Transforming Financial Services in IFSC

OVERVIEW

Stakeholders are hopeful for reforms to boost GIFT City IFSC’s global appeal:

• Tax Parity for resident investors aligning with global hubs.
• Non-Resident Inclusion in Over-the counter (OTC) transactions with Category-III AIFs.
• Tax Clarity on securities and post-tax holiday units.
• Deemed Dividend Exemption for IFSC-based finance companies.
• Green Bond Incentives with a reduced 5% tax rate.

These changes could position GIFT IFSC as a premier international financial hub.

Significance and Importance

• By promoting green finance through tax incentives on green bonds, the reforms support sustainability goals.
• Additionally, clarity on tax regulations and exemptions will reduce ambiguities, fostering a stable and predictable investment environment.

KEY ANTICIPATED REFORMS

• Tax Parity: Residents investing via IFSC funds face accrued income taxation at up to 40%, unlike offshore funds taxed on receipt or redemption. Stakeholders expect tax parity with global hubs like Singapore and Mauritius to streamline outbound investments.
• OTC Transactions for Non-Residents: Include non-residents in over-the-counter (OTC) transactions with Category-III AIFs under Section 10(4E) exemption for tax clarity.
• Capital Asset Clarification: Define securities on IFSC exchanges as ‘capital assets’ to reduce ambiguities and ensure stable tax treatment.
• Dividend Exemption: Exclude finance companies in GIFT IFSC from deemed dividend provisions to boost treasury operations and financial sector growth.
• Green Bond Incentives: Reduce tax rate on interest from green bonds listed in IFSC to 5%, fostering sustainable investment.
• Post-Tax Holiday Clarity: Provide guidelines on tax treatment for units after the tax holiday period to encourage long-term investments.

CONCLUSION

• The Union Budget 2025 holds great promise for GIFT IFSC’s growth, with expectations for key reforms such as tax parity for resident investors, non-resident inclusion in OTC transactions, green bond incentives, and clarity on post-tax holiday taxability.
• These measures aim to enhance GIFT IFSC’s global competitiveness, making it a premier hub for international finance and attracting investors, financial institutions, and sustainable projects.
• Stakeholders are optimistic that the upcoming budget will elevate GIFT IFSC’s standing in the global financial landscape.