Direct Tax

December 2023

GIFT - Direct Tax Provisions

GIFT is India’s first IFSC under Special Economic Zone Act, 2005 (“SEZ Act 2005”). It is being developed as a global financial services hub. GIFT IFSC is a Multi Services SEZ which commenced its business in April 2015. It is in Gandhinagar, capital of Gujarat State and is easily accessible from Ahmedabad City. Being in SEZ, GIFT is demarcated in GIFT SEZ and Domestic Tariff Area (“DTA”). The majority of the units in GIFT are in IFSC which is under SEZ.

On direct tax front, the GOI has been giving impetus year on year to units set up in GIFT IFSC by bringing amendments in the IT Act. These are benefits in the form of tax exemptions to income from certain entities in the financial sectors, tax holiday for a ten-year period, lower tax rate on certain income arising from businesses set up in GIFT, capital gains exemption, etc. Primarily the focus is to incentivize financial sector activities in GIFT and to encourage non-resident investors and business enterprises to be part of these activities.

On regulatory front, SEBI, RBI, Insurance Regulatory and Development Authority (“IRDAI”) has issued regulations, guidelines, etc. for Capital Markets Intermediaries, Banks and Insurance companies/Insurance Brokers respectively. With the passing of International Financial Services Centres Authority Act, 2019, there is unified regulatory authority for the units in IFSC.

Income exemption provisions [S. 10]