Fund Structure Taxation: Inbound, Outbound and Master-Feeder Funds
Follow the money: who invests, which entity may pay Indian tax, and how investors are treated, for each structure.
Does my GIFT IFSC fund qualify as a specified fund?
A specified fund is a GIFT IFSC Category III fund, retail scheme or ETF that meets the Act’s conditions. The key one: all units, apart from the sponsor’s or manager’s, must be held by non-residents, with an allowance only for investors who become resident in a later year, up to 5% of the units and subject to prescribed conditions. GIFT IFSC registration alone does not make a fund a specified fund.
Schedule VI, Note 1(g)(C)
[(C) of which all the units other than the unit held by a sponsor or manager are held by non-residents except,–– (I) where such non-resident becomes resident under section 6(2) or (3) or (4) or (5) or (6) or (7) in any tax year subsequent to that tax year; and (II) the number of units held by such resident unit holder or holders do not exceed 5% of the total units issued and shall fulfil such other conditions as may be prescribed; or]
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
A specified fund’s own rates (section 210)
| Income | Rate |
|---|---|
| Income from securities (for example Indian dividends and interest) | 10% |
| Short-term gains, other than those under section 196 | 30% |
| Short-term gains under section 196 | 20% |
| Long-term gains, other than those under section 198 | 12.5% |
| Long-term gains under section 198, above ₹1,25,000 | 12.5% |
| Other income | Rates in force |
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Meet the expert
CS Prashant Kumar
Company Secretary & Compliance Officer
Global Horizons Capital Advisors (IFSC) Private Limited — an IFSCA-licensed investment banker
Published in The Chartered Accountant (Jun 2025, Jan 2025, Mar 2024) and Chartered Secretary (Aug 2023)
Prashant Kumar is a seasoned Company Secretary and corporate governance strategist with more than 13 years of experience advising large corporates, promoter-led groups and global businesses on compliance, regulatory risk and board governance. In GIFT IFSC, the IFSCA regime is his day job rather than a research topic.