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FEMA & Cross-Border Transactions

GIFT City IFSC Advisory

GIFT City IFSC Advisory

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Overview

GIFT City IFSC advisory is the guidance for setting up and operating in India's International Financial Services Centre at GIFT City — the domestic jurisdiction where financial activity happens in foreign currency and on international terms. The International Financial Services Centres Authority Act 2019 created the IFSCA, the unified regulator for the centre, and the advisory covers the entities that operate there: banks, funds, insurance companies, stock exchanges, and the units that carry on financial services in the IFSC. The tax incentives of the centre — including the income tax exemption for IFSC units under Section 80LA of the Income Tax Act 1961 (VERIFY: the current scope and conditions of the Section 80LA exemption) — are part of the calculus.

The IFSC is designed for the business that would otherwise have gone offshore — a fund, a treasury, a global trading operation — and the advisory is about structure: the entity to establish, the activities permitted, the incentives available, and the compliance the IFSCA expects. The centre's value is the combination of the international operating environment with India's regulatory and tax framework.

The cost of entering the IFSC wrong is the structure failing: an entity that does not fit the IFSCA's framework, an activity that crosses the permitted lines, or an incentive missed because the structure was not designed for it. Each is a defect in a centre built for clean international business.

This service is for companies and funds planning IFSC operations at GIFT City. We advise on the entity and activity structure under the IFSCA Act 2019 and the IFSCA's regulations, coordinate the establishment with the IFSCA, map the tax incentives and the Section 80LA position, and set up the operating and compliance framework for the IFSC unit.

How It Works

  1. 1

    IFSC Opportunity Analysis

    We assess the business fit for the IFSC and the entity structure required.

    Harun Raaj & Associates does this1 week
  2. 2

    Entity & Activity Design

    We design the entity and the permitted activities under the IFSCA framework.

    Harun Raaj & Associates does this1-2 weeks
  3. 3

    IFSCA Registration

    We prepare and file the IFSCA registration and manage the process.

    Harun Raaj & Associates does this4-8 weeks
  4. 4

    Tax & Incentive Mapping

    We map the tax incentives including the Section 80LA position.

    Harun Raaj & Associates does this1 week
  5. 5

    Operations & Compliance

    We set up the IFSC operations and the ongoing compliance calendar.

    Harun Raaj & Associates does thisOngoing

Frequently Asked Questions

What tax exemption does a unit in GIFT IFSC get under the Income-tax Act?
A unit in an IFSC Special Economic Zone is eligible for a 100% profit deduction for any 10 consecutive years out of the first 15 years of commencement under Section 80LA of the Income-tax Act, 1961 (for AY 2026-27 and earlier). From TY 2026-27 onward, the equivalent provision migrates to ITA 2025. In addition, dividend income received by the unit from an offshore entity and interest paid to non-residents are exempt under Sections 10(15)(viii) and 10(23BBH) respectively, subject to the conditions in those sections.
Which regulator governs an IFSC Banking Unit or fund registered in GIFT City?
The International Financial Services Centres Authority (IFSCA), constituted under Section 4 of the IFSCA Act, 2019, is the unified regulator for all financial products and services in GIFT IFSC — including banking units (IFSCA Banking Regulations 2020), Alternative Investment Funds (IFSCA (Fund Management) Regulations 2022), and broker-dealers. The SEZ Act, 2005 and SEZ Rules, 2006 continue to govern the physical zone infrastructure and customs/duty treatment.
What FEMA permissions are needed to remit money into or out of a GIFT IFSC entity?
Transactions between an IFSC unit and a person resident outside India are treated as current or capital account transactions under the Foreign Exchange Management Act, 1999 and the FEMA (International Financial Services Centre) Regulations, 2015 notified under Section 47 of FEMA. Resident Indians investing into IFSC AIFs must use the Liberalised Remittance Scheme (LRS) under RBI A.P. (DIR Series) Circular — the current annual limit is USD 2,50,000 per individual per financial year.
Is GST applicable to services supplied by a GIFT IFSC unit?
An IFSC unit located in a Special Economic Zone is a "Special Economic Zone developer or unit" for purposes of the IGST Act, 2017. Services supplied to or by an SEZ unit are treated as zero-rated supplies under Section 16(1)(b) of the IGST Act, 2017, allowing the supplier to claim a refund of input tax credit under Section 54 of the CGST Act, 2017 or to supply under a Letter of Undertaking (LUT) without paying integrated tax. Routine back-office or administrative services procured from the domestic tariff area are taxable at the applicable CGST/SGST rate.
Can an Indian holding company transfer shares of a foreign subsidiary to its GIFT IFSC holding company without capital gains tax?
A transfer of shares of a foreign company between two related parties where one is an IFSC unit is not automatically exempt. Capital gains under Section 45 of the ITA 1961 (Section 67 under ITA 2025) will apply unless the transfer qualifies for a specific exemption or treaty benefit. IFSCA has permitted IFSC holding companies ("IFSC HC") under the IFSCA (Setting up and Operation of International Financial Services Centre) Guidelines, 2019, but the tax treatment of the upstream transfer must be assessed separately under the applicable DTAA read with Sections 90 or 91 of ITA 1961 (Sections 159/160 of ITA 2025).

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