Gujarat: Tax incentives to put GIFT City on global map, unified authority soon

India's first international financial services centre (IFSC), Gujarat

International Finance

Tec-City (

GIFT City

), is set to be at par with global financial centres with Union finance minister Nirmala Sitharaman announcing a slew of

tax incentives

as well as fast-tracking the setting up of much-awaited unified authority for IFSCs.


Sitharaman announced direct tax incentives, including 100 % profit-linked deduction under section 80-LA, exemption from dividend distribution tax from current and accumulated income to companies and mutual funds, exemptions on capital gain to Category-III AIF and interest payment on loan taken from non-residents.

Currently, a unit in the IFSC is allowed deduction of 100% of profits for first five consecutive years and 50% for next five years from the year of commencement. The finance minister today proposed to provide for 100% deduction for 10 consecutive years and the unit may claim the deduction, at its option, for any 10 consecutive years out of 15 years from the year of commencement.

Fast-tracking a unified authority is required as the guidelines for IFSCs at present are jointly set by the stock market, banking and insurance regulators.

"Government will implement the essential elements of the regulatory roadmap for making India a hub for such activities," Sitharaman said in her budget speech today.

In February, the Union Cabinet had approved establishment of a unified authority for regulating all financial services in IFSCs in India through International Financial Services Centres Authority Bill, 2019.

GIFT City's managing director & Group CEO, Tapan Ray, said, "Key measures related to aircraft leasing business, reinsurance business, tax benefits announced today will enable significant offshore finance activities to take place from India and create jobs in the financial services industry. It will bring back billions of dollars of business which India has been losing to other competing global financial hubs."

"Fast-tracking the Unified IFSC Regulatory Authority will augur well to focus on growing the IFSC and over the next few years, GIFT IFSC alone can contribute US$ 1 trillion to Indian industry and infrastructure," said to V. Balasubramaniam, MD & CEO, India International Exchange IFSC Ltd. (India INX).

"Extending income tax exemption to 10 years from 5 years and exempting dividend distribution tax is also welcome," said Balasubramaniam.

Sitharaman also proposed to reduce net owned fund requirement from 5,000 crore to 1,000 crore to facilitate on-shoring of international insurance transactions and enable opening of branches by foreign reinsurers in the IFSC.