India Revises SEZ Rules to Support IFSC Funds, Aircraft and Ship Leasing

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Dated: 27.10.2026

India Revises SEZ Rules to Support IFSC Funds, Aircraft and Ship Leasing

India’s proposed Special Economic Zones (Fourth Amendment) Rules, 2026 simplify establishment and operating requirements for units in International Financial Services Centres (IFSCs), especially investment funds and aircraft or ship leasing businesses.

Overview

Issued by the Ministry of Commerce and Industry under the Special Economic Zones Act, 2005, the notification amends the Special Economic Zones Rules, 2006. The changes take effect when published in the Official Gazette.

The amendments align SEZ procedures more closely with the regulatory framework of the International Financial Services Centres Authority (IFSCA). Their practical purpose is to reduce duplicative documentation, clarify when an IFSC unit has commenced operations, and make approval renewals more responsive to regulatory performance.

Easier space and lease documentation for IFSC funds

A fund established in an IFSC will receive more flexible treatment for premises-related documentation.

Under the amended Rule 18:

A developer’s written confirmation of a provisional offer of space to a fund management entity (FME) will be treated as the provisional offer of space for the fund itself.
A lease deed executed by the FME for that fund will be treated as the lease deed of the fund.

This recognizes the operational reality that an FME commonly establishes and administers a fund. Rather than requiring parallel space and lease documents in the fund’s own name, the rules permit the fund to rely on the FME’s corresponding arrangements.

The meanings of “fund management entity” and “fund” will follow the International Financial Services Centres Authority Regulations, 2025. The term “International Financial Service Centre” will follow the International Financial Services Centres Authority Act, 2019 and related rules or regulations.

A clearer start date for IFSC service units

The amendment introduces a specific test for determining when a unit in an IFSC begins its service activity.

For an IFSC unit, the commencement date will be the date on which IFSCA grants its first final recognition, registration, licence or authorisation, regardless of the label used for that approval. This provides a regulatory milestone that can be used consistently for SEZ compliance purposes.

Importantly, that commencement date does not change if the particular IFSCA recognition, registration, licence or authorisation later stops being valid. In effect, the original grant establishes the historic date of commencement permanently.

Renewal of Letters of Approval tied to regulatory performance

For IFSC units, renewal of a Letter of Approval (LoA) will be decided based on IFSCA’s recommendations. The assessment will focus on three criteria:

Employment generated by the unit.
Violations of applicable laws governing the unit’s functioning.
Defaults in statutory payments, if any.

This moves the renewal process toward an outcome-based approach. Units that create employment and maintain a sound compliance record are better positioned for LoA renewal, while legal breaches and overdue statutory obligations become explicit risk factors.

Shared resources for aircraft and ship leasing units

The substituted Rule 21B creates a more flexible operating model for aircraft and ship leasing businesses in an IFSC.

An authorised leasing unit, or a person intending to establish one, may use the office space, manpower, or both, of another authorised aircraft or ship leasing unit or a Trust and Company Service Provider (TCSP), where IFSCA permits the arrangement.

There is an important condition: where resources are shared with a TCSP, that TCSP must be providing, or intending to provide, services to the leasing entity using the shared resources.

A leasing entity approved to share resources will not need its own separate provisional offer of space or lease deed. The space offer and lease deed of the unit whose premises are shared will satisfy Rule 18 requirements.

This is particularly significant for new leasing businesses. It can lower initial administrative and infrastructure burdens while preserving IFSCA oversight of the arrangement.

Exemption for IFSC funds under Rule 22

The amendment also provides that the requirements in Rule 22(3) will not apply to a fund set up in an IFSC. Combined with the new Rule 18 treatment, this creates a tailored compliance route for IFSC fund structures instead of applying requirements designed for more conventional SEZ unit arrangements.

Business impact

The amendments are designed to make IFSC-based structures easier to establish and administer without removing regulatory accountability.

Fund sponsors and FMEs gain clearer authority to use FME-level space and lease arrangements for funds.
IFSC service units receive a definitive commencement trigger based on final IFSCA approval.
Existing IFSC units face a more transparent LoA renewal framework centred on employment, legal compliance and statutory-payment discipline.
Aircraft and ship leasing businesses can operate through approved shared-office or shared-manpower arrangements, reducing duplication during setup.

Overall, the rules reinforce IFSCA as the central regulatory reference point for IFSC operations while adapting SEZ processes to the way funds and leasing businesses are actually structured and run.

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Source: Ministry of Commerce and Industry

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