GIFT City Just Got Cheaper to Enter: What the 2025 IFSCA Fund Rules, 100% NRI Ownership and the 2030 Tax Holiday Actually Open Up

A reader in New Jersey emailed me in December, thrilled. His relationship manager had pitched a GIFT City dollar fund: invest in USD, no Indian capital gains tax, no STT, repatriate freely, and a five-year tax holiday just extended to 2030. He wanted to move USD 200,000 into it. The pitch was accurate on every count except the one that mattered for him. As a US tax resident, that pooled fund is a Passive Foreign Investment Company, and the IRS would tax his gains at 37% with an interest charge layered on top, against zero Indian tax he could credit back. The structure that is genuinely excellent for his cousin in Dubai would have been one of the worst things he could do with his money.

The 30-second answer: In 2025 GIFT City got cheaper and easier for NRIs to enter. The IFSCA (Fund Management) Regulations, 2025, notified 19 February 2025, cut the PMS minimum from USD 150,000 to USD 75,000 (about Rs 65 lakh) and the non-retail fund corpus floor from USD 5 million to USD 3 million. SEBI's circular of 27 June 2024 now allows up to 100% NRI and OCI ownership of IFSC-based FPIs. Budget 2025 extended the IFSC tax holiday to 31 March 2030 and made offshore fund, ETF and retail-scheme relocation tax-neutral from 1 April 2026. The honest catch: for US-resident NRIs, pooled GIFT funds are PFICs, taxed up to 37% with no Indian tax credit. PMS sidesteps it.

This is a news-analysis piece, not an explainer of what GIFT City is. If you do not yet know that GIFT City is India's International Financial Services Centre (IFSC) in Gujarat, a deemed-foreign jurisdiction where NRIs can invest in dollars without it counting against any India limit, start with the GIFT City investing guide and come back. What follows is what specifically changed across 2024 and 2025, why each change matters in rupees and dollars, and the one trap that the marketing decks leave out.

The single most important number changed: PMS now starts at USD 75,000

For years the practical barrier to GIFT City was not regulation, it was the ticket size. The minimum for portfolio management services sat at USD 150,000, roughly Rs 1.3 crore at today's rate. That put it firmly in private-banking territory and quietly excluded the salaried NRI who had built a respectable corpus but was not yet writing crore-plus cheques into a single product.

The 2025 regulations cut that floor in half, to USD 75,000, about Rs 65 lakh. That is the headline most coverage led with, and rightly so, because it is the change that moves the addressable audience from a few thousand ultra-wealthy families to a much larger pool of senior professionals in the Gulf, London and Singapore.

The corpus rules eased in parallel, which matters if you are thinking about anchoring or seeding a fund rather than just buying into one. The minimum corpus for venture capital schemes and restricted (non-retail) schemes dropped from USD 5 million to USD 3 million. Open-ended schemes can now begin investing with as little as USD 1 million, provided they reach the USD 3 million floor within twelve months. A fund management entity, or its associates, can now hold up to 100% of a scheme, subject to conditions, which is what makes a genuinely small, single-family or single-promoter fund viable for the first time. The regulations also let pending capital sit in bank deposits and overnight schemes instead of being forced into the market immediately, and they removed prior IFSCA approval for appointing key managerial personnel, replacing it with simple intimation. None of that last set is glamorous, but it is the plumbing that lowers the cost of running a small fund, and that cost was always passed to the investor.

Put a number on what the lower floor opens up. Take Anil, a UAE-resident NRI with USD 80,000 he wants in a discretionary India-equity strategy run from GIFT City. Before February 2025 he simply could not access PMS there at all; the door opened only at USD 150,000, so he would have had to nearly double his commitment or stay out. After the change his USD 80,000 clears the USD 75,000 floor with room to spare. The change did not make him richer; it made a product that was structurally closed to him merely open. That is the correct way to read this reform. It widened the door, it did not improve the returns inside the room.

SEBI's June 2024 move is the quieter, bigger structural shift

The fee-floor cut got the headlines, but the more consequential change came a few months earlier from SEBI, not IFSCA. On 27 June 2024, SEBI amended the FPI Regulations to allow up to 100% contribution by NRIs, OCIs and resident Indians to the corpus of a Foreign Portfolio Investor domiciled in the IFSC.

To see why that is a structural shift, you have to know what it replaced. Under the old rule, a single NRI or OCI could contribute less than 25% of an FPI's corpus, and all such Permitted Investors together less than 50%. The logic was to keep these vehicles genuinely foreign and stop them being used as a back door for round-tripping Indian money. The practical effect was that an NRI could never be the principal owner of a GIFT City FPI; you were always a minority guest alongside foreign institutional money, which meant these funds had to be built around a foreign anchor that may not have shared your India thesis at all.

The June 2024 amendment removed both the 25% individual cap and the 50% aggregate cap for IFSC-based FPIs. The guardrails moved from ownership limits to disclosure: the fund must collect the PAN of every NRI, OCI and resident-Indian contributor and document each one's economic interest, and applicants declare at registration an intention that at least 50% of the corpus comes from Permitted Investors.

What this unlocks in plain terms: a fund built entirely by NRIs is now possible inside GIFT City. An NRI family office, or a group of NRI friends pooling capital, can own 100% of an IFSC FPI and run it on their own mandate. That was structurally impossible eighteen months ago. For the reader weighing whether GIFT City is "for people like me", this is the change that says yes more clearly than the fee cut does, because it means the products being built can now be designed for NRI money rather than tolerating it at the margin.

Budget 2025: the tax holiday runs to 2030, and relocation goes tax-neutral

Regulation lowers the cost of entry. Tax policy decides whether staying is worth it. Budget 2025, presented on 1 February 2025, did two things that matter to anyone deciding whether to commit for the long term.

First, it extended the sunset date for IFSC tax concessions by five years, to 31 March 2030. Several of the headline GIFT City benefits, the tax holiday for units, the relocation regime, the exemptions for investment banking units, were due to lapse for new entrants. The marketing always emphasised the benefits and skated past the fact that they were time-limited and approaching expiry. Pushing the cut-off to 2030 gives a five-year runway of certainty, which for a long-horizon investor is worth more than another basis point of yield. If you commit in 2026 you now have visibility to the end of the decade rather than to a sunset that was uncomfortably near.

Second, and more technical, Budget 2025 widened the relocation regime and made it tax-neutral. Existing offshore funds, plus, newly, retail schemes and exchange-traded funds (ETFs), can relocate into GIFT City without the move itself triggering a taxable event, with the relevant rules taking effect from 1 April 2026. Normally, shifting assets from a Mauritius or Singapore fund into an Indian jurisdiction would be treated as a transfer and taxed. Tax-neutral relocation means a global manager can pick up an existing offshore vehicle and re-domicile it in GIFT City without handing the tax authority a bill on the way in.

Why should an individual NRI care about a rule aimed at fund managers? Because it is the strongest signal yet about supply. The whole point of removing the relocation tax is to pull funds that currently sit in Mauritius, Singapore and Dublin into GIFT City. More funds relocating means more products, more competition on fees, and more credible managers to choose from. The 2025-26 reforms are best read as a package: SEBI opened ownership, IFSCA lowered the entry cost, and Budget 2025 extended the runway and pulled in supply. The intent is unambiguously to make GIFT City compete directly with Singapore and Mauritius for NRI and global capital, and for the first time the rules are arranged to make that plausible rather than aspirational.

It is worth being honest that some of this is still landing. The relocation rules take effect 1 April 2026, weeks from now as I write in January 2026, so the wave of relocated retail schemes and ETFs is a near-future expectation, not a present-day shelf you can shop from today. Treat the supply story as a strong tailwind that is arriving, not as a catalogue that already exists.

Onboarding got easier too, and that is not a footnote

For an NRI, the friction was never only the money; it was the paperwork and the physical-presence problem. Opening accounts in India has historically meant couriered documents, notarised copies and, too often, a visit. The GIFT City ecosystem has leaned into remote, video-based KYC onboarding, so an NRI in Toronto or Dubai can open an IFSC Banking Unit account and complete fund onboarding without flying to Gujarat.

The mechanics are straightforward. You open a Global Savings Account with an IFSC Banking Unit, the GIFT City arms of banks like ICICI, HDFC, SBI and Axis, in your chosen currency (USD, GBP, EUR, AED and others), or you fund from an existing NRE account in foreign currency. KYC is completed over video. Because GIFT City is a deemed-foreign jurisdiction, money you bring in from abroad does not touch any India-side limit, and crucially for the Indian-resident reader, it does not consume your NRE balances or anyone's repatriation cap, because it never entered the domestic Indian system in the first place. For a resident Indian, by contrast, a GIFT City investment does count against the LRS limit of USD 250,000 per financial year, since for them it is an outward remittance. The distinction matters: an NRI bringing in already-foreign money faces no such cap, which is one of the genuine structural advantages of being an NRI here.

Retail entry points have come down hard as well. Where the historic minimum was USD 150,000, retail mutual fund schemes in GIFT City can now start at around USD 500, and the post-2025 AIF and PMS floors sit at USD 75,000. The combination of remote onboarding and low minimums is what turns GIFT City from a private-banking curiosity into something a salaried NRI can actually open on a weekend.

The PFIC trap: why this whole package can be a mistake for a US NRI

Here is the part the relationship managers leave out, and it is the single most important paragraph in this article if you are American. Everything above is genuinely good news, for NRIs resident in jurisdictions that do not have a hostile rule for foreign pooled funds. The United States has exactly such a rule, and it overrides every benefit GIFT City advertises.

Under US law, a foreign corporation that mostly earns passive income or holds passive assets is a Passive Foreign Investment Company (PFIC). A GIFT City mutual fund, retail scheme or AIF, anything that pools investor money and issues you fund units, is almost certainly a PFIC. The consequences are punitive by design. Under the default Section 1291 regime, your gains and "excess distributions" are taxed at the highest ordinary income rate, currently 37%, not the favourable 15% to 20% long-term capital gains rate, and an interest charge is added as if you had deferred the tax over your whole holding period. You must file Form 8621 every year for each PFIC you hold, a form notorious enough that many US preparers charge per form to complete it. A mark-to-market election can soften the timing but still taxes annual unrealised gains at ordinary rates. Neither route gives you the capital gains rate.

Now layer GIFT City's own selling point on top, and see why it backfires. The pitch is zero Indian tax. For a US person that is not a feature, it is the problem. With an ordinary Indian mutual fund held in your NRO account, India deducts TDS, and you can claim that Indian tax as a foreign tax credit against your US bill via Form 67 and Form 1116, so you are not taxed twice. A GIFT City fund deducts nothing in India, so there is no foreign tax credit to claim, and the full, unmitigated PFIC bill lands on you. The structure that is tax-free for the Dubai investor is tax-maximising for the New York one.

Run the contrast with numbers. Suppose two cousins each invest USD 100,000 in India-focused exposure and realise a USD 40,000 gain over several years. The Dubai cousin uses a GIFT City pooled fund: India taxes the gain at zero, the UAE has no personal capital gains tax, so his tax on the gain is nil. The New York cousin uses the identical GIFT City fund: it is a PFIC, so under Section 1291 his gain is taxed at the top US ordinary rate, roughly 37%, about USD 14,800, plus an interest charge for the deferral, and he claims no foreign tax credit because India took nothing. Had the New York cousin instead held a plain Indian equity mutual fund through his NRO account, India would have taxed the long-term gain at 12.5% above the Rs 1.25 lakh annual exemption, around USD 5,000, and he could credit most of that against his US tax, leaving a far smaller combined bill and no PFIC interest charge or Form 8621 filing. The GIFT City "tax-free" fund left him worse off than both the boring Indian fund and his Dubai cousin. Same product, three completely different outcomes, driven entirely by where the investor pays tax.

There is a clean way for a US NRI to take GIFT City exposure without walking into the PFIC regime, and it is precisely the product the 2025 rules just made cheaper: PMS, structured as a separately managed account. In a PMS account you own the individual underlying securities directly, in your own name, rather than holding units of a pooled fund. Because there is no foreign pooled corporation between you and the assets, the PFIC rules do not bite. You will still owe US tax on the underlying dividends and gains at the normal rates, and you will still report them, but you escape Section 1291, the interest charge and the Form 8621 machinery. GIFT City USD fixed deposits with an IFSC Banking Unit are likewise bank deposits, not pooled funds, so they too sit outside PFIC. This is the rare case where the lower USD 75,000 PMS floor is not just a convenience but the difference between a sensible structure and a tax disaster. For more on the PMS-versus-pooled distinction, see NRI PMS and AIF and the PFIC overlay in NRI mutual fund eligibility.

Edge cases

RNOR is the cleanest window of all, and it is short. If you have just returned to India and qualify as Resident but Not Ordinarily Resident, your foreign income is largely outside the Indian net for the two-or-so years the status lasts. A GIFT City structure used during RNOR can be unusually efficient because neither India nor, if you have exited the US tax system cleanly, a foreign regime is fully taxing it. The window is narrow and the rules are exacting, so read the residency and RNOR rules before you build anything around it, and do not let a sales pitch stretch your assumed RNOR period beyond what the day-count actually supports.

UK and Canada are not the US, but they are not the UAE either. The PFIC problem is uniquely American in its severity, but the UK has its offshore-fund and reporting-fund rules, and Canada has its own foreign-investment-entity and T1135 reporting regime, both of which can tax or report a GIFT City pooled fund less favourably than a domestic one. The takeaway is not that GIFT City is bad for UK and Canadian NRIs, it is that "tax-free in India" is only the first of two questions; the second is what your country of residence does with a foreign fund, and that answer is rarely zero outside the Gulf.

The 100% NRI ownership rule still requires real disclosure. The removal of the 25% and 50% caps is not a removal of scrutiny. Every NRI, OCI and resident contributor must furnish PAN and document their economic interest, and the fund must still satisfy IFSCA and SEBI on source-of-funds and beneficial ownership. If part of the appeal to you is opacity, this is the wrong vehicle; it is built for transparent, declared, compliant capital.

The relocation benefit is a 2026-onward story. Tax-neutral relocation of retail schemes and ETFs takes effect 1 April 2026. If a manager tells you today that their relocated ETF is already live in GIFT City under the new neutral regime, check the dates, because the regime that makes it painless only switches on in April. Several genuinely good products are coming; not all of them are here yet.

The closing read

The honest read is that 2024 and 2025 turned GIFT City from a private-banking enclave into something a serious NRI can realistically use, and the reforms are real, not cosmetic. The PMS floor at USD 75,000, 100% NRI ownership of IFSC FPIs since June 2024, the tax holiday extended to 2030, and tax-neutral relocation from April 2026 together lower the cost of entry, widen the supply of products, and remove the "is this even for me" doubt. For an NRI resident in the UAE or the wider Gulf, where there is no personal capital gains tax to collide with, GIFT City is now one of the cleaner ways to hold dollar-denominated India and global exposure, repatriable, outside every India-side limit, and increasingly cheap to access. For most Gulf-resident NRIs with the ticket size, it deserves a serious look.

For a US-resident NRI, the recommendation flips, and you should not let a good pitch talk you out of it: do not put money into a pooled GIFT City fund. The PFIC regime taxes you at up to 37% with an interest charge and gives you no Indian tax to credit back, so the "tax-free" headline is the trap, not the prize. If you want GIFT City exposure, use PMS or USD fixed deposits, where you own securities or a deposit directly and PFIC does not apply, which is exactly the product the 2025 rules made cheaper to reach. UK and Canada NRIs sit in between: workable, but only after you have checked how your home regime treats a foreign fund, not on the strength of the India-side zero alone. The reforms are good. Whether they are good for you depends entirely on the passport in your other pocket, and that is the question the brochure will never ask you.

Related guides

• How NRIs can invest in GIFT City
• NRI PMS and AIF: what they are and who they suit
• Budget 2026: what changed for NRIs
• NRI portfolio and asset allocation
• NRI residency and RNOR rules
• NRI mutual fund eligibility and the PFIC trap
• Foreign tax credit and Form 67
• All News and analysis
• All Investments guides

This guide is educational and general in nature. It is not individual investment or tax advice. GIFT City rules, IFSCA regulations and the IFSC tax concessions changed across 2024 and 2025 and several provisions, including tax-neutral relocation, take effect only from 1 April 2026, so they may evolve further. PFIC, offshore-fund and foreign-entity treatment depend on your exact country of residence and your own tax position, so confirm your specific situation with a qualified cross-border adviser and a chartered accountant before you invest.