India has announced a major policy enhancement for Gift City by extending the tax holiday period from the current 10 years to 20 years. This significant extension doubles the duration of tax benefits available to businesses operating within the financial hub.

Policy Enhancement Details

The extension represents a substantial improvement in the incentive structure for Gift City operations. The policy change increases the tax holiday duration as outlined below:

Strategic Implications

This policy enhancement is designed to strengthen Gift City's competitive position as a financial hub. The extended tax holiday period provides businesses with:

• Enhanced Long-term Planning: The 20-year horizon allows for more comprehensive business planning and investment strategies
• Improved Cost Structure: Extended tax benefits significantly improve the overall cost economics for operations
• Competitive Advantage: The longer benefit period enhances Gift City's attractiveness compared to other financial centers

Market Impact

The extension of the tax holiday from 10 years to 20 years represents a clear commitment by India to develop Gift City as a premier financial destination. This policy change is expected to attract greater interest from both domestic and international businesses looking to establish operations in the financial hub.

The doubled benefit period provides substantial long-term value proposition for entities considering Gift City as their operational base, potentially accelerating the hub's growth trajectory and enhancing its role in India's financial ecosystem.

India's GIFT IFSC witnessed a sharp deceleration in new Alternative Investment Fund registrations during 2025, even as the broader mainland AIF ecosystem maintained its robust expansion trajectory. The divergent performance highlights evolving maturation dynamics between the international financial center and domestic markets.

GIFT IFSC Registration Slowdown

New AIF launches in GIFT IFSC dropped significantly in 2025, falling over 40% year-on-year to just 57 from 106 in 2024. According to the December 2025 edition of the AltLens report, compiled by Eleveight Research for Nuvama Asset Services and BDO India, the cumulative total of registered AIFs in GIFT IFSC reached 256 by December 10, 2025.

Despite the registration slowdown, investor participation across IFSC schemes demonstrated strong growth, rising sharply to 4,733. This increase signals sustained trust and broadening engagement in the international financial hub.

Mainland AIF Ecosystem Expansion

The registration decline in GIFT IFSC stands in stark contrast to the mainland SEBI-regulated AIF landscape, which continued its impressive growth trajectory. Mainland registrations reached 1,710 by 2025, representing a nearly 19-fold increase from just 16 in 2012.

Annual launches have consistently exceeded 150 since 2022, with 2025 posting a 20% increase. Total commitments in the mainland ecosystem ballooned from ₹27,484.00 crore in 2015 to over ₹15.00 lakh crore by September 2025, achieving a 49% CAGR that far outpaced mutual funds and PMS growth rates.

Investment Allocation Patterns

AIFs maintained their preference for unlisted assets, which continued to dominate portfolios at approximately 65% of total deployed investments. Unlisted holdings reached ₹3.76 lakh crore out of ₹5.75 lakh crore total deployments, registering 23% year-on-year growth led by Category II funds.

Listed holdings demonstrated remarkable expansion, rising sharply to ₹1.99 lakh crore with a 35% portfolio share. This segment recorded a 49% year-on-year surge driven almost entirely by Category III AIFs, which captured an estimated 81% to 87% of listed allocations.

Sector-Specific Performance

Category III strategies emerged as the clear growth engine within listed instruments. Allocations to REITs, InvITs, and AIF units exploded 184% year-on-year, rising from negligible levels to approximately 13.70% share. Direct equity and equity-linked holdings retained dominance at 68% with 31% year-on-year growth.

In private domains, enterprise deployments remained robust. Startups maintained a 90% share of allocations with 19% year-on-year growth, while MSMEs demonstrated explosive momentum across all segments.

Capital Flow Dynamics

Domestic capital flows powered the growth engine, rising 40% year-on-year to ₹4.70 lakh crore. Foreign inflows grew more modestly at 14% year-on-year to ₹2.50 lakh crore. FPI allocations contracted sharply by 87% year-on-year, likely reflecting lower Category II commitments amid global headwinds.

SEBI's 2025 reforms introduced frameworks for accredited investor-only schemes, large value funds, dedicated co-investment vehicles, and angel fund simplifications. These measures have reduced friction, enhanced flexibility, and aligned compliance with investor sophistication levels, supporting the sector's continued evolution.