Artha Bharat shifts two master funds to Abu Dhabi amid GIFT City tax issues

what happened

According to TradingView, Artha Bharat Investment Managers, an asset manager with $800 million under management, has decided to relocate the master funds of two of its six funds from India's GIFT City to ADGM in Abu Dhabi. The firm says the move reflects more than tax benefits. Its main problem is that the Income-tax Act does not properly recognise the ultimate non-resident investor when money passes through an intermediate GIFT-based fund.

Founder Sachin Sawrikar said foreign-exchange rules were not the obstacle. Under Schedule VI of the Income-tax Act, 2025, a GIFT Category III fund counts as a specified fund only if every unit holder other than the sponsor or manager is a non-resident. As a result, a fund investing in another such fund can lose its status and tax exemption. "The test should be applied to the ultimate non-resident investor," Sawrikar said.

The firm had earlier linked the decision to a rejected claim under Section 80LA, but later said that rejection stemmed from a portal glitch. Artha Bharat will keep operating from GIFT City and retain its support functions there, and may use GIFT-based vehicles as feeders. Tax advisers at BDO India and PwC described the issues as largely procedural.

why it matters

For GIFT City fund managers pooling overseas capital through several vehicles, uncertainty over whether the ultimate investor or the immediate unit-holder determines tax eligibility can shape where they domicile master funds. The story is niche and has little direct effect on broader markets, but it highlights the tax friction facing India's fund hub.

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