GIFT City–IFSC: India’s Global Finance Gateway Unwrapped

Where global capital meets tax-friendly shores—fuelling a world-class financial hub in India’s own backyard.

What distinguishes GIFT City–IFSC is its targeted income-tax incentives and a bespoke regulatory framework designed to attract financial institutions, startups, international investors, and professionals.

Introduction

The Gujarat International Finance Tec-City (“GIFT City”) is home to India’s first International Financial Services Centre (“IFSC”)—a jurisdiction conceived to compete with global financial hubs such as Singapore and Dubai, while operating on Indian soil. What distinguishes GIFT City–IFSC is its targeted income-tax incentives and a bespoke regulatory framework designed to attract financial institutions, startups, international investors, and professionals.

From profit-linked tax holidays and capital gains exemptions to access to double taxation avoidance treaty benefits, GIFT City offers package of fiscal advantages that materially reduce the cost of conducting international financial business from India. Coupled with unified regulatory authority—the International Financial Services Centres Authority (“IFSCA”) and smart-city infrastructure, GIFT City is positioning itself as “gateway to global finance” within India.

This article examines the broad framework of GIFT City–IFSC with particular focus on its income-tax regime and regulatory structure and analyses why it has emerged as a magnet for businesses ranging from fintech startups to multinational banks and investment funds.

A World of Tax Incentives in One City

The tax regime applicable to IFSC units is one of GIFT City’s principal attractions. Through combination of exemptions and concessional tax rates, the Government has sought to make IFSC competitive with offshore financial centres, while retaining regulatory oversight.

Key income-tax incentives include:

• 10-Year Tax Holiday - Units licensed in the IFSC are eligible for 100% income-tax deduction for any 10 consecutive years out of the first 15 years of operation under section 80LA of the Income-tax Act, 1961 (“the IT Act”). This profit-linked incentive allows IFSC entities to strategically choose the most beneficial 10-year block.
• Concessional MAT / AMT - Where the tax holiday is not availed or has expired, IFSC units are subject to a reduced Minimum Alternate Tax (“MAT”) / Alternate Minimum Tax (“AMT”) rate of 9% (plus applicable surcharge and cess), compared to the standard rates applicable elsewhere in India, thereby improving cash flows and long-term profitability.
• Transaction-Level Tax Exemptions - No Securities Transaction Tax (“STT”), Commodities Transaction Tax (“CTT”) or stamp duty is levied on trades executed on IFSC stock exchanges. Further, capital gains arising to non-residents from transfer of specified securities on recognised IFSC exchange are exempt, substantially reducing transaction costs for global investors.
• GST Neutrality for Offshore Services - Services provided by IFSC units to offshore clients or to other IFSC/SEZ units, as well as services received by IFSC units are treated as zero-rated under the Goods and Services Tax regime, ensuring that cross-border financial services are not burdened with indirect taxes.
• Tax Neutrality for Non - Residents - The IFSC framework ensures tax efficiency for foreign investors. For instance, interest paid by IFSC banking units to non-resident lenders is exempt from Indian tax, facilitating cost-effective cross-border financing. Dividends distributed by IFSC entities to non-resident shareholders are subject to concessional withholding, as prescribed under the IT Act.
• Double Taxation Relief - India’s extensive network of Double Taxation Avoidance Agreements (“DTAAs”) further enhances certainty. Income earned through IFSC structures can generally be repatriated with limited or no additional tax in the investor’s home jurisdiction, subject to treaty provisions.

While these incentives are subject to prescribed conditions and sunset timelines, the Government has periodically extended eligibility windows, providing businesses with sufficient lead time to establish operations and avail the benefits.

Overall, GIFT City’s fiscal framework significantly reduces effective tax costs for eligible businesses and investors, while ensuring compliance with domestic and international tax norms.

A Unique Regulatory Structure: SEZ Meets Unified Regulator

Beyond taxation, GIFT City–IFSC derives its appeal from tailored regulatory architecture that combines the benefits of Special Economic Zone with single-window regulatory mechanism.

• SEZ Foundation - The IFSC is located within multi-service SEZ notified under the SEZ Act, 2005, and is treated as deemed foreign territory for specified regulatory purposes facilitating cross-border financial activity.
• Company Law and Legal Framework - Entities operating in IFSC are governed by Indian law, subject to targeted relaxations. Amendments to statutes such as the Companies Act enable branches of foreign companies and other flexible structures to operate within IFSC. Units may be established as companies, LLPs, trusts (for funds), or branches of foreign entities.
• Unified Regulator (IFSCA) - IFSCA acts as a consolidated regulator for banking, capital markets, insurance and fund management activities in IFSC, reducing regulatory fragmentation and improving ease of doing business.

In effect, GIFT City offers the flexibility associated with offshore financial centres, while maintaining regulatory oversight aligned with international standards.

Attracting Startups and Fintech Innovation

While traditionally associated with banks and funds, GIFT City is increasingly emerging as destination for fintech and financial-services startups with global ambitions. The combination of tax incentives, regulatory flexibility and access to international capital makes IFSC attractive for innovation-driven enterprises.

Domestic startup incentives have also been extended to IFSC. Notably, eligible startups can avail the three-year tax holiday under section 80-IAC of the IT Act, subject to prescribed conditions and timelines.

Startups in fintech, regtech and allied sectors can operate from globally oriented jurisdiction, raise foreign currency funding and serve international clients—while remaining physically located in India.

Global Funds and Investors: India’s Onshore Alternative to Offshore Jurisdictions

Historically, international investors have relied on jurisdictions such as Mauritius or Singapore for India-focused fund structures. GIFT City–IFSC is now emerging as a credible alternative.

Key fund-specific advantages include:

• Pass-Through Taxation - Category I and II Alternative Investment Funds (“AIFs”) in IFSC enjoy tax pass-through status, eliminating fund-level taxation and ensuring tax is levied only at the investor level.
• Currency and Repatriation Flexibility - IFSC funds operate in foreign currency with minimal restrictions on capital inflows and outflows, offering greater flexibility compared to domestic fund structures.
• Fund Re-domiciliation - The regulatory framework permits relocation of offshore funds to IFSC without triggering capital gains tax, subject to prescribed conditions, encouraging India-focused funds to shift domicile closer to the underlying market.

Conclusion: Embracing the Future of Finance in GIFT City

In a relatively short span, GIFT City–IFSC has evolved from a policy initiative into functioning international financial ecosystem. Its zero-to-low tax regime, streamlined regulatory framework and strategic geographic location position it as a vital conduit between global capital and India’s growth story.

With sustained government support and continued regulatory refinement, GIFT City–IFSC is well placed to expand its global footprint. It reflects a forward-looking India—confident, competitive and increasingly integrated with global finance.

As the saying goes, the future belongs to those who prepare for it today and GIFT City represents India’s measured and deliberate preparation for the future of international finance.

Disclaimer – The views expressed in this article are the personal views of the author and are purely informative in nature.