Gujarat International Finance Tec-City (GIFT City), has been set up with an objective to attract global players to set-up units in the IFSC. It also allows similar Indian financial institutions to set up presence in IFSC and provide financial service products to the overseas markets. GIFT City has been developed on a multi-service special economic zone (SEZ) and provides various direct and indirect tax benefits to the units, which are set-up in GIFT City and to overseas investors investing into GIFT City.

Key benefits of setting up a unit in IFSC:

  • cross-border transactions
    Complete financial service ecosystem for cross-border transactions
  • foreign capital
    Aims to attract foreign capital by having liberal tax and regulatory regime
  • Cross-border business
    Help domestic companies in financial services sector to do cross-border business easily

The regulatory powers of the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI) and Pension Fund Regulatory and Development Authority (PFRDA) have been vested in International Financial Services Centres Authority (IFSCA) for regulating financial institutions, financial products and services in IFSC at GIFT City, exercisable by IFSCA from 1 October 2020. Each unit set up in IFSC must obtain SEZ-IFSC unit licence in addition to licence from IFSCA.

Services in focus

Aircraft leasing
Banking units

IBUs (International Banking Units) were covered by the regulations issued by the RBI. However, with the unified IFSCA being notified, it would be the regulatory authority for the units set up in IFSC. The IFSCA (Banking) Regulations (IBU regulations) repeal and supersede the scheme for setting of IFSC BUs (banking units) formulated by the RBI. Foreign banks can now set up a BU in IFSC, subject to the fulfillment of certain additional conditions.

Key features

  • Adhere and compliance to the norms and guidelines prescribed by the IFSCA (International Financial Services Centre Authority)
  • A minimum capital of USD 20 million or equivalent in any foreign currency to its BU
  • Maintain liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) at IBU level.

Benefits

  • Ability to transact in foreign currency in the off-shore market
  • Ability to meet foreign currency requirements of Indian corporates, foreign subsidiaries and foreign companies
  • Ability to tap the growing trade activities in the region
Finance company

Global experience suggests that non-banking financial companies (NBFCs) complement the role of banking in providing finance, innovative products and, thus, play an important role in the development of a financial centre. Accordingly, the IFSCA issued IFSCA (Finance Company) Regulations, 2021 to provide a framework for FCs (Financial Centres) in the IFSC.

Key features

  • The finance company can be set up in the form of either a separate entity, or an IFSC-joint venture, or a subsidiary
  • The finance unit is set up in the form of a branch of a regulated financial service provider in the jurisdiction

Benefits

  • 100% income tax exemption for 10 consecutive years
  • Minimum Alternate Tax (MAT)/Alternate Minimum Tax (AMT) levied at 9% of book profits
  • GST applicable on services provided to DTA (Domestic Tariff Area); state subsidies applicable to the IFSC units
Portfolio Management Services (PMS)

SEBI (Securities and Exchange Board of India) issued guidelines in 2015 for Portfolio Managers (PMs) to render services to person resident outside India, non-resident Indians, financial institutions and person resident in India.

Key features

  • A company can be set up as a PMS in the form of a branch of a SEBI registered intermediary or as a company
  • A minimum net worth of USD 750,000 is required
  • Non-resident principal officer and employee must have certification from organisation recognised by the Financial Market Regulator in foreign jurisdiction

Benefits

  • 100% income tax exemption for 10 consecutive years out of the block of 15 years
  • No GST on services received and/or services provided to IFSC units or offshore clients
  • GST applicable on services provided to DTA; state subsidies applicable to IFSC units.
Relocation of offshore fund

With the recent trend of re-domiciling offshore funds in various jurisdictions, the Government of Indian (GOI) and IFSCA have been progressively aligning the GIFT City architecture to global IFSCs. To facilitate onshoring of offshore funds focused in India, the GOI has announced tax incentives for relocation of offshore funds to IFSC AIF.

Key features

  • Shareholder of original fund will receive shares of the alternative investment fund (AIF) in the same proportion as interest/share/unit held in offshore fund.
  • Original fund will receive share/unit of AIF in the same proportion as above, in respect of which share/unit is not issued to shareholder of the offshore fund.

Benefits

  • Capital gains exemption to non-resident investors of resultant fund or resultant fund
  • Lower operating costs, availability of skilled resources and access to global markets
  • Platform for fund managers to launch fund by raising money from domestic and foreign investors
Global In-house Centres (GICs)

Global In-house Centres (GIC) are service delivery operations, owned and operated by the same company receiving the services, i.e., the parent company that may be located in a different jurisdiction. Given the available financial and technological infrastructure at GIFT City, the financial data processing support activity performed by GICs can now be carried out in IFSC.

Key features

  • Relocation of employees from an existing entity in India shall be permissible with prior approval
  • Provide services to non-resident entities, along with the provision of freely convertible foreign currency
  • Business can be conducted in any mode permitted by the Ifsca

Benefits

  • Favourable tax and regulatory environment and financial structure
  • Wide pool of talent with a cutting-edge infrastructure
  • 100% income tax exemption for 10 consecutive years
Investment advisers

SEBI (Securities and Exchange Board of India) issued guidelines in 2015 for Investment Advisers (IA) to render services to person resident outside India, non-resident Indians, financial institutions and person resident in India.

Key features

  • Provisions of the IA Regulations, guidelines and circulars shall apply to IAs operating in IFSC.
  • A minimum net worth of USD 700,000 is required
  • Resident partners and representatives shall have certification from the National Institute of Securities Markets (NISM) or any other organisation or institution

Benefits

  • No GST on services received by units in IFSC and/or services provided to IFSC/SEZ units or offshore clients
  • 100% income tax exemption for 10 consecutive years

Our services

At Grant Thornton Bharat, we assist in evaluating the eligibility criteria for setting up an entity in IFSC, advise on the capital requirements and tax implications, along with assistance in obtaining approval from the IFSC authorities and SEZ regulator for operating in IFSC-GIFT City. We also specialise in filing Income-tax and regulatory compliance and provide advisory and other other consultancy services.

Why choose us?

Grant Thornton Bharat is led by a dedicated Partner/Director team with vast and varied experience in providing focused services to the financial services sector. We provide new ideation and update upon change in law and regulations by way of emails, webinars, alerts, flash news, etc., with a Partner-led, pro-active, pragmatic and solution-oriented approach.

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