Gift City IFSC Rules 2026 Update on Specified Funds

The Central Board of Direct Taxes (CBDT) has notified the Income-tax (Second Amendment) Rules, 2026, introducing an important amendment to Rule 157 of the Income-tax Rules, 2026. Effective from 21 July 2026, the amendment revises the definition of a "specified fund", expanding the scope of eligible investment funds operating within GIFT IFSC.

The notification is significant for investment managers, Alternative Investment Funds (AIFs), Fund Management Entities (FMEs), and businesses operating in India's international financial ecosystem. It further aligns the tax framework with the evolving regulatory environment of GIFT IFSC while supporting internationally recognised fund management structures.

How Gift City IFSC Rules 2026 Expand the Definition of Specified Funds

Under the revised gift city ifsc rules 2026, a specified fund now includes Category I and Category II Alternative Investment Funds established in India as a trust, company, limited liability partnership, or body corporate that hold a valid registration certificate.

The amendment also recognises funds regulated under the IFSCA (Fund Management) Regulations, 2022, provided they are located in an International Financial Services Centre. Additionally, funds referred to under Schedule VI [Note 1(g)] of the Income-tax Act are included within the revised definition.

This clarification provides greater certainty for fund managers and investors participating in GIFT IFSC's growing investment ecosystem.

Business Impact for GIFT IFSC Fund Managers

The revised Rule 157 strengthens the regulatory framework supporting fund management activities within GIFT IFSC.

For entities operating under the GIFT IFSC Finance Company Framework, the amendment reinforces regulatory clarity by recognising eligible fund structures under both SEBI and IFSCA regulatory regimes. This creates greater confidence for domestic and international investors while supporting efficient fund administration.

Businesses engaged in Capital Raising GIFT IFSC can also benefit from clearer tax recognition of eligible investment funds, improving confidence among institutional investors and global fund managers.

Supporting International Financial Services India

India continues strengthening GIFT IFSC as a globally competitive financial centre through progressive regulatory reforms.

The revised definition of specified funds complements the broader objectives of International Financial Services India by promoting internationally accepted fund management practices, improving regulatory certainty, and encouraging greater participation from global asset managers.

Professional Investment Advisory in GIFT City remains valuable for businesses evaluating fund structures, tax implications, and regulatory obligations under the evolving legal framework.

Regulatory Clarity Encourages Sustainable Growth

As GIFT IFSC continues expanding across investment management, alternative funds, fintech, banking, and capital markets, regulatory clarity becomes increasingly important.

The amendment to Rule 157 demonstrates the Government's continued focus on modernising India's tax framework while supporting internationally regulated investment vehicles operating within GIFT IFSC.

Businesses operating under GIFT IFSC SPV Regulations or using TCSP GIFT City services should continue reviewing their governance and compliance frameworks to ensure alignment with the latest regulatory developments.

Industry Insights: Rule 157 Amendment & Specified Funds in GIFT IFSC

The following insights are based on the Income-tax (Second Amendment) Rules, 2026 amending Rule 157 relating to the definition of 'specified fund'. They are intended to complement the Gift CFO article.

Industry Insight	Regulatory Observation	Business Significance
Expanded Definition of Specified Funds	Rule 157 now includes eligible Category I and II AIFs regulated by SEBI or IFSCA.	Provides greater tax clarity for eligible investment funds.
Recognition of IFSCA Funds	Funds regulated under the IFSCA (Fund Management) Regulations, 2022 are recognised when located in an IFSC.	Strengthens confidence for fund managers operating in GIFT IFSC.
Alignment with Tax Framework	Specified funds now align more closely with the Income-tax Rules, 2026.	Reduces ambiguity for investors and regulated entities.
Support for Fund Management	The amendment complements India's evolving IFSC fund management ecosystem.	Encourages international asset management activities.
Regulatory Certainty	Clearer eligibility criteria improve consistency in tax interpretation.	Helps businesses plan structures with greater certainty.
Cross-border Investment	The notification supports internationally recognised investment structures.	Enhances GIFT IFSC's attractiveness for global investors.
Compliance Readiness	Businesses should review fund structures against the revised Rule 157 definition.	Supports timely compliance and governance.
International Financial Centre	Continuous regulatory updates reinforce GIFT IFSC's global positioning.	Builds long-term investor confidence and ecosystem growth.

Key Takeaways

• Review existing fund structures under the revised Rule 157 definition.

• Ensure regulatory and tax documentation reflects current requirements.

• Seek professional advice before restructuring or launching investment funds.

• Monitor future CBDT and IFSCA notifications for additional guidance.

How Gift CFO Can Help

Gift CFO provides specialised advisory services for businesses operating within GIFT IFSC, including Investment Advisory in GIFT City, Capital Raising GIFT IFSC, tax advisory, fund structuring, regulatory compliance, corporate governance, and strategic financial consulting. Our experienced professionals help businesses interpret evolving regulations while supporting compliant and sustainable growth.

Conclusion

The amendment to Rule 157 under the Income-tax (Second Amendment) Rules, 2026 marks another important step in strengthening India's international financial ecosystem. By expanding the definition of specified funds, the Government has provided greater regulatory clarity for eligible investment funds operating within GIFT IFSC.

As gift city ifsc rules 2026 continue evolving, businesses, fund managers, and investors should review their structures and compliance frameworks to ensure alignment with the latest regulatory requirements while maximising opportunities available through GIFT IFSC.

DISCLAIMER: This article is published for informational, educational, and analytical purposes only. It does not constitute legal advice, regulatory guidance, trade compliance advice, or a solicitation of any kind.

All information in this article is based on IFSCA Circular No. IFSCA-PMTS/10/2023-Precious Metals/2026/2 dated 15th June 2026, issued under Sections 12 and 13 of the International Financial Services Centres Authority Act, 2019, read with Regulation 78 of the IFSCA (Bullion Market) Regulations, 2025. This circular amends the original Circular dated 10th October 2025 on import of gold or silver by Qualified Jewellers and valid India-UAE CEPA TRQ holders through IIBX, as previously updated on 2nd January 2026.

References to DGFT Notifications 17/2026-27 (dated 16th May 2026) and 19/2026-27 (dated 2nd June 2026) are based on information contained within the IFSCA circular. Readers should independently verify the full text of these DGFT notifications for complete details.

A separate, updated Consolidated Circular incorporating these amendments is being issued by IFSCA. Readers should refer to the official, most current Consolidated Circular available at www.ifsca.gov.in under Legal Framework → Circulars for authoritative and up-to-date compliance requirements.

Eligibility for Qualified Jeweller notification, import authorisation requirements, and applicable policy conditions may vary based on entity type, SEZ status, ITC(HS) classification, and other factors specific to each applicant. Entities are strongly advised to consult qualified legal, customs, trade compliance, and tax professionals before undertaking any bullion import transaction through IIBX.

The publisher is not a law firm, customs broker, or IFSCA-regulated entity. Nothing in this article constitutes legal or regulatory advice