Gujarat International Finance Tec-City (GIFT City), India's first International Financial Services Centre (IFSC), operates as a distinct regulatory and tax jurisdiction within India — designed to bring financial services business (currently often booked in Singapore, Mauritius, or Dubai) back onshore, with a regulator, the International Financial Services Centres Authority (IFSCA), built specifically for this purpose rather than layered onto existing domestic financial regulators.
Why Businesses Consider GIFT City
- Single regulator — IFSCA consolidates what would otherwise be RBI, SEBI, IRDAI, and PFRDA jurisdiction for IFSC-based entities, simplifying licensing considerably for businesses that would otherwise need multiple domestic regulatory approvals.
- Genuine tax incentives — a 100% profit-linked deduction for 10 consecutive years out of the first 15 years of operation for specified IFSC units, alongside other concessions on capital gains, dividend, and interest income for funds and banking units operating from the IFSC.
- Foreign currency operations — IFSC units can transact predominantly in foreign currency, which is the specific structural feature that makes it viable for businesses currently booking transactions offshore.
Entity Options in GIFT City
- Banking Units — branches of Indian or foreign banks conducting offshore banking business, licensed and regulated by IFSCA.
- Fund Management Entities (FMEs) — for setting up alternative investment funds, portfolio management services, and other fund structures targeting global investors, under the IFSCA (Fund Management) Regulations. This has become one of the most active categories, particularly for Indian fund managers who previously routed offshore fund structures through Singapore or Mauritius.
- Insurance and Reinsurance entities — IFSC Insurance Offices, permitted to write both domestic and international business under specific conditions.
- Aircraft and Ship Leasing entities — a category with specific tax incentives designed to build an aircraft leasing ecosystem onshore rather than in Ireland or Singapore, where this business has traditionally been booked.
- Global In-House Centres and ancillary services units — for finance, IT, and other support functions serving group entities globally.
- Broker-dealers and other capital market intermediaries operating under IFSCA's capital markets framework.
Setting Up: The Broad Process
- Choose the entity type and corresponding IFSCA license category — this decision drives everything downstream, since capital requirements, reporting obligations, and permitted activities differ significantly by category.
- Incorporate the entity (typically as a company or LLP) under Indian company law, with its registered office in GIFT City's IFSC — this is a standard India entry services incorporation process, but with GIFT City-specific registered office and regulatory considerations built in from the outset.
- Apply for the relevant IFSCA license or registration, which involves demonstrating capital adequacy, fit-and-proper criteria for promoters and key managerial personnel, and a business plan specific to the license category sought.
- Register with the Special Economic Zone authorities, since GIFT City IFSC operates within an SEZ framework, layering SEZ compliance on top of IFSCA regulation.
- Set up banking and operational infrastructure within the IFSC, including foreign currency accounts as permitted under the applicable license.
Tax Considerations to Plan Around
- The 100%-for-10-years profit-linked deduction is available only to units that begin operations within a specified window and meet ongoing conditions — this needs to be tracked from the first year of operation, not assumed to apply automatically for the full period regardless of compliance.
- GST and stamp duty concessions specific to IFSC transactions need to be factored into commercial pricing and contract structuring from the outset, since these are meaningfully different from mainland India treatment.
- Transfer pricing considerations remain relevant for IFSC units transacting with group entities elsewhere in India or abroad — the tax-holiday status doesn't remove the need for arm's-length documentation, and is squarely a tax advisory and compliance matter to build into the operating model from day one.
Who Should Actually Consider This
GIFT City makes the most sense for businesses that are currently booking genuine offshore financial services activity (fund management, treasury operations, reinsurance, leasing) through Singapore, Mauritius, or Dubai structures, and want to relocate that activity onshore without losing the foreign-currency operational flexibility or the favorable tax treatment those jurisdictions historically offered. It is a more involved setup than an ordinary Indian subsidiary — the regulatory and tax framework is genuinely different — but for the right business model, it closes a gap that previously only an offshore structure could fill.
Perfect Accounting advises on GIFT City entity structuring, IFSCA license category selection, and the tax planning that keeps the profit-linked deduction and other incentives intact through the operating period.