Singapore VCC insights

GIFT City vs Singapore for an Indian Family Office: IFSC Tax Holiday Against 13O and 13U

By VCC Editorial Team · Published 15 October 2026 · Updated 16 October 2026

Short answer: For an Indian resident family, GIFT City is often the more practical choice: India’s restriction on individuals investing in financial services entities does not apply there, and IFSC units can claim a 20-of-25-year tax deduction. Singapore offers deeper global banking and a route for principals to relocate, but needs S$20 million or more and Singapore-based staff.

This article is general information only and is not legal, tax or investment advice. For matters needing legal advice, we work with a panel of experienced Singapore law firms.

For an Indian promoter family, GIFT City vs Singapore is a choice between two legal systems, not just two tax rates. GIFT City is the IFSC in Gandhinagar, Gujarat. It sits inside India’s tax net but is treated as overseas for exchange control. This guide sets the IFSC incentives against Singapore’s 13O and 13U schemes for a family whose members are resident in India, using only official sources from the Reserve Bank of India (RBI), the International Financial Services Centres Authority (IFSCA), the Indian Income Tax Department, the Monetary Authority of Singapore (MAS) and the Inland Revenue Authority of Singapore (IRAS), all checked on 15 October 2026.

Can an Indian resident family move capital to either hub?

Yes, but family members acting as individuals face the same US$250,000 annual ceiling for both destinations, because Indian exchange control treats an IFSC entity as a foreign entity.

The RBI’s Master Direction on the Liberalised Remittance Scheme (updated 6 September 2024) lets authorised dealers allow resident individuals to remit up to US$250,000 per financial year (April to March) for permitted current or capital account transactions. The scheme is not available to corporates, partnership firms, Hindu undivided families (HUFs) or trusts. Remittances can be combined across family members, but for capital account transactions such as investments only where the members are co-owners. The same Direction expressly allows LRS remittances to IFSCs.

The bigger difference lies in the overseas investment rules. The RBI’s Master Direction on Overseas Investment defines a “foreign entity” to include an entity in an IFSC in India. It states that the restriction on resident individuals making overseas direct investment (ODI) only in operating entities, and never in a foreign entity engaged in financial services activity, “shall not apply to an investment made in IFSC”. Banking and insurance are excluded. For an Indian company, ODI into a financial services entity normally requires net profits in each of the preceding three financial years, but the Direction lets a company that does not meet this test make such ODI in an IFSC.

In practice, family members can hold an IFSC fund manager or family vehicle directly more easily than a Singapore investment holding company. Singapore structures are usually funded through an operating group company or through family members already living outside India.

What is a family investment fund in GIFT City?

A family investment fund is an IFSC fund that pools money from a single family only. It is managed by a fund management entity (FME) that the family itself sets up and registers with IFSCA in the lightest of three registration categories.

The IFSCA (Fund Management) Regulations, 2025 (as amended up to 10 September 2026) define a family investment fund as one “pooling money only from a single family under one or more investment vehicles”. “Single family” means the lineal descendants of a common ancestor, together with their spouses and children (including stepchildren and adopted children). It also covers family-controlled entities such as trusts and companies. Regulation 3(4)(a)(ii) places an FME set up by a single family to manage its family investment fund in the “Authorised FME” category.

The substance rules are real. Every FME must designate a principal officer who is based in the IFSC and meets the qualification and experience standards in regulation 7(5). Proposals on portfolio composition must be initiated by a person based in the FME’s IFSC office (regulation 7(7)). IFSCA’s fund management brochure (December 2025) lists a minimum net worth of US$75,000 for an Authorised FME. Confirm the current minimum corpus for a family investment fund with IFSCA directly. The 2025 Regulations replaced the 2022 Regulations on 19 February 2025, and the older figure should not be assumed.

What tax holiday does GIFT City offer after the Income-tax Act, 2025?

A unit of an IFSC can deduct 100% of income from its approved business activities for 20 consecutive tax years, chosen from the first 25 tax years.

Section 147 of the Income-tax Act, 2025, as amended by Act No. 4 of 2026 with effect from 1 April 2026, allows the deduction for “twenty consecutive tax years out of twenty-five years beginning from the relevant tax year, at the option of an assessee”. The relevant tax year is the year in which the IFSCA registration or permission was obtained. Until that amendment, the deduction ran for ten consecutive years out of fifteen. IFSCA’s December 2025 brochure still shows the older figure. A unit that starts operating on or after 1 April 2026 qualifies only if it is not formed by splitting up, reconstructing or reorganising a business already in existence in India.

Two limits keep the holiday in proportion for a resident family. First, the deduction covers the IFSC unit’s income from approved business activities. Whether a family vehicle’s investment returns fall within that phrase is a question for Indian tax counsel. Second, the IFSCA brochure notes that dividends distributed by an IFSC fund manager are taxed at domestic rates for resident shareholders. The family members themselves remain Indian taxpayers.

What do the 13O and 13U schemes require from an Indian family’s Singapore fund?

Singapore exempts specified income of an approved fund vehicle, but only if the family office meets asset, staffing, spending, local investment and banking conditions every year.

Section 13O of the Income Tax Act 1947 applies to a company “incorporated and resident in Singapore” whose funds are managed in Singapore. Under MAS Circular FDD Cir 05/2026 (31 July 2026) and the MAS family office tax schemes page, an SFO fund needs:

• At least S$20 million (13O) or S$50 million (13U) in designated investments, measured at application and at the end of each basis period.
• Two (13O) or three (13U) qualifying investment professionals, at least one of them not a family member. Each must be a Singapore tax resident earning more than S$3,500 a month. A fund may apply with one fewer professional and must then hire the last one by the end of the first basis period.
• Tiered local spending: S$200,000 where designated investments are below S$250 million, S$500,000 up to S$2 billion, and S$1 million above that.
• A capital deployment requirement equal to the lower of 10% of designated investments or S$10 million, invested in Singapore-linked assets.
• A private banking account with a MAS-licensed financial institution.

On licensing, a qualifying SFO has operated under a class exemption since 15 June 2026. It notifies MAS within 14 days of commencing, banks with a MAS-licensed bank and files an annual return. Existing SFOs have until 15 June 2027. Our guides to Singapore family office minimum assets and the 15 June 2027 transition cover both points in detail.

GIFT City vs Singapore: how do the two regimes compare side by side?

For capital that stays mostly in Indian-rupee assets and family members who remain in India, GIFT City is lighter. For a family moving people, rather than only money, into a global portfolio, Singapore is the deeper platform.

Issue	GIFT City (IFSC)	Singapore
Exchange control for resident individuals	Treated as overseas. LRS cap of US$250,000 per person per year applies. Financial services restriction on individual ODI lifted, except banking or insurance	Treated as overseas. LRS cap applies. Individual ODI limited to operating entities not engaged in financial services
Regulator and vehicle	IFSCA. Authorised FME managing a family investment fund	MAS. SFO under the class exemption, fund vehicle approved under s 13O or s 13U
Headline tax relief	100% deduction on approved business income, 20 of 25 tax years (Income-tax Act, 2025, s 147)	Exemption of specified income for approved funds (Income Tax Act 1947, ss 13O and 13U)
Minimum assets	Confirm current family investment fund corpus with IFSCA	S$20 million (13O) or S$50 million (13U) in designated investments
People on the ground	Principal officer based in the IFSC	Two or three Singapore tax-resident investment professionals
Time limit	Deduction window runs from the year of registration	No new 13O approvals after 31 December 2029
Principal’s residence	Stays in India	Optional relocation through a work pass or the Global Investor Programme

Where does the India-Singapore tax treaty matter?

The treaty no longer shelters gains on Indian shares bought after March 2017. A Singapore entity managed from India also risks being treated as Indian tax resident.

The IRAS summary of the 2016 protocol to the India-Singapore Double Taxation Agreement (DTA) explains how share gains are taxed. Gains on shares acquired before 1 April 2017 remain taxable only in the seller’s state of residence, subject to conditions including expenditure on operations of at least S$200,000 in Singapore. Gains on shares acquired on or after that date that arise after 31 March 2019 “will be taxable in the State in which the company whose shares are alienated is resident”. A Singapore vehicle therefore pays Indian capital gains tax on recently acquired Indian shares.

The second risk is residence. Under section 6(10) of the Income-tax Act, 2025, a company is resident in India if its place of effective management is in India. That means the place where “key management and commercial decisions necessary for the conduct of business of the company as a whole are, in substance, made”. A Singapore fund vehicle whose decisions are really taken by principals in Mumbai or Delhi is exposed on both sides. India could tax it as resident, and it could fail the Singapore residence condition in s 13O(1). A GIFT City vehicle is an Indian entity in any event, so this question does not arise there.

Who needs to live where?

GIFT City needs no change of residence. Singapore needs Singapore-resident investment staff at a minimum, and works best when at least one family member actually relocates.

For principals who want to move, the Economic Development Board’s Global Investor Programme factsheet (updated 5 May 2025) sets out Option C for family office principals. It requires a Singapore SFO with at least S$200 million in assets under management, of which at least S$50 million must be transferred into Singapore and deployed in specified investments. Our Global Investor Programme guide walks through the conditions, and our sister firm Singapore Employment Agency handles employment passes for investment professionals. A principal who moves should also check the residence tests in section 6 of the Income-tax Act, 2025, including the deemed residence rule for Indian citizens not liable to tax elsewhere.

Banking follows the same split. Singapore requires the SFO, and any 13O or 13U fund, to bank with a MAS-licensed institution, and onboarding turns on documented source of wealth. See our guide to opening a family office bank account in Singapore. In GIFT City, resident individuals can hold foreign currency accounts in the IFSC for permitted LRS purposes.

How should an Indian family decide between the two?

Start from where the people will live and which entity can lawfully hold the capital, then compare incentives.

1. Map the source of funds: individual LRS headroom across family members, operating company profits, or assets already held outside India.
2. Test each route under the overseas investment rules. Individuals have more freedom in an IFSC. An Indian company that does not meet the three-year profitability test can still invest in a financial services entity there.
3. Decide whether any principal will become non-resident in India. If no one will, a Singapore vehicle carries place of effective management risk under section 6(10) of the Income-tax Act, 2025.
4. Size the portfolio against Singapore’s S$20 million and S$50 million thresholds and the staffing and spending conditions that come with them.
5. Check what proportion of the portfolio is Indian shares acquired after 1 April 2017. Those gains are taxable in India whichever hub holds them.
6. Model the GIFT City section 147 deduction and Singapore’s 13O or 13U exemption over the family’s investment horizon, keeping in mind that new 13O approvals end on 31 December 2029.

Some families use both: an IFSC vehicle for India-facing capital and a Singapore structure for global allocation, run by family members who have moved. For another hub comparison, see Hong Kong’s family investment holding vehicle regime against 13O.

Frequently asked questions

Is GIFT City “overseas” for an Indian resident?

For exchange control, yes. The RBI’s overseas investment directions define a foreign entity to include one in an IFSC in India, and LRS remittances to IFSCs are expressly permitted. For income tax, an IFSC unit remains an Indian taxpayer that claims the section 147 deduction.

Can an Indian HUF or family trust use the LRS to fund either structure?

No. The RBI’s Master Direction states that the LRS is not available to corporates, partnership firms, HUFs or trusts. They must look to other routes under the overseas investment rules.

Is the GIFT City tax holiday still ten years?

Not for the current law. Since 1 April 2026, section 147 of the Income-tax Act, 2025 gives an IFSC unit a deduction for 20 consecutive tax years out of 25.

Does the India-Singapore DTA exempt a Singapore fund’s gains on Indian shares?

Only for shares acquired before 1 April 2017, and only if the conditions in the protocol are met. Gains arising after 31 March 2019 on shares acquired on or after 1 April 2017 are taxable in India.

Sources

• Reserve Bank of India, Master Direction on the Liberalised Remittance Scheme (updated 6 September 2024)
• Reserve Bank of India, Master Direction on Overseas Investment
• MAS, Fund Tax Schemes for Family Offices
• MAS, Revised Framework for Single Family Offices to take effect on 15 June 2026
• IRAS, Summary of key changes in new Protocol to update the Singapore-India DTA

Raffles Corporate Services helps Indian families and their advisers set up Singapore family offices, VCCs and 13O or 13U fund vehicles, and handles their ongoing compliance alongside Indian counsel. Email hello@rafflescorporateservices.com or Call/SMS/WhatsApp +65 8501 7133, or visit Raffles Corporate Services.

Last reviewed: 15 October 2026. The Editorial Team, Variable Capital Companies Act.

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