Artha Bharat Investment Managers is relocating two funds, worth over $112 million, from GIFT City to the Abu Dhabi Global Market. The firm cites persistent difficulties with Section 80LA tax deductions and strict compliance norms as primary reasons. This move underscores the ongoing operational friction some fund managers face in India's financial hub compared to international jurisdictions.
Artha Bharat Investment Managers has decided to move two of its key funds, including the $112 million Artha Global Multiplier Fund, from Gujarat International Finance Tec-City (GIFT City) to the Abu Dhabi Global Market (ADGM). The decision comes after the fund house faced challenges in utilizing tax deductions under Section 80LA of the Income Tax Act, which is meant to offer benefits to entities operating within India's International Financial Services Centre.
The firm stated that the expected tax incentives have been difficult to claim in practice. CEO Sachin Sawrikar noted that the current Indian tax framework for these funds creates complex compliance requirements, which often makes it harder to operate compared to other global hubs. While GIFT City offers a tax-advantaged environment, the administrative work required to qualify for these benefits has become a bottleneck for the firm's operations.
Beyond tax complications, operational constraints have also played a role in the decision. Rules requiring Permanent Account Number (PAN) details for non-resident investors and strict limits on mixing resident and non-resident capital have hindered the growth of certain investment schemes. Furthermore, the minimum ticket size in GIFT City, often reaching $150,000, has created friction for investors using the Liberalised Remittance Scheme (LRS). In contrast, the ADGM offers a lower threshold of $55,000, which the firm believes will help it attract a wider pool of investors.
This move highlights a broader debate regarding the operational environment in India's financial hub. While GIFT City has seen significant growth, with over 235 entities registered and $45 billion in commitments, the relocation of these funds serves as a reminder of the regulatory hurdles that remain. Industry experts suggest that the strict adherence to safe harbour thresholds—rules intended to prevent the misuse of tax benefits—can sometimes act as a barrier for fund managers who need flexibility in managing their corpus size and investor concentration.
Looking ahead, the shift is a signal for policymakers to re-evaluate the administrative burden associated with these tax incentives. For investors and fund houses, the key monitorable will be whether regulators introduce greater clarity on tax interpretations and simplify the compliance process. Artha Bharat’s choice to domicile a planned venture capital fund in Mauritius instead of GIFT City further reflects a preference for jurisdictions that offer higher predictability in day-to-day operations.