Fund manager overseeing more than $800 million in assets cites uncertainty over tax deductions, investor eligibility and regulatory requirements; lower minimum investment in Abu Dhabi could help widen its investor base

Artha Bharat Investment Managers IFSC, a fund management entity operating in Gujarat’s GIFT City, plans to relocate two of its funds to Abu Dhabi Global Market (ADGM), citing tax uncertainty, compliance requirements and restrictions on investor participation. The proposed shift highlights the challenges that international fund managers may face when balancing tax incentives against regulatory certainty and operational flexibility.

The fund manager oversees more than $800 million in assets in GIFT City. Its decision involves relocating the master fund of the $112 million Artha Global Multiplier Fund, which primarily invests in US consumer-focused opportunities, and the recently launched Artha Bharat Absolute Return Fund, an arbitrage strategy investing in Indian securities.

The company is setting up a new fund in ADGM, following which investors in the existing funds may move to the new structure. The firm has clarified that the decision does not represent a complete exit from GIFT City, as its other funds will continue to be managed from the Indian international financial services centre.

Tax Uncertainty Emerges as a Key Concern

According to the fund manager, uncertainty surrounding the availability of tax deductions has been a significant factor behind the relocation decision.

Artha Bharat founder and chief executive officer Sachin Sawrikar said the firm had been denied a deduction under Section 80LA of the Income Tax Act, 1961, and was pursuing the matter. The provision offers specified tax deductions to eligible offshore banking units and units operating in international financial services centres, subject to applicable conditions.

The issue highlights the importance of predictable tax treatment for fund managers structuring cross-border investment vehicles. Tax incentives can make a financial centre attractive, but uncertainty over eligibility, interpretation or continuing compliance can reduce the practical value of those benefits.

Fund managers must also consider how different categories of income and investors are taxed. According to Sawrikar, the existence of multiple investor and fund-level tax classifications in India adds complexity compared with jurisdictions where taxation is more straightforward.

For international investment firms, clarity on tax treatment can influence decisions involving fund domicile, investor onboarding, service-provider payments and long-term operating costs.

Artha Global Multiplier Fund and Absolute Return Fund to Move

The first fund involved in the relocation is the master fund of the $112 million Artha Global Multiplier Fund, which primarily follows a US consumer investment theme. The fund is open only to non-resident Indians (NRIs).

The second is the recently launched Artha Bharat Absolute Return Fund, an arbitrage fund that invests in Indian securities. Arbitrage strategies generally seek to benefit from pricing differences between related securities or market positions, with returns and risks depending on the strategy, costs and market conditions.

The relocation is expected to take place through a new fund structure in Abu Dhabi. Existing investors may shift to the new vehicle once the required arrangements are completed.

The move does not necessarily imply a change in the underlying investment strategy of either fund. Instead, the proposed restructuring is aimed at addressing concerns about the legal, tax and operational framework under which the funds are managed.

Lower Minimum Investment Could Expand Investor Access

One of the key differences identified by the fund manager is the minimum investment requirement.

The minimum ticket size for the funds in GIFT City was $150,000, compared with a proposed minimum of $55,000 in ADGM. The lower threshold could allow the fund manager to approach a wider pool of eligible investors, subject to the new fund's terms and applicable regulations.

The difference is particularly relevant for Indian investors considering overseas investment opportunities through the Liberalised Remittance Scheme (LRS), which has a limit of $250,000 per resident individual per financial year under the applicable framework.

A $150,000 minimum investment can consume a substantial portion of that annual allowance before accounting for other overseas remittances. A lower entry threshold could provide greater flexibility, although the actual accessibility of the fund will also depend on investor eligibility, remittance rules, tax treatment and distribution arrangements.

For fund managers, the ability to attract a broader investor base can support fundraising and reduce dependence on a relatively small number of large investors.

Investor Eligibility and Fund-Level Taxation Create Additional Hurdles

Artha Bharat has also raised concerns about restrictions on investor participation and distribution. According to the fund manager, one of its funds has faced difficulties attracting investors because of requirements involving investor classification and tax status.

The firm said non-resident investors are required to provide Permanent Account Number (PAN) details, while the fund cannot accept investments from resident Indians without risking its specified-fund status under the applicable tax framework. Mixing resident and non-resident investors can, in certain circumstances, result in taxation at the fund level rather than the intended investor-level treatment.

The company said these restrictions had prevented one of its funds from attracting investors over the previous 15 months.

Such requirements can affect a fund's ability to market itself across investor categories. They may also increase the administrative burden associated with investor verification, tax reporting and ongoing compliance.

For fund managers operating across jurisdictions, these factors are important because the commercial viability of a fund depends not only on its investment performance but also on its ability to accept eligible capital efficiently.

Withholding Tax on Overseas Services Adds to Operating Costs

The fund manager has also highlighted withholding-tax concerns involving payments to overseas service providers, including law firms and research vendors.

These expenses can arise when a fund uses international legal, analytical or operational services, even where its capital comes from foreign investors and is deployed outside India. The applicable tax treatment depends on the nature of the payment, the parties involved and relevant legal provisions.

For fund managers, uncertainty around such payments can complicate budgeting and cross-border operations. It can also influence decisions about where a fund is domiciled and which service providers it uses.

The broader issue is whether the benefits of operating from an international financial centre outweigh the costs of meeting its tax and regulatory requirements. A favourable headline tax regime may not be sufficient if the conditions attached to it are difficult to satisfy or interpret.

Abu Dhabi Offers an Alternative Fund Domicile

Artha Bharat expects to receive its ADGM licence shortly, according to the information provided by the firm. It had also applied for a licence in Singapore in June 2026. A venture capital fund previously planned for GIFT City will instead be domiciled in Mauritius.

The developments suggest that the fund manager is assessing different international jurisdictions for different investment strategies rather than relying exclusively on a single financial centre.

ADGM has become an alternative location for fund structures seeking access to international investors and a regulatory framework designed for financial services. In Artha Bharat's case, the lower minimum investment and the prospect of a more predictable operating structure are among the factors supporting the move.

However, relocating a fund does not automatically eliminate all tax or compliance obligations. The final outcome will depend on licensing, the new fund's legal structure, investor eligibility, the tax treatment of its investments and the rules applicable in each relevant jurisdiction.

GIFT City Continues to Build Its Fund Management Ecosystem

Despite Artha Bharat's decision to relocate two funds, GIFT City remains an important part of India's effort to develop an international financial services hub.

As of June 2026, approximately 235 fund management entities were registered in GIFT City, with more than 400 schemes. Cumulative commitments in the non-retail fund management segment stood at around $45 billion.

These figures indicate the scale of the ecosystem that has developed around the financial centre. Its long-term competitiveness, however, will depend on more than the number of registrations or announced investment commitments.

Predictable taxation, efficient compliance procedures, investor access and the ability to operate across borders are important considerations for global fund managers comparing financial centres.

Legal experts have also pointed to continuing tests relating to investor composition, concentration of holdings, resident participation and fund corpus. These conditions may need to be monitored throughout a fund's life, with breaches potentially carrying tax consequences.

For GIFT City, the challenge is to preserve regulatory safeguards while ensuring that eligible fund managers can understand and comply with the rules without excessive uncertainty.

What the Shift Means for India's Financial Services Ambitions

The relocation decision highlights the competition among international financial centres to attract investment funds, asset managers and cross-border capital.

India has sought to use GIFT City to bring more international financial activity within its regulatory framework. If fund managers encounter uncertainty around tax benefits or restrictions that limit fundraising, some may consider alternative domiciles even while retaining investment management or operational functions in India.

At the same time, one fund manager's decision does not establish that the wider GIFT City ecosystem is losing competitiveness. Artha Bharat has stated that its other funds will continue to be managed from GIFT City, and the scale of the centre's existing fund management activity remains significant.

The key question for policymakers is whether tax rules and compliance requirements can be made sufficiently clear and consistent to support the growth of sophisticated investment structures while maintaining appropriate safeguards.

Market Outlook

Artha Bharat's plan to relocate two funds to Abu Dhabi highlights how tax certainty, investor eligibility and minimum investment requirements can influence the choice of fund domicile. The proposed reduction in the minimum ticket size from $150,000 to $55,000 could also help the manager reach a broader investor base, subject to the final fund structure and applicable regulations.

For GIFT City, the development underscores the importance of predictable tax treatment and practical compliance requirements as it competes with established international financial centres. The firm's decision is not a complete withdrawal from GIFT City, but it does raise questions about whether the benefits offered by the jurisdiction are sufficiently clear and accessible for every type of fund strategy.

The developments to watch include the grant of Artha Bharat's ADGM licence, the transfer arrangements for existing investors, the outcome of its Section 80LA tax dispute and any regulatory changes affecting fund-level taxation or investor participation.

Ultimately, the competitiveness of an international financial centre depends not only on tax incentives but also on certainty, ease of operation and access to capital. How effectively GIFT City addresses these considerations could influence its ability to attract and retain global fund managers in the years ahead.