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India’s ambition to establish itself as a global financial powerhouse is exemplified by the rise of GIFT City (Gujarat International Finance Tec-City)—India’s first operational International Financial Services Centre (IFSC). Designed as a hub for financial innovation and international trade, GIFT City offers unparalleled advantages to businesses, particularly in the domains of tax benefits, regulatory ease, and global market access.
In this blog, we explore the benefits of doing business in GIFT City, dive into the range of tax exemptions in GIFT City, and assess how these factors collectively position GIFT City as a promising destination for global and domestic enterprises alike.
Why GIFT City?
Established as a greenfield smart city between Ahmedabad and Gandhinagar, GIFT City offers futuristic infrastructure and a policy ecosystem tailored for international business. It hosts India’s only IFSC, where businesses can engage in cross-border financial services, largely shielded from the conventional restrictions of the domestic economy.
1. Tax Advantages in GIFT City
The most compelling benefit of business in GIFT City lies in its tax-friendly framework. The government of India, through proactive policy-making, has created an exceptionally favorable environment for financial institutions, fintech firms, insurance companies, and other global enterprises.
Income Tax Exemptions
Units registered in the IFSC are eligible for:
- 100% income tax exemption for 10 consecutive years out of 15 years of operation.
- This applies to profits from core financial services such as banking, capital markets, insurance, fund management, and more.
🡪 Read the official GIFT City tax guide
Minimum Alternate Tax (MAT) Relief
- MAT is reduced to 9% for IFSC units (compared to 15% elsewhere).
- Businesses set up as partnerships or LLPs are fully exempt from MAT.
GST & Other Indirect Tax Benefits
- No GST on services received by IFSC units or provided to offshore clients.
- No Stamp Duty on instruments executed by IFSC units.
- No Commodity Transaction Tax (CTT) and Securities Transaction Tax (STT) for trades made in GIFT exchanges.
Extended Tax Breaks for New Sectors
Recent Union Budgets have extended tax incentives until March 31, 2030, and included newer sectors like aircraft and ship leasing. For example, dividends paid by ship leasing units in the IFSC are fully exempt from tax.
📌 According to Money control, these incentives are designed to attract billion-dollar shipping and aircraft financing companies to Indian soil.
2. Regulatory Ease
Navigating India’s complex regulatory environment can be a challenge for global firms. However, one of the lesser-known but powerful benefits of business in GIFT City is the presence of a unified, forward-thinking regulator: the International Financial Services Centres Authority (IFSCA).
Simplified Compliance Framework
- The IFSCA is India’s only unified regulator for banking, insurance, capital markets, and fintech in the IFSC.
- A single-window clearance mechanism cuts red tape, ensures faster approvals, and offers clarity on policy.
FEMA & Liberalized Forex Rules
- Units in GIFT IFSC are treated as non-residents under FEMA, enabling free movement of capital and currencies.
- Transactions denominated in foreign currency (USD, EUR, etc.) are allowed, with no exposure to exchange controls applicable to domestic entities.
Ease for Global Fund Managers
- Global hedge funds, VC/PE firms, and asset managers can set up Category III AIFs with tax neutrality.
- No withholding tax on interest payments made to non-residents.
3. Global Market Access
Being an IFSC, GIFT City bridges India’s domestic economy with global financial markets. Businesses in GIFT City can access international clients, investments, and talent—without the regulatory hurdles of mainland India.
Dual Listing & Trading Platforms
- GIFT City hosts two international stock exchanges—India INX and NSE IFSC—which offer 22-hour trading, facilitating global investor participation.
- Companies can issue Masala Bonds, foreign currency bonds, or raise ECBs (External Commercial Borrowings) with ease.
Strategic Location
- GIFT City’s proximity to Ahmedabad Airport and major highways makes it a strategic logistics and operations hub for cross-border businesses.
📊 According to Incorp Advisory, businesses can reduce operational costs by over 20% compared to Tier 1 cities like Mumbai or Bengaluru.
Challenges to Consider
While GIFT City offers many advantages, businesses should weigh certain challenges:
Developing Ecosystem
- As a new financial hub, GIFT City is still developing its complete financial ecosystem. Some infrastructure and service providers may take time to fully scale.
Talent Pool Availability
- Although the government is investing in skill development programs, finding senior-level global financial professionals locally may take time.
Sector-Specific Approvals
- Despite the single-window clearance, some industry-specific approvals may still involve coordination with domestic regulators (e.g., RBI, IRDAI).
Conclusion
The benefits of business in GIFT City, particularly the tax exemptions, regulatory ease, and access to global markets, make it an unmatched proposition in India’s financial landscape. For businesses seeking a jurisdiction that combines India’s growth story with international flexibility, GIFT City presents an ideal destination.
Whether you’re a startup, a multinational financial institution, or a fund looking to tap into Asia’s emerging market potential—GIFT City offers not just cost advantages, but strategic access to international opportunities with Indian roots.
Interested in setting up in GIFT City? Reach out to FinGuru India for expert advisory and end-to-end compliance support.
Related Post:
What is GIFT City? A Complete Guide to India’s First Smart Financial Hub
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