Introduction to GIFT city and IFSC Units
GIFT City (Gujarat International Finance Tec-City) is India’s first operational greenfield smart city and International Financial Services Centre (IFSC), located between Ahmedabad and Gandhinagar in Gujarat. Conceived in 2007, it was developed to position India as a global hub for finance, technology, and sustainable urban innovation.
GIFT City was developed as a joint venture between the Government of Gujarat and Infrastructure Leasing & Financial Services. It integrates commercial, residential, and social infrastructure within a “walk-to-work” model. The SEZ hosts India’s first IFSC, regulated by IFSCA, enabling offshore banking, insurance, and capital-market operations under a unified framework.
As India’s only IFSC, GIFT City serves as a gateway for international finance, supporting activities like banking, fund management, aircraft and ship leasing, and bullion trading through institutions such as the India International Bullion Exchange. By attracting global capital, it aims to channel foreign investment toward India’s development goals, including green financing initiatives.
Built with advanced urban technologies, GIFT City features India’s first district cooling system, automated waste collection, and “digging-free” underground utility tunnels. It holds a Platinum Green City certification from the Indian Green Building Council, reflecting its commitment to sustainability and low energy consumption.
Situated along the Delhi–Mumbai Industrial Corridor, GIFT City benefits from strong connectivity—20 minutes from Ahmedabad International Airport and linked by metro and highway. It has attracted major global banks, IT firms, and universities, including international branch campuses from Australia. As a flagship initiative under Government of India’s financial reforms, GIFT City represents the nation’s ambition to compete with hubs such as Singapore, Dubai, and London.
These GIFT cities operate under the regulatory framework of International Financial Services Centre Authority (IFSCA).
Who is IFSCA?
International Financial Services Centre Authority (IFSCA) is India’s unified financial sector regulator for IFSC units. The IFSCA was established under the International Financial Services Centres Authority Act, 2019, it became operational on April 27, 2020, with headquarters at GIFT City, Gandhinagar, Gujarat. The IFSCA regulates, develops, and promotes cross-border financial activities from Indian IFSCs, with GIFT IFSC as the country’s first such center.
What is GIFT City IFSC?
GIFT City : Gujarat International Finance Tec-City
Location: Gujarat
Objective: To develop a global financial hub in India
Types of Entities operated in GIFT City: The following types of entities are being operated
- Banks
- Insurance Companies
- Fund management entities
- Fintech companies
- Exchanges
Income Tax Incentives available to IFSC units
The following exemptions or deductions or benefits are available under the Income Tax Act to the entities situated in the IFSC units.
Deduction under section 80LA – Deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centres
Deduction under section 80LA is available to the following entities/assesses which are setup in the IFSC units. The entities or assesses which can claim deduction are:
Allowable Deduction
Conditions to claim the deduction
- Form 10CCF to be issued by an accountant certifying the correctness of the claim of the deduction.
- a copy of the permission to be obtained under section 23(1)(a) of the Banking Regulation Act, 1949; or
- a copy of the permission or registration to be obtained under the International Financial Services Centres Authority Act,2019.
Reduced rate of MAT (Minimum Alternate Tax)
As per section 115JB the reduced rate of MAT applicable to units situated in International Financial Services Centre or Special Economic Zone is 9% as against the 15% applicable to other companies.
Tax Exemptions / Deductions available to Investors of IFSC units
Exemption under section 47(viiab) – Transactions not regarded as transfer
Non-residents are eligible for exemption under capital gains on satisfying certain conditions. The asset to be transferred to claim exemption under this condition are:
(a) bond or Global Depository Receipt as referred in Section 115AC(1); or
(b) rupee denominated bond of an Indian company; or
(c) derivative; or
(d) such other securities as may be notified by the Central Government in this behalf.
The assets are to be purchased from a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in foreign currency.
Exemption under section 10(4E)
Under section 10(4E) of the Income Tax Act 1961, any income accrued or arisen to a non-resident on account of:
- transfer of non-deliverable forward contracts or offshore derivative instruments or over-the-counter derivatives; or
- distribution of income on offshore derivative instruments or over the counter derivatives
entered into with an IFSC unit or any Foreign Portfolio Investor being an unit of IFSC is exempt from capital gains taxation.
Exemption under section 10(4F)
Exemption under section 10(4F) of the Income Tax Act 1961 is applicable to non-residents. The exemption under this section can be availed when the non-resident assessee earns any income by way of royalty or interest, on account of lease of an aircraft or a ship in a previous year, paid by a unit of IFSC, if the unit has commenced its operations on or before 31st March 2030.
Exemption under section 10(4G)
Exemption under section 10(4G) of the Income Tax Act 1961 is applicable to non-residents. Exemption under this section is applicable to non-residents when any income is received from:
- portfolio of securities or financial products or funds, managed or administered by any portfolio manager on behalf of such non-resident; or
- such activity carried out by such person, as may be notified by the Central Government in the Official Gazette,
in an account maintained with an Offshore Banking Unit in IFSC.
Conclusion
The emergence of GIFT City as India’s International Financial Services Centre marks a significant step towards integrating the Indian financial system with global markets. Through a combination of regulatory flexibility and targeted tax incentives—such as exemptions on capital gains, derivative transactions, and specific income streams for non-residents—the Government has created a competitive and investor-friendly ecosystem within the IFSC framework.
Provisions under the Income-tax Act, including deductions for IFSC units and exemptions under various clauses of section 10, reflect a clear policy intent to attract foreign capital, promote offshore transactions within India, and develop specialised sectors such as fund management and aircraft leasing. As GIFT City continues to evolve, it presents substantial opportunities for businesses, investors, and financial institutions seeking a tax-efficient and globally aligned operating environment.
