Funds in GIFT IFSC — Retail, Restricted and Venture Capital Schemes
Fund schemes in the GIFT IFSC follow IFSCA's fund management regulations, not SEBI's mutual fund rules. This lesson explains the three kinds of scheme, who may invest in each, and why a resident's result in rupees depends on both the market and the exchange rate.
Who runs the schemes, and under which rules
A fund scheme in the IFSC is set up by a fund management entity that is registered with or authorised by the International Financial Services Centres Authority (IFSCA).
The governing rules are the IFSCA (Fund Management) Regulations, 2025, notified on 19 February 2025, which replaced the 2022 regulations. SEBI's mutual fund rules do not apply; SEBI's regulations govern mutual funds and alternative investment funds set up in the domestic market.
Three kinds of scheme
A venture capital scheme is filed as a Category I alternative investment fund. It may have at most 50 investors, with a minimum of USD 250,000 per investor (accredited investors are exempt from the minimum), and it is close-ended.
A restricted scheme, also called a non-retail scheme, is for accredited investors or for those investing at least USD 150,000. It may have up to 1,000 investors.
A retail scheme is open to all, with no cap on the number of investors.
Reading the USD 150,000 figure
The types are sorted by who may invest, and the permitted number of investors falls from no cap to 1,000 to 50. USD 150,000 is therefore not the cost of investing in GIFT City. It is the minimum for a restricted scheme only, and accredited investors may enter without it. The minimum for a particular scheme is stated in its offer document.
What a resident actually holds
Units are in foreign currency, and a resident individual pays for them by remittance under the Liberalised Remittance Scheme (LRS), within that year's limit.
Their value in rupees depends on how the scheme's investments perform and on the exchange rate when the units are valued or sold. Either can go against the investor. Income and gains are taxable in India under the normal rules for residents.
Rules at a glance
Two scheme labels, two answers
Sanjay, 50, a resident in Coimbatore, is not an accredited investor. He is shown two schemes in the GIFT IFSC, one labelled a retail scheme and the other a restricted scheme.
The retail scheme is open to him. The restricted scheme is open to him only if he invests at least USD 150,000. Either way he would remit the money under LRS, hold units in foreign currency, and deal with a scheme governed by IFSCA's regulations, not SEBI's mutual fund rules.
Market and currency together
- A resident buys units for USD 20,000 at ₹80 per dollar: 20,000 × 80 = ₹16,00,000. All prices and rates are assumptions for the example, not forecasts.
- Case A: the units rise 10% to USD 22,000 and the rate falls to ₹76 per dollar. Value: 22,000 × 76 = ₹16,72,000, a gain of ₹72,000, or 72,000 ÷ 16,00,000 = 4.5%.
- Case B: the units fall 10% to USD 18,000 and the rate falls to ₹76 per dollar. Value: 18,000 × 76 = ₹13,68,000, a loss of ₹2,32,000, or 2,32,000 ÷ 16,00,000 = 14.5%.
Result. A stronger rupee cut a 10% dollar gain to 4.5% in rupees in Case A, and deepened a 10% dollar loss to 14.5% in Case B. A weaker rupee would have worked the other way.
Key points
- Schemes in the IFSC follow the IFSCA (Fund Management) Regulations, 2025, which replaced the 2022 regulations; SEBI's mutual fund rules do not apply.
- A venture capital scheme is filed as a Category I alternative investment fund and may have at most 50 investors.
- A restricted (non-retail) scheme is for accredited investors or a minimum of USD 150,000, with up to 1,000 investors; a retail scheme is open to all, with no cap.
- Units are in foreign currency, so a resident's rupee value depends on both market performance and the exchange rate.
Common misunderstandings
- USD 150,000 is not a general minimum for the GIFT IFSC: it is the minimum for a restricted scheme.
- A figure of USD 75,000 quoted in some material is the minimum for portfolio management in the IFSC, not for restricted schemes.
- Holding units in foreign currency is not protection against loss: the market and the exchange rate can both go against the investor.
Questions people ask
Who may set up a fund scheme in the IFSC?
A fund management entity registered with or authorised by IFSCA.
Is a venture capital scheme in the IFSC regulated by SEBI?
No. It is filed as a Category I alternative investment fund under IFSCA's regulations; SEBI's regulations govern funds set up in the domestic market.
How are a resident's gains on these units taxed?
They are taxable in India under the normal rules for residents; the detail depends on the asset and on the law in force for that year.
What this lesson relies on
- IFSCA (Fund Management) Regulations, 2025 (notified 19 February 2025)
- RBI — Liberalised Remittance Scheme (RBI FAQ on LRS)
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.