IN GIFT CITY

OVERVIEW

• TechFin entities are technology-first firms that are stepping into the financial services space, unlike traditional financial institutions that later adopt technology.
• TechFins like AI startups and blockchain firms focus on innovation and automation, using digital-first, customer-centric models over traditional finance.
• The new IFSCA regulations aim to provide a clear, structured pathway for such entities to operate within the IFSC ecosystem, encouraging responsible innovation while ensuring regulatory oversight.

Key Features of the Draft Regulations

• The draft regulations mandate IFSCA registration and introduce sandbox testing, enabling innovative TechFin models to be tried with regulatory relaxations in a controlled setting.
• The regulations emphasize strict compliance with data privacy and cybersecurity standards, ensuring that consumer interests are protected through well-defined consumer protection norms.
• The framework welcomes both Indian and foreign entities and brings ancillary service providers—like those in accounting, analytics, and cloud computing—under formal regulation.

What Are Tax Accounting Services (TAS)?

• Tax Accounting Services (TAS) include defined activities such as accounting and bookkeeping, tax return preparation, international tax advisory, tax reporting and compliance, and support for cross-border structuring.
• The purpose of regulating these services is to bring them under a formal framework when provided from GIFT City IFSC, ensuring consistency, quality, and global alignment.

Who Can Offer TAS in IFSC?

• Tax Accounting Services (TAS) can be offered by entities registered in the IFSC, provided they employ qualified professionals such as Chartered Accountants (from India or abroad), Certified Public Accountants (CPAs), or tax advisors with recognized global credentials.
• These entities must also meet fit and proper criteria and adhere to a prescribed Code of Conduct to ensure high standards of professionalism and integrity.

Accelerating FinTech Innovation in GIFT City

• This move significantly boosts cross-border FinTech innovation and strengthens GIFT City’s position as a global digital finance hub.
• It creates new opportunities for startups, Big Tech firms, and venture capitalists, while offering clarity for entities operating in emerging areas like AI, Blockchain, InsurTech, and RegTech.
• The inclusion of an Innovation Sandbox places India alongside global regulators like Singapore’s MAS and the UK’s FCA in fostering safe experimentation.

CONCLUSION

• The draft IFSCA (TechFin and Ancillary Services) Regulations, 2025, aim to streamline and unify the regulatory framework for technology-driven financial services and ancillary service providers in GIFT City IFSC.
• These regulations simplify the registration process, enhance transparency, and support the growth of global financial services.
• They cover registration, eligibility criteria, and reporting obligations, ensuring that only qualified entities operate within the IFSC.