India is strongly pushing to establish GIFT City in Gujarat as a premier global financial hub. To attract foreign investors, fund managers, and global banks, Finance Minister Nirmala Sitharaman announced a fresh set of tax incentives that could position GIFT City as a contender against financial centres like Singapore and Dubai.
A key highlight of the announcement is the five-year extension of tax benefits for financial institutions operating in GIFT City. Earlier, these incentives were granted for short-term periods, leaving businesses uncertain about long-term prospects. Now, with the deadline extended to March 31, 2030, investors have greater clarity and confidence to set up operations.
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The finance minister highlighted that the changes are "proposed to provide a simplified safe harbour regime for investment funds managed by fund managers based in the IFSC. Additionally, the relaxation of conditions for IFSC units will be extended until March 31, 2030."
The government has also opened the door for mutual funds and ETFs to relocate to GIFT City with tax advantages, making it a compelling destination for India-centric funds that currently operate offshore. In a major step to boost offshore investments, the tax exemption on participatory notes (p-notes) has been expanded. Until now, only banking units in GIFT City could issue these instruments with tax benefits.
With the latest changes, non-banking financial institutions and Foreign Portfolio Investors (FPIs) operating from GIFT City will also be eligible, making it a more attractive base for international investors.
The government has further relaxed key conditions under Section 9A, which earlier made it difficult for foreign fund managers to operate from India. With these restrictions lifted for firms setting up in GIFT City before 2030, the move is expected to draw in global investment houses, creating new jobs and strengthening India’s financial ecosystem.
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Experts have welcomed these measures. "The Union Budget 2024-25 introduced several key measures to enhance the competitiveness and attractiveness of GIFT City as a global financial hub. The tax concessions and regulatory simplifications will boost real estate demand. Real estate companies with projects in or near GIFT City, such as Brigade Enterprises, Sobha Ltd, Godrej Properties, and Prestige Estates, could see increased investor interest," Ruchit Jain, Vice President of Technical Research at Motilal Oswal told Moneycontrol.
GIFT City has made steady progress, with over 740 entities registered and banking assets crossing $78 billion by December 2024. The latest incentives aim to build on this momentum, making GIFT City a serious alternative to offshore financial centres. India is sending a clear signal that it is ready to play a bigger role in global finance—and it is willing to offer the right incentives to make it happen.
"Tax exemptions have been introduced on proceeds from life insurance policies issued by IFSC insurance intermediaries, without having any pre-condition related to maximum annual premiums. Additionally, the capital gains exemptions currently available to non-residents investing in aircraft leasing have been extended to non-residents holding shares of the IFCS units engaged ship leasing as well. The government has also proposed to remove the applicability of the ‘deemed dividend’ provision on inter-group borrowings, a step expected to benefit corporate treasury operations within the IFSC regime," said Aditya Hans, Partner at Dhruva Advisors.
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