Funds & Investment Law

Introduction

India’s investment funds sector is witnessing rapid growth, driven by alternative investment structures, increasing foreign participation, and evolving regulatory frameworks. The Securities and Exchange Board of India (SEBI), Reserve Bank of India (RBI), and Ministry of Finance have introduced stricter compliance requirements for venture capital (VC) funds, private equity (PE) funds, hedge funds, REITs (Real Estate Investment Trusts), and InvITs (Infrastructure Investment Trusts).

Key Trends Impacting the Investment Funds Sector in India:

• Updated SEBI AIF (Alternative Investment Fund) regulations, with stricter norms on fund management, taxation, and investor protection.
• Increased foreign investment in Indian VC & PE funds, requiring compliance with Foreign Exchange Management Act (FEMA) and Foreign Direct Investment (FDI) policies.
• Stronger taxation and compliance measures for offshore hedge funds investing in India.
• Regulatory focus on ESG (Environmental, Social, and Governance) investments, mandating sustainable finance disclosures.
• Growing impact of fintech & digital assets on fund structuring, requiring legal clarity on crypto-based investments.

With Mumbai being India’s financial hub, Bengaluru emerging as a startup investment center, New Delhi as the policy capital, and Ahmedabad as a growing financial services destination, fund managers and investors must ensure compliance with SEBI, RBI, and tax regulations.

Candour Legal is a leading funds & investment law firm in India, offering legal advisory services to fund managers, PE/VC firms, hedge funds, REITs, and high-net-worth investors (HNWIs).

Regulatory & Legal Framework Governing Funds & Investment in India:

The funds industry in India operates under multiple laws, tax policies, and compliance frameworks, covering fund structuring, taxation, foreign investment, and securities regulation.

Key Regulatory Authorities in Fund & Investment Law:

1. Securities and Exchange Board of India (SEBI) – AIF Regulations & Fund ComplianceSEBI is the primary regulatory authority overseeing investment funds in India, including:
   • Alternative Investment Fund (AIF) registration and compliance.
   • Venture capital, private equity, and hedge fund regulations.
   • Disclosure norms, investor protection guidelines, and taxation frameworks.

   Fund managers operating in Mumbai, Bengaluru, Ahmedabad, and New Delhi must ensure full SEBI compliance to avoid legal risks.

2. Reserve Bank of India (RBI) – Foreign Investment & Exchange Control RegulationsRBI regulates:
   • Foreign Direct Investment (FDI) in Indian investment funds.
   • FEMA compliance for offshore fund structures.
   • Cross-border remittances and foreign portfolio investments (FPIs).
3. Income Tax Department – Fund Taxation & ComplianceThe Income Tax Department enforces:
   • Capital gains taxation on fund investments.
   • Taxation of hedge funds, REITs, and InvITs.
   • Withholding tax regulations for foreign investors.

Key Laws Governing Investment Funds in India:

Investment firms, fund managers, and asset management companies must comply with various laws governing securities, taxation, and foreign investments.

1. 1. • Regulates Category I, II, and III AIFs (VC, PE, hedge funds).
      • Mandates investor disclosures, fund structuring guidelines, and exit strategies.

• Regulates offshore investments into Indian funds.
• Compliance requirements for foreign fund managers operating in India.

 

• The Income Tax Act, 1961 – Taxation of Funds & Investment Income
  • Taxation on carried interest for fund managers.
  • Applicability of Goods & Services Tax (GST) on fund management fees.
  • Tax benefits for foreign investors under double taxation treaties (DTAA).
• SEBI (Real Estate Investment Trusts & Infrastructure Investment Trusts) Regulations, 2014 – REIT & InvIT Compliance
  • Regulates real estate & infrastructure investment trusts in India.
  • New guidelines on retail investor participation & taxation benefits.
• Companies Act, 2013 – Corporate Governance & Fund Structuring
  • Regulates fund incorporation and investment vehicle structuring.
  • Ensures legal compliance in mergers, acquisitions, and fund exits.

 

Legal Challenges for Investment Funds in India:

The funds & investment industry in India faces several legal challenges, including:

• Stricter SEBI regulations on alternative investment funds (AIFs).
• Tax uncertainties in private equity & hedge fund structures.
• Foreign exchange compliance issues in offshore fund investments.
• ESG investment mandates & regulatory complexities in green finance.
• Legal risks in fintech & digital asset-based investment models.

Candour Legal provides regulatory guidance, fund structuring strategies, and compliance solutions for fund managers and investment firms in Ahmedabad, Bengaluru, Mumbai, New Delhi, and across India.

Why Choose Candour Legal for Funds & Investment Legal Services?

Candour Legal is a top investment law firm in India, specializing in:

• SEBI Compliance & Fund Registration – AIF structuring, SEBI approvals, and investor compliance.
• Private Equity & Venture Capital Fund Structuring – Legal advisory for PE/VC fund managers.
• Hedge Fund Compliance & Offshore Investment Structuring – Cross-border fund regulations.
• Real Estate & Infrastructure Investment Trusts (REITs & InvITs) – Legal due diligence and compliance.
• Investment Taxation & Foreign Investment Compliance – GST, capital gains tax, and FEMA guidelines.

Conclusion:

India’s investment funds sector is evolving rapidly, with increasing regulatory scrutiny on alternative investments, venture capital, and hedge funds. Businesses must ensure compliance with SEBI, RBI, and tax laws to operate legally.

Ahmedabad, Bengaluru, Mumbai, and New Delhi serve as major investment hubs, attracting private equity, venture capital, and foreign investors. Companies in these cities must align with India’s evolving investment laws to scale operations successfully.

If you are looking for a trusted funds & investment lawyer in India, Candour Legal is your go-to law firm for investment compliance, fund structuring, and regulatory advisory.

For expert legal assistance, contact Candour Legal – Your Trusted Funds & Investment Law Firm.