From FME registration to GIFT City AIF launch: the steps

IFSCA’s “Setting up a Unit in GIFT IFSC” workflow on the SWIT portal (published July 2026) sets out steps 1 to 9 below. It calls the process “indicative” and subject to applicable regulations, so each step applies only where relevant to the applicant. Step 10 comes from the FM Regulations, not the workflow:

1. Agree office space with a GIFT City co-developer (letter of intent) and reserve the company or LLP name with MCA (not needed for a branch).
2. Obtain the co-developer’s provisional letter of allotment and NOC, then incorporate the entity and obtain PAN and TAN (not needed for a branch).
3. Apply on SWIT: one joint application to the Administrator (IFSCA), which grants SEZ unit approval, and to IFSCA as regulator.
4. Fix any SEZ Online deficiencies and appear before the Unit Approval Committee.
5. The Administrator issues the Letter of Approval (LOA), and IFSCA gives in-principle approval where applicable.
6. Complete the post-approval formalities: bond-cum-legal undertaking, IEC and RCMC registration, an IBU foreign-currency account, an SNRR account, ODI capital infusion (the workflow says “when required”) and GST registration, as applicable.
7. Sign the lease and file it on SWIT within 6 months of the LOA.
8. Receive the certificate of registration on SWIT.
9. Complete the state registrations and SEZ ID cards, file the date of commencement, and tell IFSCA when operations start.
10. Appoint fiduciaries and service providers, then file the PPM with the filing fee. A VC or restricted scheme opens for subscription once IFSCA takes the PPM on record (green channel, Regs. 19(2), 31(2)). The Regulations say that, for the Income Tax Act, 1961, this confirmation is construed as the certificate of registration (Explanations to Regs. 19(2), 31(2)). How that applies under the Income-tax Act, 2025 is discussed in GIFT City tax benefits for funds and fund managers.

The Regulations set no deadline for IFSCA to decide an application. The applicant has 30 days to fix deficiencies (Reg. 14).

IFSCA fees for a GIFT City AIF

IFSCA’s fee circular of 2 March 2026 (IFSCA-DTFA/1/2026) sets the current fees. It applies from FY 2026-27 (1 April 2026) (para 16). A corrigendum of 13 March 2026 (IFSCA-DTFA/2/2026) means the earlier circulars are superseded from FY 2026-27, not from issue (para 15.1). The fund rows are in Schedule I, Part 2(A).

The registration fee is due within 15 days of in-principle approval. After the first year, the recurring fee falls due on 1 April and must be paid by 30 April. Late payment attracts simple interest of 0.75% for every month or part of a month (Fee Circular 2026, paras 3.1, 4.2, 4.3 and 8). IFSCA fees are only the regulatory part of the cost. Office, staff, audit, administration, custody, legal and other professional costs come on top.

Ongoing obligations

• Reporting. Quarterly reports in the April 2025 formats (circular of 3 Apr 2025). The annual report goes to IFSCA, and the abridged summary to investors, within 6 months of the year-end. Both were 4 months before 10 September 2026 (Reg. 134).
• NAV. Restricted schemes report NAV monthly if open-ended and half-yearly if close-ended, or yearly with the prior approval of 75% of investors by value (Regs. 36, 39).
• Website. From 1 December 2026 every FME needs a website or webpage (circular of 26 Aug 2026).

Common questions

Is a GIFT City AIF the same as a SEBI AIF? No. It is a restricted scheme under the IFSCA FM Regulations, filed as a Category I, II or III AIF (Reg. 30). It is regulated under those Regulations, not registered under SEBI’s AIF Regulations.

What is an FME in GIFT City? A Fund Management Entity is the IFSC company, LLP or branch that registers with IFSCA and manages schemes (Reg. 5(1)). The categories are Authorised, Registered (Non-Retail) and Registered (Retail).

How much capital do I need to start a GIFT City fund? The FME needs net worth of USD 75,000 (Authorised), USD 500,000 (Non-Retail) or USD 1m (Retail). Each VC or restricted scheme needs a minimum corpus of USD 3m and a sponsor commitment, unless a waiver applies.

How fast can a restricted scheme launch? It opens for subscription as soon as IFSCA confirms it has taken the PPM on record (green channel). The Regulations set no deadline for that confirmation.

Can an Indian manager commit more than 10% to its GIFT fund? Yes, from 10 September 2026, up to 25% of corpus if the scheme invests only in IFSC or foreign-jurisdiction assets (Regs. 28(1), 40(1)).

Sources

1. IFSCA (Fund Management) Regulations, 2025, as amended up to 10 September 2026 (consolidated). IFSCA, 14 Sep 2026. ifsca.gov.in
2. IFSCA (Fund Management) Regulations, 2025, as originally notified (IFSCA/GN/2025/002). IFSCA, 10 Feb 2025. ifsca.gov.in
3. IFSCA (Fund Management) (Amendment) Regulations, 2026 (IFSCA/GN/2026/006). IFSCA, 27 Jan 2026. ifsca.gov.in
4. IFSCA (Fund Management) (Second Amendment) Regulations, 2026 (IFSCA/GN/2026/015). IFSCA, 31 Aug 2026. ifsca.gov.in
5. FAQs on IFSCA (Fund Management) Regulations, 2025. IFSCA, 3 Aug 2026 (updated to 30 Jun 2026). ifsca.gov.in
6. Fee structure circular (IFSCA-DTFA/1/2025), superseded from FY 2026-27. IFSCA, 8 Apr 2025. ifsca.gov.in
7. Fee structure for the entities undertaking or intending to undertake permissible activities in IFSC (IFSCA-DTFA/1/2026). IFSCA, 2 Mar 2026. ifsca.gov.in
8. Workflow for setting up in IFSC on the SWIT portal, v1.0. IFSCA, 7 Jul 2026. ifsca.gov.in
9. Extension of timeline for the certification course. IFSCA, 29 Sep 2026. ifsca.gov.in
10. Governance and oversight of schemes: segregation of the role of fiduciaries. IFSCA, 10 Apr 2026. ifsca.gov.in
11. Requirement for FMEs to maintain a website or webpage. IFSCA, 26 Aug 2026. ifsca.gov.in
12. Revision in reporting formats for FMEs. IFSCA, 3 Apr 2025. ifsca.gov.in
13. Extension of validity of expired PPMs. IFSCA, 11 Sep 2026. ifsca.gov.in
14. Maintenance of net worth by FMEs. IFSCA, 16 Feb 2024. ifsca.gov.in
15. Press release on notification of the FM Regulations, 2025. IFSCA, 19 Feb 2025. ifsca.gov.in
16. Transition to the FM Regulations, 2025. IFSCA, 8 Apr 2025. ifsca.gov.in
17. Corrigendum to fee circular (IFSCA-DTFA/2/2026). IFSCA, 13 March 2026. Official URL not located
18. Framework for differential distribution in Venture Capital Schemes and Restricted Schemes to facilitate blended finance and other fund structures (F. No. IFSCA-DSF0SFHB/1/2025-Capital Markets). IFSCA, 25 Sep 2026. ifsca.gov.in

Related reading

• AIF Registration: SEBI AIF or GIFT City Fund? – compares the two regimes side by side.
• Category I, II and III AIFs in GIFT City: Rules Compared – how each restricted-scheme category is defined and run.
• GIFT City Tax Benefits for Funds and Fund Managers – the tax position that follows registration.
• Launch a GIFT City AIF Without Your Own FME – the third-party fund management route under Part D.
• Who Can Invest in a GIFT City Fund: A Manager’s Guide – investor eligibility and minimums.
• Family Investment Fund in GIFT City: Registration and Rules – the single-family fund route.
• IFSCA regime – overview of the regulator and its rulebook.
• Variable Capital Company: GIFT City vs Singapore, DIFC, ADGM – umbrella vehicles, including the proposed GIFT VCC.
• India–Mauritius DTAA 2026: What It Means for Mauritius Funds – relocating an offshore fund into GIFT City.
• Master-Feeder Structures with a GIFT City Feeder Fund – using a GIFT feeder with an overseas master fund.
• Setting Up a Fund Manager in GIFT City, DIFC or ADGM – where the fund manager itself should sit.

This article is general information and not legal advice. The legal framework and its application change over time; please take advice on your specific circumstances.