The central government has announced several tax incentives to promote capital raising activities at the Gift City International Financial Service Center (IFSC) in Gujarat. These include increasing sunset clause by 5 years, encouragement for mutual fund transfer and giving relief to foreign portfolio investors (FPIs) trading in foreign derivatives (ODIs). Several tax concessions related to IFSC have been extended till March 31, 2030.
Finance Minister Nirmala Sitharaman also announced the inclusion of retail schemes and exchange traded funds (ETFs) in the current transfer system for funds at IFSC. Experts believe that these changes will attract a large number of India -focused mutual funds and ETFs to come to IFSC. Apart from this, the Finance Minister has also announced tax exemption on Participatory notes (P-notes).
Partner Rajesh Gandhi in Deloite said that non-banks issuing ODIs in Gift City will get benefit from tax exemption to P-Note holders, which now include P-notes issued by non-banks of Gift City foreign portfolio investors. An official of the IFAC Authority explained that earlier this exemption was limited to the banking units of IFC, whose scope has now been included to include FPI license institutions.
Most of the conditions have been removed under Section 9A for institutions established in Gift City by March 31, 2030 to further promote fund management activities. Industry experts believe that this will attract the global fund manager to create a base in IFSC, making a large number of jobs. Tapan Rai, Managing Director and Group CEO of Gift City, said, “The proposed tax initiatives and regulation will attract global investors, fund managers and businesses, which will strengthen India’s economy.”
Siddharth Shah, partner at Khaitan & Company, says that increasing the sunset clause by 5 years will remove the concern related to expansion in the shortage and the challenge of completing the transfer within the deadline. Till now it was allowed to do this during two years. Investment fund practice and gift city office lead in Nitish Desai Associates, Radhika Parikh believes that the deadline has been overcome by increasing the deadline. The government has also announced a profit for those opening treasury centers of leasing units, insurance offices and treasury centers of global companies in IFSC.