Government provides more sops to attract relocation of foreign funds to GIFT City

NRIs investing in India via Gift City have also received certain relief in terms of taxation

In the Budget for FY26, finance minister Nirmala Sitharaman announced special measures for funds, ETFs and retail schemes eligible for free of tax relocation to Gift City.

In a bid to attract relocation of more off-shore funds to International Financial Services Centre(IFSC), Gift City, Gandhinagar, the government has announced newer tax sops for such funds. The government has now proposed to extend the existing relocation regime to even Exchange Traded Funds(ETFs) and retail schemes willing to move from off-shore locations such as Singapore and Mauritius to Gift City. this amendment will take effect from April 1, 2026, and shall apply in relation to the assessment year 2026-27 and subsequent assessment years. Exchange traded funds are specialized funds that track popular market indices like sensex or Nifty.

The non-resident investors using Gift City have also received a boost from  a provision extending the scope tax benefits. Currently, any income earned by NRI via derivative trades or participatory notes is exempt from taxation. Now, the government has extended this benefit to even if NRIs are investing through a foreign portfolio investor(FPI) based out of Gift City.

“In order to further incentivize operations from the IFSC, it is proposed to amend clause (4E) of section 10 to provide that the income of a non-resident on account of transfer of non-deliverable forward contracts or offshore derivative instruments or over the-counter derivatives, or distribution of income on offshore derivative instruments, entered into with Foreign Portfolio Investors being an IFSC unit shall also not be included in the total income subject to certain conditions as may be prescribed. “according to the budget documents.

The government has also proposed to rationalize the safe harbor rules that allow funds to shift their base from an overseas jurisdiction to India. In the Budget 26, the government proposed to calculate the resident participation in a fund as on first day of April or October.