In a bid to provide a fillip to Gujarat’s GIFT City, FM Nirmala Sitharaman announced several measures to further incentivise investment in Prime Minister Narendra Modi’s pet project. The incentives doled out in the Union Budget include a slew of incentives aimed at promoting investment, employment and off-shore funding at GIFT’s International Financial Services Centre (IFSC).
To increase off-shore funds relocation to ISFC, the government has proposed to extend the existing relocation regime to Exchange Traded Funds (ETFs), which track popular market indices such as the Sensex and Nifty, and retail schemes which are willing to relocate from off-shore locations such as Mauritius and Singapore to GIFT City.
The relocation of an original fund to a resultant fund will also be considered a tax-neutral transaction. Non-residents availing life insurance from IFSC-based insurance offices will also benefit from amendments to the existing Clause 10D of Section 10, set to take effect on 1 April 2025.
The amendment will exempt taxes without any condition on life insurance policy proceeds they receive from the IFSC insurance intermediary office. Non-resident investors will benefit from a provision extending scope of tax benefits. Along with the existing tax exemption on any income earned by the NRIs via derivative trades or participatory notes, benefits will extend to those investing through a Foreign Portfolio Investor (FPI) based in GIFT City.
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Treasury centres in the IFSC which manage operations including foreign exchange, risk management and asset management presently have a deemed dividend provision. However, the amendments propose that under specific criteria, the deemed dividend provisions shall not apply to IFSC-based treasury centres on any advance or loan between two group entities.
Units based in IFSC or non-residents engaged in ship leasing businesses will be given exemptions on capital gains tax on the transfer of equity shares of domestic companies (units of IFSC) which are also engaged in ship leasing. Additionally, the exemption will be provided on dividends paid by a company (unit of IFSC) engaged in the business, or ship leasing to another IFSC unit engaged in the same activity.
Commenting on the proposed incentives, GIFT City MD and Group CEO Tapan Ray stated, “The proposed tax incentives and regulatory simplifications will attract global investors,
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