Introduction
GIFT City (Gujarat International Finance Tec-City) has transformed into India's premier International Financial Services Centre (IFSC) in Gandhinagar, Gujarat. Following the 2025 budget announcements, it has cemented its position as the cornerstone of India's financial ambitions on the global stage.
According to the GIFT City official website, as of 2025, over 750+ entities now operate here, including major banks, insurance providers, stock exchanges, and innovative fintech startups.
The eye-catching tax benefits provided by GIFT City is a wonderful opportunity for NRIs and corporate investors. This blog will help you understand the tax benefits available in GIFT City and how you can avail it.
Understanding the Tax Benefits in GIFT City
GIFT City operates through two complementary frameworks that create its unique tax environment:
Special Economic Zone (SEZ) - provides business-friendly regulations and infrastructure
International Financial Services Centre (IFSC) - offers specialised financial services regulations
This framework provides an extremely conducive tax regime that's pulling businesses from around the world. All transactions within GIFT City are made in international currencies, making it suitable for foreign businesses and investors.
Corporate Income Tax Benefits in GIFT City
100% Income Tax Holiday
The flagship benefit for companies in GIFT City is the complete income tax exemption for 10 consecutive years (chosen from a 15-year block). This applies to income derived from foreign currency transactions conducted within GIFT City.
For example, a multinational bank operating in GIFT City can earn fee income, trading profits, and interest from international clients completely tax-free for a decade. According to the Income Tax Department's latest guidelines, companies must specify their chosen tax holiday period when registering under Section 80LA.
Extended Tax Incentive Timeline
The February 2025 Budget extended these tax incentives until March 2030 (previously 2025). This extension gives businesses more time to establish operations and still receive the full benefits package. During her budget speech, the Finance Minister emphasised that this extension aims to establish GIFT City as a global financial powerhouse.
Reduced MAT/AMT Rate
Companies in GIFT City enjoy a significantly reduced Minimum Alternate Tax (MAT) rate of 9%, compared to 15% elsewhere in India. For businesses subject to Alternative Minimum Tax (AMT), the same reduction applies.
This means even companies with substantial deductions that would trigger MAT elsewhere can maintain a low effective tax rate in GIFT City. For a company with ₹100 crore in book profits, this represents a tax saving of ₹6 crore annually compared to operations elsewhere in India.
Tax Incentives for Foreign Investors & NRIs
Interest Income Exemption
The banking units in GIFT City IFSC offer fixed deposits in their GIFT City units. These fixed deposits are used by banks to lend to other entities. There is no tax on the interest gain from investing in these deposits. The foreign currency denomination ensures that their earnings do not reduce due to rupee depreciation.
Capital Gains Tax Relief
Foreign investors trading on GIFT City exchanges enjoy complete exemption from capital gains tax. According to India INX's February 2025 FAQ update, this applies regardless of holding period and covers all financial instruments including:
Equities and debt securities
Derivatives and structured products
ETFs and mutual funds
Commodity derivatives
The gains are taxed based on the taxation rate of the investor's resident country.
Tax-Free Insurance Products
Since January 2025, several insurance companies have launched dollar-denominated policies specifically designed for NRIs through their GIFT City operations. Gains on ULIPs and endowment plans offered out of GIFT City are tax-free, given that the premium does not exceed 10% of the insured amount.
The insurance offerings now include retirement plans, investment-linked policies and traditional endowment plans.
P-Note Tax Exemptions
In a surprise move, the 2025 Budget accelerated the implementation of Participatory Notes (P-notes) tax exemptions, originally scheduled for April 2026. Foreign investors using P-notes through GIFT City now benefit from zero withholding tax on their earnings, making GIFT City more attractive than traditional P-note markets like Singapore and Mauritius.
GST and Indirect Tax Benefits in GIFT City
Services Export GST Exemption
There is no GST levied on the firms offering services out of GIFT City. This makes the services offered by international firms located in GIFT City more competitive for Indian service providers.
For example, financial advisory firms, technical consulting companies, and IT service providers can offer their services to global clients without adding GST, making their pricing more attractive compared to service providers from the Domestic Tariff Area (DTA).
Transaction Tax Advantages
Trading on GIFT City exchanges continues to be exempt from various transaction taxes that apply elsewhere in India:
No Securities Transaction Tax (STT)
No Commodities Transaction Tax (CTT)
No Stamp Duty – varies by state but completely waived in GIFT City
For active traders and institutional investors, these exemptions can save millions in transaction costs annually, significantly improving net returns.
Income Tax Benefits for Individuals Working in GIFT City
GIFT City now offers enhanced benefits for individuals who choose to work there:
Housing Benefits
Subsidised residential accommodations in modern township developments
Rental rates 30-40% below comparable properties in major Indian cities
Cost of Living Advantages
Subsidised utilities, including electricity and water
Special pricing on local amenities, including gym memberships, dining, and entertainment
Integrated township with modern infrastructure, reducing commuting costs
These benefits create a substantially higher disposable income for professionals working in GIFT City compared to other financial centres in India. Many employees report saving 20-30% on their overall living expenses while enjoying a better quality of life.
Tax Benefits for Startups & Fintech Companies
Angel Tax Abolition
The 2025 Budget permanently abolished the angel tax (Section 56(2)(viib)) for all startups in GIFT City, regardless of investor nationality. This eliminates a major pain point for Indian startups, allowing them to raise capital at premium valuations without facing tax implications on the fund raise.
For early-stage companies, this means being able to raise capital from foreign investors without the additional burden of proving valuation justification to tax authorities.
Alternative Investment Fund Benefits
The AIFs in GIFT City have a pass-through status. This means the returns from the investments in AIFs are taxed based on the investor’s gains, not at the fund level. This is currently available for Category I and Category II AIFs.
This makes GIFT City an ideal location for setting up venture capital, private equity, and hedge funds focused on Indian investments but raising capital internationally.
ETF Relocation Program
January 2025 saw the launch of GIFT City's formal program to help retail ETFs relocate from other jurisdictions like Singapore and Hong Kong. The program offers:
Tax-free asset transfers
Fast-track regulatory approvals (15 days)
Marketing support for investor retention
The Nippon India ETF NIFTY Fund's relocation from Singapore in February 2025 serves as a prominent success story. It is designed for international investors, including NRIs and foreign nationals. The fund has diversified exposure and has access to high-quality large-cap stocks in India’s growing equity market, said the release.
How NRIs Can Avail GIFT City Tax Benefits
For setting up business units in GIFT City
Step 1: Entity Setup
To access GIFT City tax benefits, you need to establish a legal presence:
Incorporate a company or LLP in GIFT City
Set up a branch office of an existing entity
Register as an IFSC Banking Unit (for banks)
Step 2: Obtain Necessary Licenses
To be set up as an entity in GIFT City, one needs permission from IFSCA. For setting up banks and insurance units, the entities should be registered either in India or their original country. Capital market intermediaries like broker-dealer license the entity to register themselves either with NSE or BSE’s international units in GIFT City.
Step 3: Tax Registration and Compliance
To claim the tax benefits:
Register under Section 80LA with the Income Tax department
File a declaration specifying your chosen tax holiday period
Submit quarterly compliance reports to maintain benefits
Maintain separate books of accounts for GIFT City operations
The newly established GIFT City Tax Assistance Cell provides free consultations to help businesses navigate these regulatory requirements smoothly.
Step 4: Ongoing Compliance
To maintain tax benefits, entities must:
Conduct all transactions in foreign currency
Maintain the minimum prescribed capital/investment
File regular reports with relevant regulators
Ensure operations align with approved activities
Regular compliance is critical - non-compliance can result in benefit withdrawal and potential penalties.
For investing in GIFT City products
For the NRIs and foreign investors, they can choose the product or service they want from GIFT City, like banking, capital markets or insurance. They need to undergo the onboarding and KYC process requirements for the product. The tax benefits are there in the product itself (fixed deposits, insurance, etc.). They do not need to file separate documentation for that.
Conclusion
GIFT City offers unparalleled tax advantages for businesses operating in the financial services sector. With 100% income tax exemptions, reduced indirect taxes, and special provisions for foreign investors, it represents India's most competitive tax jurisdiction for international business.
The 2025 Budget has further enhanced these benefits, extending timelines and introducing new incentives for emerging sectors like fintech, digital assets, and aircraft leasing. For businesses with international operations, foreign currency transactions, or those seeking foreign investment, GIFT City presents a compelling value proposition.
With over 750+ entities already operational and growing rapidly, GIFT City is well on its way to becoming Asia's next financial powerhouse.
