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The International Financial Services Centres Authority (IFSCA) has introduced a revised framework for Global/Regional Corporate Treasury Centres (GRCTCs) in GIFT IFSC, effective April 4, 2025. This updated framework brings several key regulatory enhancements and newly introduced provisions aimed at streamlining operations and strengthening oversight for these specialized financial entities.

The revisions build upon the erstwhile framework dated June 25, 2021, incorporating changes across various aspects of GRCTC operations, from permissible activities to corporate governance.

Key Changes in the Revised Framework:

• Expanded Permissible Activities: While the core permissible activities for GRCTCs largely remain the same, the revised framework includes key additions such as managing obligations of service recipients towards insurance and pension-related commitments, acting as a holding company, and managing relationships with financial institutions, investors, and counterparties. GRCTCs can also undertake any other treasury activity with prior intimation to the Authority.
• Broadened Definition of “Group Entity”: The definition of “group entity” has been expanded. Previously, it covered holding, subsidiary, associate companies, branches, joint ventures, or subsidiaries of a holding company to which it is also a subsidiary. The revised framework now also includes entities sharing a common brand name.
• Mandatory Substance Requirements: A significant new inclusion is the mandate for GRCTCs to employ at least five qualified personnel, based in IFSC, to undertake permissible activities. This includes the Head of Treasury and the Compliance Officer, who must be appointed before the commencement of operations. This contrasts with the erstwhile framework, which had no specific mention of substance requirements for GRCTCs beyond those applicable to finance companies generally.
• Flexible Service Recipients: While the erstwhile framework restricted permissible activities to only Group Entities domiciled in jurisdictions not identified as ‘High-Risk Jurisdictions subject to a Call for Action’ by FATF, the revised framework allows services to be undertaken for: Group Entities; Group Entities of the Parent; and Branches of such Parent or Group Entities. GRCTCs must maintain an updated list of all service recipients and provide it to IFSCA when requested.
• Time Limit for Commencement of Operations: The revised framework now explicitly requires GRCTCs to begin operations within six months of obtaining registration , a provision not present in the erstwhile framework.
• Revised Fee Structure: While the application fee (USD 1,000) and registration fee (USD 12,500) remain unchanged, the annual recurring fee has been doubled from USD 12,500 to USD 25,000.
• Enhanced Currency of Operations: The previous framework permitted operations only in freely convertible foreign currency, with Indian Rupee (INR) allowed solely for administrative expenses via a separate INR SNRR account. Transactions in non-freely convertible currencies were only permitted if directly linked to underlying trade flows of Group Entities and settled in freely convertible currency. The revised framework allows operations in “Any of the Specified Foreign Currency(ies)” and permits transactions outside IFSC in currencies other than Specified Foreign Currency(ies). Additionally, GRCTCs may now open an SNRR account with an authorized dealer in India (outside IFSC) under Schedule 4 of FEMA Deposit Regulations, 2016, for business transactions outside IFSC.
• Specific Corporate Governance Policy: Unlike the erstwhile framework which required compliance with general IFSCA Guidelines on Corporate Governance and Disclosure Requirements for a Finance Company , the revised framework mandates GRCTCs to have a Board-approved corporate governance policy clearly documenting governance arrangements. It also requires a Board-approved policy for undertaking permissible activities, including approval processes, financial limits, oversight/audit procedures, and other relevant control mechanisms.

Transition Period:

Existing GRCTCs are required to align with the new framework within six months from the date of its notification.

These changes reflect IFSCA’s continuous efforts to evolve its regulatory landscape, making GIFT IFSC a more robust and attractive destination for corporate treasury operations while ensuring sound governance practices.

The International Financial Services Centres Authority (IFSCA) has recently updated its Corporate Governance and Disclosure Requirements for finance companies operating within the Gujarat International Finance Tec-City (GIFT IFSC). In a significant development dated April 4, 2025, IFSCA carved out finance companies registered as Global/Regional Corporate Treasury Centres (GRCTCs) from the full applicability of its corporate governance framework, aiming to streamline regulations and enhance ease of doing business for these specialized entities.

The original framework, designed to ensure transparency, accountability, and robust management practices, lays down comprehensive governance and disclosure standards. These standards cover critical areas such as “fit and proper” criteria for management, detailed risk management policies, compliance functions, comprehensive disclosure requirements, and robust grievance redressal mechanisms.

Key Changes and Their Implications

The recent amendment specifically exempts finance companies operating as GRCTCs from both Part I (Generic Guidelines) and Part II (Detailed Guidelines) of the comprehensive governance framework. This revision is particularly notable given the unique operational nature of treasury centers.

• Tailored Regulation for GRCTCs: By exempting GRCTCs from the general governance framework, IFSCA acknowledges their distinct role within corporate structures. GRCTCs primarily serve as in-house banks for multinational corporations, centralizing fund management, intercompany lending, and financial risk management for their group entities. Their operations, while critical, differ significantly from those of traditional finance companies offering services to external clients.
• Reduced Compliance Burden: This exclusion is expected to significantly reduce the compliance burden on GRCTCs. Instead of adhering to the broader governance requirements designed for diverse finance companies, GRCTCs will now operate under a more specific and streamlined regulatory framework tailored to their treasury functions. This will allow them to focus more on their core activities of optimizing group-wide liquidity, managing financial risks, and facilitating inter-company transactions.
• Encouraging GRCTC Setup in GIFT IFSC: The move is a strategic step by IFSCA to make GIFT IFSC an even more attractive destination for multinational corporations looking to set up their global or regional treasury operations. By offering a more agile regulatory environment for these specialized units, IFSCA aims to draw more such centers to the IFSC, bolstering its position as a competitive international financial hub.
• Continued Focus on Prudence: While exempting GRCTCs from the general governance framework, it’s understood that IFSCA will continue to maintain appropriate prudential oversight to ensure the safety and soundness of these entities, in line with their specific risk profiles and activities. This reflects a balanced approach to regulation – one that is both facilitative and prudent.

This proactive regulatory update by IFSCA demonstrates its commitment to adapting the regulatory landscape to the evolving needs of the global financial industry. It aims to foster a more business-friendly environment within GIFT IFSC, attracting specialized financial activities and contributing to the growth of India’s international financial services ecosystem.

For companies considering establishing a finance company or a corporate treasury center in GIFT City, understanding these updated guidelines is crucial for efficient setup and operations.

Link to amendment circular: https://ifsca.gov.in/Viewer?Path=Document%2FLegal%2F02-guidelines-on-corporate-governance-and-disclosure-requirements-for-a-finance-company04042025061002.pdf&Title=Amendment%20to%20the%20%E2%80%98Guidelines%20on%20Corporate%20Governance%20and%20Disclosure%20Requirements%20for%20a%20Finance%20Company&Date=04%2F04%2F2025 

If you’re considering setting up a finance company or treasury centre in GIFT City, feel free to reach out at dhairya.c@treelife.in for a discussion.

In a significant move aligned with the Hon’ble Finance Minister’s Budget 2025 speech, the Ministry of Corporate Affairs (MCA) has released a draft notification proposing to expand the scope of fast-track mergers under Section 233 of the Companies Act, 2013. This initiative is a strategic response to the substantial backlog of cases at the National Company Law Tribunal (NCLT), with over 8,000 cases under the Companies Act, 2013 pending as of September 2024, highlighting an urgent need to streamline corporate restructuring processes.

The existing fast-track merger mechanism, while efficient, has had a limited scope. The proposed amendments aim to widen its applicability significantly, thereby reducing the burden on the NCLT and enhancing the overall ease of doing business in India.

Key Proposed Inclusions under the Fast-Track Route

The draft notification outlines several crucial categories of companies that will now be eligible for the fast-track merger process:

• Unlisted Companies with Limited Borrowings and No Default: Unlisted companies (excluding Section 8 companies, which are non-profit entities) will be able to pursue fast-track mergers if their borrowings are less than ₹50 crore and they have no record of default in repayment. This opens the fast-track route to a large segment of the corporate sector that currently has to undergo the longer NCLT-approved merger process.
• Holding Company with Unlisted Subsidiaries: The framework proposes to include mergers between a holding company (whether listed or unlisted) and one or more of its unlisted subsidiaries. Currently, only wholly-owned subsidiaries are explicitly covered under the fast-track route, and this expansion will provide greater flexibility for intra-group consolidations.
• Fellow Unlisted Subsidiaries within a Group: Mergers between unlisted subsidiaries of the same holding company (often referred to as “fellow subsidiaries”) will also be brought under the fast-track mechanism. This is a pragmatic step to simplify internal group restructuring, which typically presents lower risks compared to mergers involving unrelated entities.
• Cross-Border Mergers with Indian WOS: The draft proposes to integrate the merger of a foreign holding company into its Indian Wholly-Owned Subsidiary (WOS) within Rule 25, making it a self-contained fast-track route for eligible cross-border mergers. This is particularly relevant in the context of the growing “reverse flip” trend, where Indian-founded startups, previously domiciled abroad, are looking to shift their base back to India for strategic or investor-driven reasons. This streamlined process will facilitate such re-domestication.

Implications and Way Forward

This expansion of the fast-track merger framework is a welcome development. It is expected to:

• Reduce Regulatory Friction: By allowing more categories of mergers to bypass the lengthy NCLT approval process, the amendments will significantly reduce the time, cost, and complexity associated with corporate reorganizations.
• Improve Ease of Doing Business: The streamlined process will contribute to a more efficient and attractive business environment in India, encouraging both domestic and international companies to consider mergers and acquisitions for growth and consolidation.
• Enable Faster Intra-Group Consolidations: The inclusion of holding-subsidiary and fellow subsidiary mergers will allow corporate groups to consolidate their entities more rapidly, leading to operational efficiencies and better resource allocation.

The MCA has invited stakeholders to submit their comments on this draft notification until May 5, 2025, through its e-Consultation Module. This consultative approach ensures that the final framework is robust and addresses the practical needs of businesses.

This proactive step by the MCA reinforces the government’s commitment to judicial efficiency and creating a more agile and business-friendly regulatory landscape in India.

Source on pending appeals: Parliament Response, DECEMBER 17, 2024 https://sansad.in/getFile/annex/266/AU2450_7V12kR.pdf?source=pqars#:~:text=As%20per%20information%20provided%20by,one%20President%20and%2062%20members

The Securities and Exchange Board of India (SEBI) has reiterated a crucial warning to investors regarding unauthorized virtual trading platforms. While the advisory was initially issued on November 4, 2024, its relevance remains paramount in today’s rapidly evolving digital financial landscape. These platforms, often presenting as harmless fantasy trading games, paper trading simulators, or stock market competitions, utilize real-time or historical stock price data of listed companies to simulate trading activities.

Understanding SEBI’s Concern

These virtual trading platforms typically draw users in with the allure of prize-based competitions, the creation of virtual portfolios, or gamified trading experiences. They allow participants to “trade” using virtual money, mimicking the dynamics of actual stock market transactions.

However, SEBI’s primary concern stems from the fact that these platforms operate without any registration or oversight from the regulatory body. This lack of regulation translates into significant risks for unsuspecting users:

• Absence of Investor Protection: Users of these platforms are not afforded the same level of investor protection that is mandatory for dealings with SEBI-registered intermediaries. This means that if something goes wrong, there are no established regulatory safeguards to protect their interests.
• No Grievance Redressal or Dispute Resolution: In the event of a dispute, issue, or perceived unfair practice, participants have no recourse to SEBI’s robust grievance redressal or dispute resolution mechanisms. This leaves them vulnerable with limited avenues for complaint or resolution.
• Potential Misuse of Data: There is a considerable risk of personal and trading data being misused by unregulated platforms, given the absence of stringent data protection protocols typically enforced by SEBI for its registered entities.

A Recurring Warning

It’s important to note that this isn’t the first time SEBI has issued such a caution. A similar advisory was released in 2016, underscoring a persistent issue in the market. The latest advisory serves as a strong reminder that only SEBI-registered intermediaries are authorized to facilitate investment and trading activities in the Indian securities markets.

Key Takeaway for Investors

For investors, the message is clear: exercise extreme caution. If a platform promises risk-free stock market games, virtual trading, or prize-based competitions, it’s essential to think twice before engaging. While the immediate financial risk might seem minimal (as real money isn’t directly invested in the simulated trades), participation in such unregulated schemes can expose individuals to other financial risks, including the misuse of personal data and the absence of legal safeguards.

Stay informed, verify the credentials of any platform offering investment-related services, and always choose to engage with SEBI-registered intermediaries for your financial activities.

In a move set to provide greater operational flexibility for financial professionals, the Securities and Exchange Board of India (SEBI) has announced a significant relaxation in its advance fee provisions for SEBI-registered Investment Advisers (IAs) and Research Analysts (RAs). The changes, introduced via a circular issued yesterday, April 2, 2025, address long-standing requests from the industry for more practical fee structures.

Previous Limitations on Advance Fees

Prior to this circular, SEBI had placed strict limitations on the amount of advance fees that IAs and RAs could charge their clients:

• Research Analysts (RAs): Were restricted from charging advance fees for more than three months.
• Investment Advisers (IAs): Could not charge advance fees for periods exceeding six months.

These restrictions, while aimed at investor protection, sometimes limited the ability of professionals to offer comprehensive, long-term advisory and research services, and could create administrative overhead for both parties.

Key Changes Introduced by SEBI

The new circular introduces several key modifications to these provisions:

• Extended Advance Fee Period: Both Investment Advisers and Research Analysts can now charge advance fees for a period of up to one year, provided this arrangement is mutually agreed upon by the client. This allows for longer engagement terms and potentially reduces the frequency of billing cycles.
• Targeted Application of Fee Rules: Significantly, SEBI has clarified that its fee-related provisions, including fee limits and refund policies, will now primarily apply only to individual and Hindu Undivided Family (HUF) clients, with the exception of accredited investors.
• Bilateral Agreements for Specific Clients: For non-individual clients, accredited investors, and institutional investors, the fee structures will no longer be dictated by SEBI-mandated limits. Instead, these arrangements will be governed by bilateral contractual agreements between the IA/RA and the client, allowing for greater customization and negotiation based on the scale and complexity of the services.

Implications for the Industry and Clients

This relaxation is poised to have several positive implications:

• Increased Flexibility for Professionals: IAs and RAs will now have more leeway to structure their services and fee models, enabling them to offer more integrated and long-term recommendations. This aligns with industry demands for a more adaptive regulatory environment.
• Streamlined Operations: For both service providers and clients, longer advance fee periods can simplify administrative processes related to billing and payments.
• Client Vigilance Remains Key: While the changes offer flexibility, clients, particularly individual and HUF investors, must remain diligent. It is crucial for them to carefully review and understand the terms of any long-term fee commitments before agreeing to them. They should ensure that the fee structure aligns with the services they expect to receive and their financial planning needs.

SEBI’s move reflects an evolving approach to regulating financial services, balancing investor protection with the need to foster a dynamic and efficient market for financial advisory and research services.

Looking to set up an RIA / RA? Reach out to us for a detailed discussion at priya.k@treelife.in

In a significant diplomatic and economic maneuver, India has taken proactive steps to ease trade tensions with the United States and avert potential retaliatory tariffs. These measures, outlined in recent government actions, signal India’s commitment to fostering a more harmonious and collaborative trade relationship with its largest trading partner.

Abolition of the Equalization Levy (the “Google Tax”)

1. One of the most notable developments is India’s decision to remove the 6% equalization levy, often dubbed the “Google Tax.” 
2. This levy, introduced in 2016, applied to foreign digital companies generating revenue from Indian users without a physical presence in the country. U.S. tech giants such as Google and Meta had long viewed this tax as discriminatory, making it a persistent point of contention in bilateral trade discussions.
3. The removal of this levy, announced at the enactment stage of the Finance Bill 2025 and effective from April 1, 2025, is a direct response to U.S. concerns. This move aims to align India’s digital taxation framework with global consensus-driven approaches and facilitate smoother trade negotiations. 
4. The levy’s abolition is expected to reduce the tax burden on these digital companies and, potentially, lower advertising costs for Indian businesses.

Considering Tariff Reductions on U.S. Imports

1. In a further gesture of goodwill and strategic foresight, India is reportedly considering reducing tariffs on a substantial portion of U.S. imports, estimated to be valued at approximately $23 billion. 
2. This proactive measure seeks to preempt and mitigate the impact of potential U.S. retaliatory tariffs, which could otherwise affect a much larger volume of Indian exports, valued at an estimated $66 billion.
3. While the specifics of these tariff cuts are still under deliberation, discussions include a range of agricultural products such as almonds, pistachios, oatmeal, and quinoa. 
4. However, key domestic sectors like meat and dairy are expected to remain protected from these reductions, reflecting India’s efforts to balance trade liberalization with safeguarding its national interests.

Strategic Trade Diplomacy Ahead of Deadline

These concerted efforts underscore India’s commitment to de-escalating trade frictions and fostering stronger economic ties with the United States. By taking these preemptive actions ahead of the April 2 deadline for potential U.S. tariffs, India demonstrates a proactive and diplomatic approach to global trade challenges.

The ongoing discussions and proposed changes are indicative of a maturing trade relationship between the two democracies, emphasizing dialogue and mutual understanding to navigate complex global economic landscapes. As India continues to integrate into the global economy, such strategic moves will be crucial in shaping its international trade policies and alliances.
Source: https://www.reuters.com/world/india/india-eyes-tariff-cut-23-bln-us-imports-shield-66-bln-exports-sources-say-2025-03-25/

The Securities and Exchange Board of India (SEBI) is set to significantly streamline the process for SEBI-registered stock brokers looking to establish a presence in the Gujarat International Finance Tec-City (GIFT-IFSC). A recently released consultation paper proposes the removal of the current No Objection Certificate (NOC) requirement, a move anticipated to enhance the ease of doing business and encourage greater participation in the burgeoning international financial services center.

Under the existing regulatory framework, SEBI-registered stock brokers are mandated to obtain an NOC from the market regulator before they can float a subsidiary or enter into a joint venture to operate within GIFT-IFSC. This requirement has been identified as a potential hurdle for swift market entry and expansion.

Key Proposed Changes

SEBI’s new proposal aims to abolish this NOC requirement entirely. Instead, stock brokers will be permitted to offer their services in GIFT-IFSC through a Separate Business Unit (SBU). This significant shift is designed to alleviate compliance burdens and enhance ease of doing business.

Implications of the Proposal

The proposed changes carry several key implications for stock brokers and the GIFT-IFSC ecosystem:

• Seamless Market Entry: Stock brokers will be able to leverage their existing infrastructure and operational expertise to establish a presence in GIFT-IFSC with greater ease and efficiency. This could lead to a quicker setup time and reduced administrative overhead.
• Independent SBU Operations: While operating under the umbrella of the parent stock broker, the SBU in GIFT-IFSC will function independently. Crucially, it will be required to maintain an “arms-length relationship” with the broker’s Indian operations, ensuring regulatory distinctiveness.
• Different Grievance Redressal Mechanisms: It’s important to note that grievance redressal mechanisms applicable to Indian operations, such as SEBI Complaints Redressal System (SCORES) and the Investor Protection Fund (IPF), will not extend to these SBUs. This is because the SBUs will fall under the regulatory jurisdiction of the International Financial Services Centres Authority (IFSCA) within GIFT-IFSC, which has its own set of investor protection frameworks.
• Transition for Existing Entities: The proposal also includes provisions for existing subsidiaries and joint ventures already operating in GIFT-IFSC to transition into the SBU model, offering them the benefits of the simplified framework.

SEBI has actively sought feedback on this crucial proposal, inviting public comments until April 11, 2025. Interested stakeholders can access the detailed consultation paper and submit their comments directly through the official SEBI website: https://www.sebi.gov.in/reports-and-statistics/reports/mar-2025/consultation-paper-on-facilitation-to-sebi-registered-stock-brokers-to-undertake-securities-market-related-activities-in-gujarat-international-finance-tech-city-international-financial-services-cent-_92823.html

This move by SEBI underscores its commitment to fostering a more conducive and accessible environment for financial services within GIFT-IFSC, aligning with India’s broader vision of establishing a world-class international financial hub.

Have doubts? Speak to us at dhairya.c@treelife.in

Cyber threats are evolving, and for entities operating in GIFT IFSC, staying ahead is not just strategic, rather it’s essential. As GIFT IFSC grows into a global financial powerhouse, the complexity of cyber risks also intensifies. Recognizing this, the International Financial Services Centres Authority (IFSCA) has introduced the “𝐺𝑢𝑖𝑑𝑒𝑙𝑖𝑛𝑒𝑠 𝑜𝑛 𝐶𝑦𝑏𝑒𝑟 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝑎𝑛𝑑 𝐶𝑦𝑏𝑒𝑟 𝑅𝑒𝑠𝑖𝑙𝑖𝑒𝑛𝑐𝑒” aimed at safeguarding data, operations, and reputations.

Key Implications

• Every entity  registered with IFSCA (Regulated Entities / REs) must appoint a Designated Officer (like a CISO) to lead cyber risk management.
• Entities need to develop and regularly update a Cyber Security and Cyber-Resilience Framework tailored to their operations.
• Annual audits are now mandatory
• Cyber incidents to be reported within 6 hours, followed by a root cause analysis within 30 days.

Important Due Dates

• The framework comes into effect April 1, 2025.
• Annual audits to be completed and reported within 90 days of the financial year-end.

Entities exempt from this guideline

Certain entities, such as units with less than 10 employees, branches of regulated entities, and foreign universities, enjoy a 3-year exemption subject to specific conditions as under:

• REs shall adopt the Cyber Security and Cyber Resilience framework and IS Policy of its parent entity.
• The CISO of the parent entity shall act as the Designated Officer for the REs in IFSC.
• The parent entity of REs, in India or overseas, shall be regulated by a financial sector regulator in its home jurisdiction.

If you’re navigating these new regulations or setting up operations in GIFT IFSC, it’s crucial to align strategies early. Have questions or need guidance? Let’s connect at dhairya.c@treelife.in for a discussion.

Strengthening the Regulatory Landscape at GIFT IFSC

The International Financial Services Centres Authority (IFSCA) continues to enhance the regulatory landscape at GIFT IFSC, driving global competitiveness and ease of doing business. On February 26, 2025, IFSCA introduced key circulars and consultation papers aimed at providing greater clarity, easing compliance, and fostering innovation.

Key Regulatory Changes

i) Reduction in Interest on Late Payment of Fees
IFSCA has significantly reduced the interest rate on late fee payments from 15% per month to 0.75% per month. This reduction underscores the regulator’s commitment to promoting the overall IFSC ecosystem, easing compliance burdens while maintaining financial discipline​.

ii) Revised Aircraft Leasing Framework
IFSCA has revised its aircraft leasing rules to allow lessors in IFSCs to acquire aircraft from Indian manufacturers, subject to the following conditions:

• The aircraft should not be exclusively used by Indian residents or for domestic services.
• Acquisition is permitted if the manufacturer is not a group entity of the lessor.
• Sale and leaseback transactions are permitted for aircraft being imported into India for the first time.

This change strengthens India’s position as a global aircraft leasing hub.

iii) Mandatory FIU-IND FINGate 2.0 Registration
Regulated entities must register on the FIU-IND portal before commencing business (or within 30 days post-commencement). This step enhances compliance with AML/CFT regulations, reinforcing financial transparency at IFSC.

Consultation Papers

💠 Tokenization of Real-World Assets
IFSCA is exploring a regulatory framework to enable the issuance, trading, and settlement of tokenized assets (commodities, real estate, etc.). This aims to reduce transaction time, enhance liquidity, transparency, and accessibility​.

💠 Securitization by Overseas Insurers/Reinsurers
The consultation paper seeks stakeholder views on the proposed securitization framework for overseas insurers/reinsurers providing insurance coverage to IFSC-regulated entities. It focuses on ensuring financial stability and risk mitigation while promoting a globally competitive insurance and reinsurance market in the IFSC.

Need guidance on IFSC regulations? 

At Treelife, we help businesses navigate the GIFT IFSC and their strategic fit with expert legal, financial, and compliance solutions. Write to us at gift@treelife.in

The international tax landscape is off to a dynamic start in 2025. On one hand, President Donald Trump, after assuming office on 20th January, announced the U.S.’s withdrawal from its commitment to OECD’s global minimum tax, sparking uncertainties around Pillar 2 implementation worldwide. On the other hand, Indian tax authorities have provided a much-needed clarity on applicability of the Principle Purpose Test (PPT) provisions under tax treaties.

What is PPT? 

The Principle Purpose Test is an anti-abuse measure introduced as part of the OECD’s BEPS Action Plan 6. It allows tax authorities to deny treaty benefits if it is reasonable to conclude that one of the principal purposes of a transaction or arrangement is to secure tax benefits under a treaty, unless such benefits align with the object and purpose of the treaty. By targeting only arrangements with the primary intent of tax avoidance, PPT ensures that legitimate tax planning within the framework of tax treaties remains unaffected.

CBDT has issued Circular No. 1 of 2025, on 21 January, 2025 providing critical clarifications on invocation of PPT provisions under tax treaties, offering relief to genuine cases while reaffirming India’s commitment to curbing treaty abuse.

Key highlights from the CBDT circular: 

1️) Prospective Application: 

PPT provisions apply prospectively. For DTAAs updated bilaterally, the PPT is effective from the entry into force of the treaty or protocol. For treaties modified through the MLI, the date is determined under Article 35 of the MLI.

2️) Grandfathering provisions: 

Grandfathering clauses in DTAAs with countries like Cyprus, Mauritius, and Singapore shall remain unaffected by PPT provisions and would continue to operate under the specific terms of DTAA.

3️) Supplementary Guidance: 

Tax authorities may refer to the UN Model Tax Convention Commentary (2021 update) and BEPS Action Plan 6 Final Report for necessary guidance while deciding on the invocation and application of the PPT provision, subject to India’s reservations, wherever applicable.

This circular strikes a balance by targeting treaty abuse while safeguarding legitimate tax planning under applicable treaty provisions. At a time when global developments bring uncertainty, India’s proactive approach provides much-needed clarity and relief for stakeholders.

With these contrasting developments, 2025 is shaping up to be a pivotal year for international tax. What are your thoughts on these changes?

The International Financial Services Centres Authority (IFSCA) on 19 February 2025, has notified the updated IFSCA (Fund Management) Regulations, 2022. Most of them are in line with the changes proposed in December 2024.

Here’s a quick summary of the new provisions for funds in GIFT IFSC:

Non-retail schemes (Venture Capital Schemes and AIFs)

• Minimum scheme corpus reduced to USD 3 Mn from USD 5 Mn. For open-ended schemes, investment can commence at USD 1 Mn, with the minimum corpus achieved within 12 months.
• FME contribution in schemes increased to 100% (subject to the condition that the FME/its associates and their UBOs are non-residents in India, and the scheme does not invest more than 1/3rd of its corpus in any single company and its associates).
• Joint Investments by related individuals now permitted

Manpower requirements for FMEs

• FMEs managing AUM exceeding USD 1 Bn must appoint an additional KMP.
• All employees of FMEs will be required to undergo certifications from institutions prescribed by IFSCA
• The requirement for obtaining prior approval from IFSCA for appointing Key Managerial Personnel (KMPs) has been removed. Going forward, FMEs only need to inform IFSCA about such appointments after they are made.
• Following amendments made to PO / KMP’s educational qualification and experience requirements: a) The required post-graduate diploma duration has been reduced from 2 years to 1 year. b) CFA or FRM certifications are now accepted as educational qualifications. c) If a PO has 15 years of relevant work experience, a graduate degree is enough. d) For the 5-year experience requirement, consultancy experience in fund management (e.g., deal due diligence, transaction advisory) is now considered. However, only up to 2 years of consultancy experience will count, and the remaining 3 years must be in other specified areas as per the regulations.

Retail Schemes

• Track record evaluation criteria for Registered FMEs (Retail) expanded to consider group experience collectively
• Listing of close-ended schemes on recognized exchanges is now optional if the minimum investment per investor is at least USD 10,000

Others

• Funds in IFSC (subject to exceptions) now mandated to appoint a custodian
• Temporary investments may be made in bank deposits / overnight schemes
• Minimum ticket size for PMS reduced to USD 75,000 from USD 150,000

IFSCA has amended the circular on permissible transactions through Special Non-Resident Rupee (SNRR) accounts to bring much-needed regulatory clarity and flexibility for IFSC units.

Previously, IFSC units faced restrictions on using SNRR accounts outside the IFSC for business-related transactions. Now, pursuant to this circular:

• IFSC units now have the flexibility to manage business-related expenses in INR outside IFSC, i.e., they may also receive funds in INR like government incentives or sales proceeds.
• Financial service-related transactions such as receipt of fees shall continue to stay within IFSC banking units.

This step simplifies operations for IFSC units and reinforces India’s growing role as a global financial hub. A welcome move to address industry needs!

Link to circular: https://lnkd.in/dpPx-SQ2

SEBI has released a consultation paper proposing revisions to Regulation 17(a) of the SEBI (Alternative Investment Funds) Regulations, 2012. The move aims to address concerns raised by credit-focused Category II AIFs, whose investment opportunities in unlisted debt securities have been significantly impacted by recent changes in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Current Issues:

Owing to the introduction of Regulation 62A of SEBI (LODR) Regulations, 2015, all listed entities (entities with equity shares, non-convertible debt, preference shares, perpetual instruments, Indian depository receipts, securitized debt, mutual fund units, or other SEBI approved securities listed on any of the recognized stock exchanges) were required to:

• List all subsequent NCD issuances from January 1, 2024 onwards.
• List any previously unlisted NCDs issued post-January 1, 2024, within 3 months of any new listed issuance.

This significantly restricted the availability of unlisted debt securities, making it difficult for Category II AIFs to comply with their >50% unlisted securities investment mandate.

Proposed Amendment by SEBI:

To provide greater flexibility while ensuring that AIFs continue to assume meaningful credit risk, SEBI proposes the following revision to the investment norms for Category II AIFs: “Category II Alternative Investment Fund to invest more than 50% of their total investible funds in unlisted securities, and/or listed debt securities having credit rating ‘A’ or below, directly or through investment in units of other AIFs.”

This change would allow Category II AIFs to meet the >50% “primarily” threshold by investing in a combination of unlisted securities and lower-rated listed debt, ensuring continued capital flow to businesses that lack access to traditional funding sources.

SEBI is inviting public comments on this proposal until February 28, 2025. Share your views here: https://lnkd.in/dukSc3Mi

SEBI had earlier mandated that Alternative Investment Funds (AIFs) must hold their investments in dematerialised form as per its January 12, 2024, circular. Given industry feedback and implementation challenges, SEBI has now extended the deadlines, providing AIFs with more time to comply. The revised timelines to comply with compulsory dematerialisation requirements are as under:

1. New Investments: The mandatory dematerialisation requirement for new investments by AIFs will now be effective from July 1, 2025 (previously October 1, 2024). This means any investment made on or after this date must be held in dematerialised form, ensuring greater transparency and ease of transaction.
2. Existing Investments: AIFs holding investments that require dematerialisation must comply by October 31, 2025 (earlier January 31, 2025). This extension gives AIFs additional time to transition their holdings into a dematerialised format while maintaining regulatory compliance.
3. Exemption for Certain AIF Schemes: AIF schemes with tenure ending on or before October 31, 2025, are exempt from this requirement (previously, the exemption was only for schemes ending on or before January 31, 2025). This provides relief for funds nearing maturity.

These regulatory relaxations aim to provide AIFs with a smoother transition period while ensuring that compliance requirements are met efficiently.

Link to SEBI circular dated 14 February 2025: https://lnkd.in/dW2-b9Ye

The Reserve Bank of India (RBI) has introduced further liberalizations in Foreign Direct Investment (FDI) rules through its latest Master Direction on Foreign Investment, dated January 20, 2025.

Key changes:

1. Flexible Acquisition Options for FOCC: Previously, Foreign Owned and Controlled Corporations (FOCCs) with over 50% foreign shareholding investing in another Indian entity for downstream investments were required to remit the entire deal value upfront. The revised framework introduces much needed flexibility, aligning with the standard FDI provisions:

a) Deferred payment – 25% of the transaction value may be deferred over a period of 18 months.

b) Share Swaps – downward investment through share swaps is now permissible i.e. issue of its own shares in lieu of receipt of shares of the investee company.

2.Tenor Flexibility for CCD/CCPS: The tenor of Compulsorily Convertible Debentures (CCDs) and Compulsorily Convertible Preference Shares (CCPS) can now be amended in accordance with the Companies Act, 2013. This is especially beneficial when share conversion needs to be postponed due to fluctuating market conditions.

These changes significantly enhance regulatory clarity and operational flexibility for M&A and investments. This would aid in fostering global-local partnerships, boost investor confidence, and catalyze growth for businesses across India.

What does this mean for you? Let’s connect at dhairya.c@treelife.in for a discussion.

Link to the updated Master direction on Foreign Investment – https://lnkd.in/dUC9sxUD 

IFSCA vide circular dated 11 July 2024, allowed Resident Individuals to open Foreign Currency bank Accounts (FCA) with IBUs in IFSCs for all permitted capital and current account transactions. Further to the same, owing to operational challenges IBUs were unable to open FCA for Resident Individuals.

Accordingly, in order to provide guidelines to IBUs for opening and maintaining FCAs for Resident Individuals, IFSCA issued a circular on 10 October 2024 providing certain clarifications.

However, IFSCA has now issued an updated circular on 13 December 2024 superseding the earlier circular providing following key guidelines / clarifications:

1) Resident individuals are permitted to deposit unutilized funds from their FCAs in Fixed Deposits, provided the tenure of such deposits does not exceed 180 days.

2) Resident individuals are allowed to remit funds directly into their FCAs from locations other than onshore India provided that such remittance represents funds duly remitted earlier under LRS or income earned on the investments made from funds duly remitted earlier under LRS.

3) IBUs are also encouraged to facilitate the opening of FCAs digitally through internet and mobile banking platforms, ensuring a smoother customer experience.

These updates provide much-needed operational clarity for IBUs, ensuring smoother processes for FCA opening for resident individuals while aligning with IFSCA’s regulations and facilitating greater flexibility.

Reach out to us at dhairya.c@treelife.in for a discussion.