INDIA Trends and Developments Contributed by: Tanmay Patnaik, Raj Chheda and Eisha Singh, Trilegal
equity compensation in US, UK or other foreign-listed companies. For many, this foreign equity represents the single largest component of their personal balance sheet. Yet, planning around it remains poorly under - stood and frequently unaddressed. The problem has two dimensions. The first is expo - sure. Foreign-situs assets held by Indian residents may be subject to estate or inheritance tax outside India. Recent changes to the UK’s inheritance tax framework have broadened that exposure, while the long-standing US estate tax regime continues to pose significant risks for concentrated holdings. For Indian residents with substantial holdings in the US or UK, the resulting death-triggered tax exposure can be considerable and is frequently unquantified. The second dimension is constraint. The ordinary mitigation steps, which are transferring assets into a trust, gifting to family members, and restructuring holding vehicles, are significantly restricted for Indian residents under India’s exchange control regime. Gift - ing foreign assets to non-resident family members, settling assets into an offshore trust, or restructuring a foreign brokerage holding may each require regula - tory approval, or may simply not be permissible at all. The result is a structural mismatch: the foreign juris - diction taxes the asset according to its own connect - ing factors, while Indian exchange control constrains the structuring that would ordinarily be deployed to address that exposure. India-resident sweat equity earners are consequently facing a planning problem, unlike their counterparts in other jurisdictions. Two groups feel this most acutely: returning NRIs or OCIs who have accumulated foreign equity abroad and are considering moving back to India, where the planning window closes the moment residency is re-established; and India-resident professionals at multinational companies who receive equity in foreign parent entities, without fully appreciating the cross- border tax implications. This growing asset class sits between global tax exposure and domestic exchange control, creating planning challenges that are only now beginning to be fully recognised. The GIFT City question
GIFT City’s Family Investment Fund (FIF) framework represents India’s most ambitious attempt to create a tax-efficient onshore–offshore vehicle for family wealth management. The International Financial Ser - vices Centres Authority (IFSCA) granted registration to the first foreign FIF in April 2026, signalling its intent to build a globally competitive regulatory ecosystem at GIFT IFSC. Regulatory gaps, however, continue to limit its prac - tical use for outbound structuring. Execution has remained, no single-family office has yet meaning - fully deployed Indian capital into foreign investments through the framework, and many families continue to rely on established Singapore and UAE structures, which offer greater regulatory predictability. As the rules around outbound investment evolve, the extent to which India can offer a viable onshore alternative to offshore wealth platforms will be a key determinant of future structuring trends. One proposed reform is the introduction of a Variable Capital Company (VCC) framework in GIFT IFSC. The draft framework contemplates a flexible corporate fund vehicle that may operate either as a standalone vehicle or through multiple sub-funds under a single umbrella. Each sub-fund would maintain a segregated pool of assets and liabilities, allowing different invest - ment strategies, investor classes, or asset pools to coexist within a single structure without cross-con - tamination of risk. For family offices and private capital managers, the relevance of the proposal lies in this flexibility, a feature that has contributed to the popu - larity of VCCs in jurisdictions such as Singapore and Mauritius. The proposal is currently at the draft legislative stage. The Department of Economic Affairs released the draft IFSCA Amendment Bill, 2026 for public consul - tation in June 2026, and the framework will become operational only after the amendment is enacted and IFSCA has issued the necessary implementing regula - tions. If operationalised in its current form, the VCC framework could meaningfully expand the structuring toolkit available to families and fund managers operat - ing through GIFT IFSC.
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