GIFT IFSC

A Statutory Safe Harbor for Global Investors in the Wake of the Tiger Global Ruling

14 November 2026 · 4 min read · By ADI Insights

Overview

The Supreme Court’s ruling in the Tiger Global case, allowing taxation of capital gains on its Mauritius-based investment in Flipkart, has reshaped the certainty traditionally associated with treaty-driven offshore structures.
As tax authorities gain wider scope to challenge treaty benefits, jurisdictions such as Mauritius and Singapore are facing elevated compliance and litigation risk.
In contrast, GIFT City IFSC is gaining prominence as a predictable and policy-aligned investment jurisdiction. Its tax incentives are embedded in Indian domestic legislation and administered through a dedicated regulator, offering clarity and consistency.
Supported by defined substance norms and onshore governance, GIFT IFSC is increasingly viewed as a credible alternative for structuring international capital into India.

The Tiger Global ruling highlighted that a Tax Residency Certificate (TRC) a key document used to justify tax benefits under treaties is no longer a foolproof shield.
Instead, the Indian tax authorities can now examine the commercial substance of offshore entities to determine whether they deserve treaty-based benefits.
On the other hand, GIFT City IFSC offers tax incentives embedded directly in the Income-tax Act. These incentives are statutory rights guaranteed by law, not subject to the whims of treaty-based challenges.
Consequently, tax authorities cannot challenge these benefits under General Anti-Avoidance Rules (GAAR) because the "substance" is already verified and regulated by the IFSCA within Indian borders.
As a result, GIFT City offers a much higher degree of certainty, especially when compared to the risks of offshore treaty jurisdictions.

Specified funds established in GIFT City IFSC are regulated investment vehicles aimed at attracting global capital to India within a transparent and controlled framework.
These funds are recognized under Indian tax laws, including the Income Tax Act, and must meet specific eligibility and operational requirements.
Crucially, they are not mere shell or pass-through entities. The framework mandates a minimum capital, diversified investors, and a tangible local presence.
This ensures the fund has real economic substance in India, linking tax benefits to actual business activity rather than tax avoidance strategies.

Offshore funds, especially after the Tiger Global ruling, must now prove their commercial substance to benefit from treaties, such as those in Mauritius.
However, GIFT City specifies that its funds must meet substance requirements, such as: Maintaining an office in GIFT City, Employing qualified personnel, Meeting operational thresholds, and Complying with regulatory norms.
These requirements ensure that the funds are legitimate business entities with real economic activity—not merely tax-avoidance structures. While this adds some upfront compliance effort, it drastically reduces the risk of tax denial or challenges in the future.

Funds set up as Specified Funds in GIFT IFSC enjoy tax benefits that flow directly from the Income-tax Act, not from tax treaties.

Capital Gains Tax Exemptions: As per section 10(4D) of the Income Tax Act (IT Act), 1961, Specified funds are exempt from tax on capital gains arising from the transfer of derivatives, non-deliverable forward contracts, and certain bonds listed on IFSC exchanges subject to prescribed conditions.
Withholding Tax (TDS) Advantages: As per Section 10(15)(ix) of the IT Act, Interest paid to non-residents on money borrowed by units in the IFSC is generally exempt from tax.
Tax Holiday: Section 80LA(1A) of IT Act states that Units in the IFSC are eligible for a 100% income tax exemption for any 10 consecutive years out of a block of 15 years. This applies to the business income of the fund manager or the entity set up in the Gift city.
Exemption from GST and Indirect Taxes: Services by an IFSC unit to another IFSC unit or offshore client are treated as Zero-Rated Supplies under the Integrated Goods and Services Tax (IGST) Act, specifically Section 16, meaning they attract 0% GST. There is also no Security Transaction Tax (STT) or Commodity Transaction Tax (CTT) on transactions conducted on IFSC exchanges.
Dividend Concessions: As per Section 115A of the IT Act, Dividends paid by an IFSC unit to a non-resident are taxed at a concessional rate of 10% (plus applicable surcharge and cess), whereas the standard rate for non-residents is typically 20%.

GIFT City IFSC is increasingly positioned as India’s gateway for stable inbound investment.
By combining regulatory oversight, domestic tax clarity, and global financial market access, it addresses investor concerns around unpredictability and litigation.
For fund managers and institutional investors seeking transparent, compliant, and scalable structures, IFSC-based funds provide a credible alternative to traditional offshore routes.

For guidance on your specific situation, speak to our team.