Fund Management Entities operating out of GIFT IFSC now have materially more headroom on three numbers that shape day-to-day fund operations: how much the manager and its associates may put into their own schemes, how often a close-ended Restricted Scheme must strike a NAV, and how long a scheme has to file its annual report. At the same time, the offer document, the governing body and the definition of "associate" have all been pulled tighter.
These changes flow from the International Financial Services Centres Authority (Fund Management) (Second Amendment) Regulations, 2026, notified and published in the Official Gazette on 10 September 2026. They amend the IFSCA (Fund Management) Regulations, 2025 and were approved by the Authority at its meeting held on 24 July 2026. IFSCA announced the amendments through a press release issued from Gandhinagar on 16 September 2026.
Quick Answer: What Did IFSCA Change?
IFSCA notified the IFSCA (Fund Management) (Second Amendment) Regulations, 2026 in the Official Gazette on 10 September 2026, amending the IFSCA (Fund Management) Regulations, 2025. The amendments cover ten areas: independent valuation, contribution by the FME and its associates, Venture Capital Schemes, Retail Schemes, appointment of auditors, ESG disclosures, the scheme annual report timeline, investor approvals, investor protection and governance measures, and service provider appointment timelines.
The headline relaxations are a contribution ceiling of 25% of corpus (raised from 10%) for FMEs and associates with Indian ultimate beneficial owners in schemes investing only in IFSC or foreign jurisdictions, an annual report timeline of six months (extended from four months) from the end of the financial year, and an option for close-ended Restricted Schemes to disclose NAV annually rather than semi-annually where at least 75% of investors by value approve in advance.
Quick Reference
What Changed?
The press release groups the amendments under ten heads. The table below sets out every materially changed parameter announced. Where the press release does not describe the pre-amendment position, this is stated rather than assumed.
Why This Matters
Two of the changes move real numbers. The contribution ceiling for FMEs and their associates with Indian ultimate beneficial owners rises from 10% to 25% of corpus, which is the difference between a token co-investment and a meaningful alignment stake. IFSCA has tied the stated purpose to track record building: a manager that has never run an offshore strategy struggles to raise third-party capital without demonstrable performance, and the earlier 10% ceiling limited how much of its own money it could deploy to create that record.
The second is the reporting calendar. Moving the scheme Annual Report from four months to six months after the financial year end relieves a bottleneck that GIFT IFSC managers have repeatedly flagged, particularly for schemes with layered offshore holdings whose own audited numbers arrive late.
The rest of the package is a mix of cost removal and tightening. Duplicate valuation in fund-of-funds structures goes away. So does the sectoral concentration constraint that made retail feeder structures difficult. In exchange, Retail Scheme offer documents must now disclose NAV methodology and conflicts of interest, internal policies need a documented governing body approval trail, and the definition of "associate" reaches further.
A Fund Management Entity is the registered entity in GIFT IFSC that sets up and manages funds, described in the Regulations as schemes. A single FME can run several schemes. The Regulations classify schemes broadly into Venture Capital Schemes, Restricted Schemes offered by private placement, and Retail Schemes offered to the public. Each category carries a different set of investor protection and disclosure obligations.
Note: This classification reflects the framework under the IFSCA (Fund Management) Regulations, 2025, and is not itself part of the September 2026 amendment described above.
Who Is Affected?
Every FME is touched by at least one limb of the amendment. The governing body approval requirement for internal policies, the widened "associate" definition, and the revised service provider appointment timeline apply across the board, independent of scheme type.
The 25% contribution ceiling is available only to FMEs and associates having Indian ultimate beneficial owners, and only for VC Schemes and Restricted Schemes that invest solely in IFSC or foreign jurisdictions.
Only close-ended Restricted Schemes can move NAV computation and disclosure from semi-annual to annual, and only where at least 75% of investors by value of their investments approve in advance.
Restricted Schemes and Retail Schemes that are Index Schemes, or Fund of Funds Schemes investing in Index Schemes or passive ETFs, gain an exemption from the minimum contribution requirement, subject to appropriate disclosures. Fund of Funds Schemes also benefit from the exclusion of their AUM from the USD 3 billion sustainability disclosure threshold and, for Retail FoFs meeting the stated conditions, from sectoral concentration limits.
Where Governments and Government-related investors such as Sovereign Wealth Funds are the sole contributors, directly or indirectly, to an FME and its schemes, a common auditor may now be appointed for the FME and those schemes.
Fund Administrators, Auditors, Valuers and Custodians are all drawn into the revised appointment timeline. The press release states that the fiduciary shall ensure compliance with the prescribed timelines.
Not directly affected: the press release does not announce changes to the registration framework for FMEs, to minimum net worth requirements, or to the treatment of schemes investing in India through permitted routes. Entities outside the IFSCA fund management perimeter are unaffected.
Provision-by-Provision Analysis
A. Independent Valuation: Annual NAV Option and Relief for Underlying Schemes
Regulatory requirement. The periodicity for computation and disclosure of Net Asset Value by close-ended Restricted Schemes may be enhanced by the FME from semi-annual to annual. The relief is conditional on prior approval of at least 75% of the investors in the scheme by value of their investments. Separately, the requirement to obtain an independent valuation of the portfolio of VC Schemes, Restricted Schemes and Retail Schemes is relaxed for investments made in underlying scheme(s) which are valued by an independent entity.
In practice. The annual NAV option is an election, not a default. An FME that wants it must go to its investors, secure approval measured by value rather than by headcount, and record that approval before changing the cycle. A close-ended Restricted Scheme with a concentrated investor base can clear the 75% threshold with a handful of consents; a widely syndicated scheme will find it harder.
Practical Example. Assume a close-ended Restricted Scheme has five investors with commitments of USD 40 million, USD 30 million, USD 15 million, USD 10 million and USD 5 million. Approvals from the two largest investors represent 70% by value, which falls short. Adding the USD 15 million investor takes the total to 85% by value, which satisfies the 75% test even though only three of five investors have approved.
If your scheme invests into another fund that already gets valued by an independent valuer, you were effectively paying for the same asset to be valued twice. The amendment removes that second layer where the underlying scheme is valued by an independent entity.
B. Contribution by the FME and Its Associates
Regulatory requirement. In place of the existing limit of 10%, FMEs and their associates having Indian ultimate beneficial owners are permitted to contribute up to 25% of the corpus of VC Schemes and Restricted Schemes, where such schemes invest only in IFSC or foreign jurisdictions. The exemption from the requirement of minimum contribution by FMEs and their associates is expanded to include Restricted Schemes and Retail Schemes that are either Index Schemes or Fund of Funds Schemes investing in Index Schemes or passive Exchange Traded Funds, subject to appropriate disclosures. In the case of Fund of Funds schemes, the automatic exemption from the contribution requirement is available only if no active fund management is involved.
In practice. Three distinct rules sit inside this head, and they pull in different directions. The 25% figure is a ceiling on how much manager capital may go in, not a floor. The Regulations separately impose a minimum contribution, and the second and third limbs deal with when that minimum falls away. Passive products get relief because there is limited discretionary risk for the manager to align against. The Fund of Funds clarification then closes the obvious gap: a fund of funds that actively selects and rotates underlying managers is not passive, and cannot claim the automatic exemption.
C. Venture Capital Schemes: Follow-On Rounds Beyond Ten Years
Regulatory requirement. VC Schemes are permitted to participate in subsequent rounds of fund raising by their investee companies even after such companies have completed ten years from incorporation, subject to specified conditions.
In practice. Deep-technology, life sciences and infrastructure-adjacent ventures routinely take longer than a decade to reach a liquidity event. Under the earlier position, a VC Scheme holding an ageing but promising investee had no clean route to defend its stake in a later round. That constraint has been lifted.
Point to verify. The press release refers to "specified conditions" without listing them. The conditions appear in the gazetted amendment text and must be read there before a follow-on round is committed.
D. Retail Schemes: Sectoral Concentration Relief for Fund of Funds
Regulatory requirement. The extant sectoral concentration limits applicable to Retail Schemes are exempted for Fund of Funds Schemes investing in underlying schemes that are regulated by the concerned financial sector regulator and permitted for offering to retail investors in their home jurisdictions.
In practice. A GIFT IFSC Retail FoF feeding into, for example, a regulated retail mutual fund in another jurisdiction could previously be caught by sectoral limits designed for direct securities portfolios. The exemption is conditional on two tests being satisfied at the underlying scheme level: regulation by the concerned financial sector regulator, and eligibility for retail offering in the home jurisdiction of that scheme. Both should be evidenced in the diligence file.
E. Appointment of Auditor: Common Auditor for Sovereign-Backed Structures
Regulatory requirement. Where FMEs and schemes are established by Governments and Government-related investors, such as Sovereign Wealth Funds, and such investors are the sole contributors directly or indirectly, a common auditor may be appointed for the FME and its schemes.
In practice. The relief is narrow. It applies only where the Government or Government-related investor is the sole contributor, whether directly or indirectly. Admitting a single third-party investor into the structure would appear to take it outside this relief.
F. ESG Disclosures: Fund of Funds AUM Excluded from the USD 3 Billion Test
Regulatory requirement. For sustainability-related disclosure requirements applicable to FMEs having Assets Under Management exceeding USD 3 billion as at the close of a financial year, the AUM of Fund of Funds Schemes is excluded while determining the prescribed threshold.
In practice. Every FME running fund of funds strategies should recompute its threshold position at the close of the financial year using the revised basis. An FME that was previously above USD 3 billion may fall below it once FoF AUM is stripped out, which changes whether the sustainability-related disclosure framework applies at all.
G. Annual Report Timeline Extended to Six Months
Regulatory requirement. The timeline for submission of the Annual Report of schemes to the Authority and to the investors is extended from four months to six months from the end of the financial year.
In practice. Both legs of the obligation move together. The extension covers submission to the Authority and to investors, so an FME does not need to run a split calendar. Compliance calendars, audit engagement letters and investor reporting undertakings in fund documents should be refreshed to reflect the revised outer date.
H. Investor Approval Through PPM and Investor Agreement
Regulatory requirement. To facilitate operational efficiency, approvals of investors for certain matters may be obtained through disclosures in the Private Placement Memorandum and the agreement executed with the investors.
In practice. This shifts weight onto drafting. Where an FME wants to rely on a document-based approval instead of a separate consent process, the relevant matter must actually be disclosed in the PPM and carried through the investor agreement. A generic catch-all clause is unlikely to satisfy the provision for a matter that was never specifically disclosed.
Point to verify. The press release says "certain matters" without identifying them. The list of eligible matters sits in the amendment text.
I. Investor Protection and Regulatory Governance
This head contains the tightening measures.
- Retail Scheme offer documents. The indicative list of disclosure requirements is expanded to include disclosures on the methodology of NAV computation and on conflicts of interest.
- Approval of internal policies. Various internal policies and frameworks required to be put in place by the FME under the Regulations must be approved by the governing body of the FME, or by a committee or official(s) to whom the governing body has delegated those powers.
- Temporary deployment of monies. Prior to a VC Scheme, Restricted Scheme or Retail Scheme achieving its minimum corpus or funds raised, monies may be temporarily deployed in instruments that support preservation of capital and adequate liquidity, with prior disclosures in the placement memorandum or offer document.
- Definition of "associate". The scope is expanded to appropriately cover natural persons and juridical persons that are not in the form of a body corporate having a direct economic interest.
CorpLawUpdates analysis. The widened "associate" definition deserves particular attention because it is a connective term feeding into contribution requirements, conflicts of interest and related-party disclosures across the Regulations (discussed further below).
J. Other Measures: Disclosure Trigger and Service Provider Timelines
Regulatory requirement. The timelines for commencement of NAV and portfolio disclosures have been clarified by linking them to the commencement of investment activities, excluding temporary deployment of monies in permitted instruments. Separately, the extant timeline for appointment of key service providers, being the Fund Administrator and Auditor, is relaxed by requiring such appointments to be completed before the execution of the agreement with any investor in the scheme, while also bringing the Valuer and Custodian within this requirement. The fiduciary shall ensure compliance with the prescribed timelines.
In practice. The two limbs work together. Parking drawdown money in permitted capital preservation instruments does not start the NAV and portfolio disclosure clock, so a scheme that has closed but not yet deployed into its strategy is not pushed into premature reporting. On the service provider side, the timeline is described as a relaxation, but it is also a reordering: the appointment must be complete before the first investor agreement is signed. For a fast-moving launch, all four appointments now sit on the critical path ahead of investor closing rather than after it.
Exemptions and Carve-Outs at a Glance
When Does It Apply?
Practical Implications for Compliance Teams
Documentation is doing more work than before. Three separate amendments push obligations into fund documents: investor approvals may be obtained through PPM disclosures and the investor agreement, temporary deployment requires prior disclosure in the placement memorandum or offer document, and the passive-product contribution exemption is expressly made subject to appropriate disclosures. An FME that treats its PPM as a marketing document rather than a compliance instrument will struggle to rely on these reliefs.
Two computations need to be rerun. The USD 3 billion sustainability threshold must be recomputed excluding Fund of Funds AUM, and any scheme where the FME or its associates hold a stake should be tested against the revised 25% ceiling and against the widened definition of "associate".
Governance evidence matters. A policy that exists but cannot be tied to an approval by the governing body, or by a validly delegated committee or official, is exposed. Where the governing body has delegated approval powers, the delegation itself should be traceable in the records.
Where implementation difficulty is likely. The 75% investor approval by value for annual NAV will be administratively awkward for schemes with a long investor tail, and the value-weighted computation needs to be documented rather than asserted. The reordered service provider appointment timeline will bite hardest on schemes already mid-launch, where the first investor agreement may be imminent while Valuer and Custodian mandates are still being negotiated.
Compliance Checklist
Related reading: IFSCA (Fund Management) Regulations, 2025 — complete framework · FME registration categories in GIFT IFSC · Restricted Schemes vs Retail Schemes under IFSCA
Frequently Asked Questions
When were the IFSCA (Fund Management) (Second Amendment) Regulations, 2026 notified?
The IFSCA (Fund Management) (Second Amendment) Regulations, 2026 were notified and published in the Official Gazette on 10 September 2026. The Authority had approved the amendments at its meeting held on 24 July 2026, and IFSCA announced them through a press release dated 16 September 2026.
What is the new contribution limit for FMEs and their associates?
FMEs and their associates having Indian ultimate beneficial owners may contribute up to 25% of the corpus of Venture Capital Schemes and Restricted Schemes, where such schemes invest only in IFSC or foreign jurisdictions. The earlier limit was 10%.
Can a Restricted Scheme now disclose NAV only once a year?
A close-ended Restricted Scheme may move the periodicity of NAV computation and disclosure from semi-annual to annual, but only if the Fund Management Entity obtains prior approval of at least 75% of the investors in the scheme by value of their investments. The change is an option available to the FME, not an automatic relaxation, and it applies to close-ended Restricted Schemes.
What is the revised timeline for submitting the Annual Report of a scheme?
The Annual Report of a scheme must be submitted to the Authority and to the investors within six months from the end of the financial year. The earlier timeline was four months from the end of the financial year.
Can a Venture Capital Scheme invest in a company that is more than ten years old?
Venture Capital Schemes are permitted to participate in subsequent rounds of fund raising by their investee companies even after those companies have completed ten years from incorporation, subject to conditions specified in the amendment. The press release does not list those conditions, so the gazetted text must be checked before committing to a follow-on round.
How does the amendment change the USD 3 billion ESG disclosure threshold?
The Assets Under Management of Fund of Funds Schemes are excluded while determining whether a Fund Management Entity exceeds the USD 3 billion AUM threshold for sustainability-related disclosure requirements, tested as at the close of a financial year. The threshold figure itself remains USD 3 billion.
Which schemes are exempt from the minimum contribution requirement now?
The exemption from the minimum contribution requirement by the FME and its associates is expanded to cover Restricted Schemes and Retail Schemes that are Index Schemes, or Fund of Funds Schemes investing in Index Schemes or passive Exchange Traded Funds, subject to appropriate disclosures. For Fund of Funds schemes, the automatic exemption is available only where no active fund management is involved.
When must the Fund Administrator, Auditor, Valuer and Custodian be appointed?
Appointments of the Fund Administrator, Auditor, Valuer and Custodian must be completed before the execution of the agreement with any investor in the scheme. The Valuer and Custodian have been brought within this requirement by the amendment, and the fiduciary is required to ensure compliance with the prescribed timelines.
Who counts as an "associate" after the amendment?
The definition of "associate" is expanded to cover natural persons and juridical persons that are not in the form of a body corporate and that have a direct economic interest. Fund Management Entities should revisit their associate mapping, because the term feeds into contribution requirements, conflict of interest provisions and related disclosures under the Regulations.
Do the 2025 Regulations still apply?
Yes. The IFSCA (Fund Management) Regulations, 2025 continue to apply as amended by the IFSCA (Fund Management) (Second Amendment) Regulations, 2026. The amendment modifies specific provisions; it does not supersede or replace the 2025 Regulations.
CorpLawUpdates Analysis
The shape of this amendment is familiar to anyone who has tracked IFSCA since 2022: reduce the operational cost of running a fund from GIFT IFSC, and pay for that relief with sharper disclosure and governance requirements. The sourcing IFSCA cites, being Chintan Shivir feedback, industry interactions, supervisory experience, public consultation and the Fund Management Advisory Committee, reads as a package assembled from practitioner complaints rather than a top-down redesign.
The contribution change is the one with strategic consequence. A ceiling of 25% for FMEs with Indian ultimate beneficial owners, restricted to schemes investing only in IFSC or foreign jurisdictions, is aimed squarely at the Indian manager trying to compete for offshore allocations without a prior offshore record. Whether it works depends on capital availability at the sponsor level, which is a commercial question rather than a regulatory one.
For compliance teams, the immediate issue is not the reliefs but the two quiet obligations. First, the expanded "associate" definition can change conclusions reached under the old mapping, and nothing in the press release suggests a grandfathering of existing arrangements. Second, the governing body approval requirement for internal policies converts a substantive obligation into an evidentiary one: the question at inspection becomes not whether a policy exists, but who approved it and under what delegation.
Several items in the press release stop short of the operative detail. The conditions for post-ten-year VC follow-on participation, the matters for which investor approval can be handled through the PPM and investor agreement, and the instruments that qualify as supporting preservation of capital and adequate liquidity are all specified in the gazetted text rather than the announcement. None of these should be actioned from the press release alone.
Source Note
Document: Press Release — "Amendments to the International Financial Services Centres Authority (Fund Management) Regulations, 2025"
Issuing authority: International Financial Services Centres Authority (IFSCA)
Underlying instrument: International Financial Services Centres Authority (Fund Management) (Second Amendment) Regulations, 2026, published in the Official Gazette on 10 September 2026
Authority approval: Meeting held on 24 July 2026
Place and date of press release: Gandhinagar, 16 September 2026
Principal regulations amended: IFSCA (Fund Management) Regulations, 2025
This article is for informational and educational purposes only and does not constitute legal or regulatory advice. Readers should verify the applicable primary regulatory source before taking action.
