New Delhi: The International Financial Services Centre (IFSC) at GIFT City, envisioned as a global financial hub and a key channel for foreign capital inflows, has received a significant fiscal push through enhanced tax incentives.

According to the Union Budget announcements, entities established in GIFT City will now be eligible for a tax holiday of 20 years, doubled from the earlier 10-year benefit. Once the holiday period ends, these units will be taxed at a concessional rate of 15%, as outlined in the Finance Bill.

“To increase the competitiveness of IFSC, it is proposed to increase the period of deduction under section 147 to 20 consecutive years out of 25 years for units in IFSC and 20 consecutive years for OBUs. It is also proposed that the business income of these units from IFSC after the expiry of period of deduction will be taxed at rate of 15%.” the budget statement of Union Finance Minister Nirmala Sitharaman said.

In comparison, overseas companies setting up operations elsewhere in India are subject to a minimum tax rate of around 35% on their income.

The government has also proposed rationalising deemed dividend provisions for treasury centres. As per the budget statement, it is proposed to rationalise the provisions of deemed dividend applicable to treasury centres in IFSC by providing that the provisions of deemed dividend shall not be applicable if (i) the parent entity or the principal of the group is listed in a country or territory outside India; and (ii) such parent or principal entity and the other group entity to the transaction are located in a country or territory outside India as may be specified by the Central Government, by notification in the Official Gazette.

Welcoming the move, Sanjay Kaul, Managing Director and Group CEO of GIFT City, said, “The Budget provides strong long-term tax certainty for entities operating from India’s maiden International Financial Services Centre at GIFT City, significantly enhancing the country’s offshore financial competitiveness. The extension of the tax deduction window to 20 years out of 25 years from 10 years out of 15 years, coupled with a clearly defined 15 per cent tax rate thereafter, offers clarity and predictability that global financial institutions and investors look for when making long-term location and capital allocation decisions.”

“This policy stability strengthens GIFT City’s position as a globally competitive financial hub within India’s jurisdiction and reinforces confidence among banks, fund managers, exchanges and other IFSC participants. The rationalisation of deemed dividend provisions for treasury centres is also a positive step, as it removes structural tax friction for multinational groups and facilitates efficient treasury and funding operations through GIFT City. Together, these measures make GIFT City an increasingly attractive destination for global financial and treasury operations seeking scale, certainty and regulatory alignmen,” he added. DeshGujarat