Family Investment Fund
at GIFT City
Within GIFT City, family offices can now establish a new financial entity known as a Family Investment Fund (FIF).
The FIF is designed to pool resources from a single family or entities controlled by that family, which can include various forms such as sole proprietorship firms, partnership firms, LLPs, trusts, companies, or other corporate bodies where a single family or a group of individuals holds at least 90% economic interest.
The standout feature of the FIF vis a vis other conventional routes (LRS/ ODI) is the ability to create a portfolio of various overseas products – FIF can invest in listed and unlisted securities, alternative investment funds, physical assets such as real estate, bullion, art etc.
Individual investors can contribute up to $250,000 to FIFs, subject to a 20% tax collection at source (TCS) as of July 1st. Additionally, qualifying Indian entities, which must be 90% family-owned, can contribute up to 50% of their net worth.
FIFs must accumulate a minimum corpus of $10 million within three years.
Here are the compelling advantages that position GIFT City as an ideal choice for family offices, surpassing traditional offshore destinations:
Progressive Regulation: GIFT City operates under the oversight of the International Financial Services Centres Authority (IFSCA), which ensures a modern and transparent regulatory framework, streamlining business operations and safeguarding investor interests. Unlike traditional regulations, IFSCA allows family offices in GIFT City to make overseas direct investments without the prerequisite of a profitable track record spanning three years.
GIFT City Advantages: For Indian High Net Worth Individuals (HNIs), GIFT City offers unprecedented access to diverse domestic financial services, reducing reliance on international transactions. Its strategic proximity to major Indian cities like Ahmedabad and Mumbai ensures seamless connectivity to global markets, with significantly lower
administrative and operational costs compared to foreign jurisdictions.
Tax Concessions: Operating within a Special Economic Zone (SEZ), GIFT City provides substantial tax benefits & exemptions. Notably, businesses may qualify for a 100% income tax exemption for up to ten consecutive years within a 15-year period, contingent on the nature of investments meeting the requisite ‘business’ criteria. Additionally, exemptions from GST add to the appeal, particularly for asset classes with extended exit horizons such as global PE/VC funds.
However, FIF may be subject to MAT/ AMT as the case may be, and the same so paid should be available as credit in later years. Also, one should be mindful that using LRS for investing in FIF would attract TCS @ 20%
w.e.f. July 1, 2023 – while TCS is not an additional cost as it will be adjusted against the final taxes, however, the same is bound to impact the cash flows.
Family offices establishing an FIF in GIFT City can leverage the expertise of wealth managers and advisors within the city to enhance their investment strategies.
In terms of registration requirements for setting up of FIF in the GIFT City, one needs to apply to the IFSC Authority and Unit Approval Committee, post obtaining a provisional letter of allotment for office space from the developer.
Further, from a substance perspective, FIF needs to have at least one principal officer in GIFT City who shall be responsible for overall activities of the FIF.
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