Family Investment Funds (FIFs) in the GIFT City by IFSCA Official offer a unique vehicle for families to manage and grow their wealth. These funds are specifically designed for pooling money from a single family, defined as lineal descendants of a common ancestor, including their spouses and children.
Eligibility Conditions
FIFs can be structured as a Company, Trust (Contributory Trust only), Limited Liability Partnership, or any other form permitted by the Authority. Specific conditions for trusts ensure identifiable beneficiaries, determinable shares, and transparency in contributions. Importantly, FIFs are exempt from the net worth and legal form requirements applicable to other Fund Management Entities (FMEs).
Minimum Corpus
They must maintain a minimum corpus of USD 10 million within three years of registration and can be either open-ended or close-ended.
Permissible Activities and Investments
FIFs are permitted to engage in a wide range of investment activities:
Securities: Unlisted entities, listed/traded securities on IFSC, Indian, or foreign exchanges.
Money Market Instruments and Debt Securities
Securitized Debt Instruments: Asset-backed or mortgage-backed securities.
Other Investment Schemes: Set up in IFSC, India, and foreign jurisdictions.
Derivatives: Including commodity derivatives.
Units of Mutual Funds and Alternative Investment Funds: In India and abroad.
Limited Liability Partnerships
Physical Assets: Real estate, bullion, art, etc.
Other Securities or Financial Products/Assets: As specified by the Authority.
Key Features and Benefits
FIFs in GIFT City enjoy significant tax benefits, including a tax holiday on business income for up to 10 years and exemptions from Minimum Alternate Tax (MAT) for companies opting for a concessional tax regime. Dividends paid to non-residents are taxed at 10%, contributing to a favorable investment climate. Borrowing and leveraging activities are permitted based on the fund’s risk management policy, allowing flexible structuring to meet family needs.
Regulatory Fees
Application Fees $2500
Registration Fees: $ 15000
Annual Fees $2000 From the Year end in which registration Granted.
Physical Presence in GIFT City
Setting up an FIF in GIFT City mandates establishing a physical office. This involves securing space, obtaining a provisional letter of allotment, and applying for unit approval from the SEZ authority. The robust regulatory framework in GIFT City ensures compliance and operational efficiency, making it an attractive destination for family offices.
Comparative Advantage: GIFT City vs. Other Financial Hubs
GIFT City offers a cost-effective alternative to other financial centers like Dubai and Singapore. Its developed infrastructure, business-friendly environment, and skilled human capital make it a compelling choice for setting up family offices. Compared to these hubs, GIFT IFSC provides a unique combination of regulatory and tax advantages.
Regulatory Edge
Under the new Overseas Investment (OI) Rules, 2022, contributions by Indian residents into FIFs in IFSCs are treated as Overseas Portfolio Investment (OPI), offering significant regulatory benefits. This facilitates smooth inbound and outbound investment flows, enhancing the strategic advantages of setting up an FIF in GIFT City.
The Future of FIFs in GIFT City
With its regulatory and infrastructural strengths, GIFT City is poised to become a leading hub for Family Investment Funds. High Net Worth Individuals (HNIs) seeking to strategically manage and grow their wealth will find establishing an FIF in GIFT City a compelling and lucrative opportunity.
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Disclaimer: This post is for informational purposes only and does not constitute professional advice. While efforts are made to ensure accuracy, we do not guarantee the completeness or reliability of the information provided. Any reliance is at your own risk.Consult professionals for specific advice.
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