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The Gujarat International Finance Tec-City, commonly referred to as GIFT City, stands as a testament to India’s vision to create a world-class financial and IT services hub. Designed to compete with global financial centres, GIFT provides state-of-the-art infrastructure, facilities, and operational ease for institutions and corporations. One of the major attractions of GIFT City is its tax framework which has been designed to encourage businesses to set up shop there.
TAX FRAMEWORK
- Income-tax
- Direct Tax:
Units in IFSC:
- Enjoy a 100% tax exemption for 10 consecutive years out of 15 years.
- Minimum Alternate Tax (MAT) for companies or Alternate Minimum Tax (AMT) is levied at 9% of book profits for others set up as a unit in IFSC. However, MAT is not applicable to companies in IFSC choosing the new tax regime.
- Dividend income given out by a Company in IFSC will be taxed in the hands of the shareholder.
- Dividend obtained by non-residents from an IFSC unit is taxable at a concessional rate of 10% plus the applicable surcharge and cess.
- No surcharge or health and education cess applies to certain incomes earned by specific funds in the IFSC.
Investors:
- Interest income paid to non-residents on money lent to IFSC units is not taxable. For Long Term Bonds and Rupee Denominated Bonds listed exclusively on a recognized stock exchange in IFSC, the tax rates vary:
- Issuance before 01 July 2023 is taxed at a lower rate of 4%.
- Issuance on or post 01 July 2023 is taxed at 9%.
- Transfers of particular securities* listed on IFSC exchanges by a non-resident or Category III AIF located in IFSC are not treated as transfer, meaning gains accruing are not chargeable to tax in India.
- Income from a variety of non-resident transactions in IFSC, such as on transfer of non-deliverable forward contracts or offshore derivative instruments or over-the-counter derivatives or distribution of income on offshore derivative instruments entered with an Offshore Banking Unit of an IFSC, are exempt from tax.
- Income obtained by a non-resident from a portfolio in IFSC that accrues or arises outside India is also exempt from tax.
*Â Specified securities include Bond, GDR, Foreign currency denominated bond, Rupee- denominated bond of an Indian company, Derivatives, Unit of a Mutual Fund, Unit of a business trust, Unit of Alternative Investment Fund and Foreign currency denominated equity share of a company
- Goods and Services Tax (GST)
Units in IFSC:
- No GST is levied on services received by a unit in IFSC.
- GST is, however, applicable on services provided to Domestic Tariff Area (DTA).
Investors:
- All transactions carried out in IFSC exchanges are exempt from GST.
- Other taxes & duties
Units in IFSC:
- State Subsidies include relief on lease rental, Provident Fund (PF) contribution, and electricity charges.
Investors:
- Exemptions are provided from Securities Transaction Tax (STT), Commodity Transaction Tax (CTT), and stamp duty for transactions on IFSC exchanges.
GIFT City, with its conducive tax framework, provides numerous opportunities for businesses and investors alike. The tax incentives are strategically designed to make the IFSC in GIFT City an attractive proposition for international financial services. As the city continues to evolve, it promises to be a cornerstone for India’s financial aspirations on the global stage.
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