The Ministry of Commerce and Industry, Department of Commerce, has notified the Special Economic Zones (Fourth Amendment) Rules, 2026, through Notification No. G.S.R. 895(E), dated October 15, 2026, introducing amendments to the Special Economic Zones Rules, 2006. Issued in exercise of powers conferred under Section 55 of the Special Economic Zones Act, 2005, the notification amends Rules 18, 19, 21B and 22 to provide revised regulatory provisions for funds, fund management entities and units operating in International Financial Services Centres (IFSCs). The amended rules came into force on the date of their publication in the Official Gazette.
Under the amendment to Rule 18(2), the Government has simplified the requirements relating to provisional offers of space and lease documentation for funds established in International Financial Services Centres. The notification provides that a provisional offer of space confirmed in writing by the Developer for the Fund Management Entity (FME) will also be considered a valid provisional offer of space for the fund concerned. Similarly, a lease deed executed by the Fund Management Entity will be treated as the lease deed of the corresponding fund. These provisions establish a common documentation framework for funds and their fund management entities, reducing the requirement for separate space-related documentation.
The amendment further clarifies that the expressions “Fund Management Entity” and “fund” will carry the meanings assigned to them under Regulation 2 of the applicable International Financial Services Centres Authority Regulations, 2025. The term “International Financial Service Centre” will have the meaning assigned under Section 3(g) of the International Financial Services Centres Authority Act, 2019, and the rules or regulations made thereunder.
In a significant regulatory clarification, the amendment to Rule 19(4) provides that, for a unit established in an International Financial Services Centre, the first recognition, registration, licence or authorisation granted in its final form by the International Financial Services Centres Authority (IFSCA) will be considered the commencement of service activity. The date on which such recognition, registration, licence or authorisation is granted will be treated as the commencement date of the unit’s service activity. The notification further specifies that this commencement date will remain unchanged even if the recognition, registration, licence or authorisation on the basis of which it was determined subsequently ceases to be valid.
The Government has also revised the provisions governing the renewal of Letters of Approval (LoA) for units operating in International Financial Services Centres. Under the amendment to Rule 19(6B), renewal decisions will be based on the recommendations of the IFSCA, taking into account employment generated by the unit, instances of violations of applicable statutes relating to its functioning, and cases of default, if any, in statutory payments. The revised framework introduces specified criteria for assessing the renewal of approvals for IFSC units.
The notification also substitutes Rule 21B of the Special Economic Zones Rules, 2006, introducing revised provisions for units engaged in aircraft or ship leasing activities. Under the amended rule, an IFSC unit authorised to undertake aircraft or ship leasing, or a person intending to establish such a unit, may be permitted by the IFSCA to operate without maintaining a separate office. Such units or persons may utilise office space, manpower or both from another authorised aircraft or ship leasing unit or an approved Trust and Company Service Provider, subject to the conditions and approvals prescribed by the IFSCA.
The amended provisions further specify that sharing office space or manpower with a Trust and Company Service Provider will be permitted only where the provider is rendering, or intends to render, services to the eligible person concerned. In cases where office sharing is permitted under Rule 21B, a separate provisional offer of space and lease deed will not be required. Instead, the provisional offer of space and lease deed of the unit with which office space is being shared will be sufficient for the purposes of Rule 18. These changes are expected to provide greater operational flexibility to eligible aircraft and ship leasing businesses in IFSCs.
Additionally, the amendment to Rule 22(3) introduces an exemption for funds established in International Financial Services Centres by specifying that the provisions contained in the said sub-rule will not apply to such funds. This exemption, together with the revised space and lease documentation requirements under Rule 18, provides a differentiated regulatory framework for funds operating in IFSCs.
The amendments are expected to facilitate the establishment and operation of funds, fund management entities and aircraft and ship leasing units within International Financial Services Centres by simplifying specified documentation requirements and providing flexibility in the utilisation of office infrastructure and manpower. At the same time, the provisions relating to commencement of service activities and renewal of Letters of Approval establish greater regulatory clarity and link renewal decisions to defined operational and statutory compliance parameters.
The Notification can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/10/Special-Economic-Zones-Fourth-Amendment-Rules-2026.pdf
