What is specified fund?
In one sentence
A GIFT IFSC Category III fund, retail scheme or ETF meeting the Act’s conditions, including that its units (other than the sponsor’s or manager’s) are held by non-residents.
An everyday analogy
Like a members-only club: the benefits apply only while everyone inside meets the membership rule.
How it flows
A real example
A non-resident in a qualifying GIFT IFSC Category III fund has no Indian tax on payouts or on the gain on transferring units.
Why it matters
Admitting Indian residents beyond the narrow exception removes the status for everyone.
How it differs
A GIFT IFSC fund that admits residents is taxed as a trust instead.
What the law says
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
Show answer
5% of the total units issued, subject to prescribed conditions.
Related pages
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.