Regulatory body for GIFT City considering release of guidelines for Variable Capital Companies
**GIFT City Set to Become Global Fund Management Hub with VCC Regulations**
The International Financial Services Centres Authority (IFSCA) is on the brink of finalising the regulatory framework for Variable Capital Companies (VCCs) in GIFT City, Gujarat. This development, coupled with recent reforms allowing third-party fund management, is poised to significantly boost GIFT City's standing as a global fund management hub.
**Current Regulatory Stage**
As of late July 2025, the VCC regulatory framework remains under development and has not yet been officially introduced. The IFSCA is expected to roll out the framework by the end of the current financial year (2024–25).
**Background and Significance**
VCCs are pooled investment vehicles that can hold multiple investment pools, each operating separately in terms of liability and rights. This structure offers greater flexibility in asset and liability isolation compared to traditional fund structures in India. The introduction of a VCC framework has been under discussion for approximately five years, following the establishment of an expert committee to draft the regulations.
**Key Benefits**
The VCC structure is expected to overcome limitations of existing structures, such as restricted access to tax treaties and challenges in asset–liability separation. This will make GIFT City more attractive to global fund managers.
**Related Regulatory Developments**
The IFSCA has recently approved measures allowing third-party fund managers (both foreign and domestic) to manage funds in GIFT IFSC without requiring a physical presence at GIFT City. This move broadens the appeal for international asset managers and enhances the jurisdiction’s competitiveness.
**Next Steps**
The finalization and formal notification of the VCC regulatory framework are anticipated in the coming months, which will clarify operational, compliance, and tax aspects for fund managers considering GIFT City as a base. Once live, this framework is expected to provide a robust, flexible, and internationally competitive environment for pooled investment vehicles in India’s only international financial services center.
**Summary Table**
| Aspect | Current Status | Expected Timeline | Key Features | |----------------------------|-----------------------------------------|------------------------|-------------------------------------------------| | VCC Regulatory Framework | Under development, not yet notified | By end of FY 2024–25 | Multi-pool structure, asset/liability isolation | | Third-Party Fund Managers | Approved, details under amendment | Immediate (with caveats)| No local substance requirement |
**Conclusion**
The regulatory framework for Variable Capital Companies in GIFT City is nearing completion, with an official rollout expected by March 2025. This development, combined with recent reforms allowing third-party fund management, is set to significantly enhance GIFT City’s position as a global fund management hub, subject to the finalization and effectiveness of the new regulations.
Investing in the finance sector of GIFT City, Gujarat could become increasingly attractive for global fund managers as the regulatory framework for Variable Capital Companies (VCCs) nears completion and third-party fund management reforms come into effect. Once the VCC regulatory framework is finalized and officially introduced by the end of the current financial year (2024–25), GIFT City's business environment is expected to provide a robust, flexible, and internationally competitive space for pooled investment vehicles.
