GIFT City: India’s Gateway to Global Finance

The global financial market is a dynamic landscape, constantly evolving with an interplay of internal and external factors. The Indian marketplace is emerging as a global financial hub, catalyzed by various factors like improved infrastructure, strategic reforms, and advancing innovation. A key milestone in this transformation is the establishment of the country’s first operational International Financial Services Centre (IFSC)—the Gujarat International Finance Tec-City, commonly known as GIFT City. Serving as a conduit to foreign investment in India, the GIFT city has many perks to offer. Let’s delve deeper into the strategic advantages and opportunities that GIFT City presents.

An Introduction to the GIFT City

Gujarat International Finance Tec-City (GIFT City) is India’s pioneering global hub for financial and IT services. Strategically located near Gandhinagar, Gujarat, it aims to serve as a central destination for finance, fintech, IT, and related industries. With an aim to compete with world’s leading financial centers, GIFT city offers a thriving ecosystem that is conducive to both domestic and international investors. 

In addition to its pro-business environment, the city boasts state-of-the-art infrastructure, cutting-edge technology, and basic and luxury amenities that enhance its appeal. This holistic setup fosters ease of doing business, positioning GIFT City as an ideal base for global corporations. GIFT City is governed by two main bodies: GIFT SEZ (Special Economic Zone)  and GIFT IFSC, both aimed at making the city attractive for foreign investment. 

IFSC’s Contribution

The International Financial Services Centre (IFSC) in GIFT City is dedicated to making international financial transactions easier and more efficient. IFSC units in GIFT City enjoy major tax benefits, including a 100% tax exemption for any 10 years within a 15-year period. Transactions on IFSC exchanges are exempt from GST and Securities Transaction Tax (STT), and interest income paid to non-residents on funds lent in GIFT City is tax-free. The wide range of tax benefits also include exemptions from stamp duty and customs duties, which significantly reduce operational costs. Financial firms also get concessional tax rates and tax holidays. For those aiming to optimize their business operations and financial performance, GIFT City offers a compelling option, thanks to its tax incentives and cost-effective environment.

The IFSC at GIFT City plays a crucial role in enabling smooth international transactions by streamlining cross-border financial services. It offers an accessible and supportive environment for foreign banks, insurance companies, and asset managers. By simplifying regulatory frameworks, it fosters an easy setup for foreign institutions to establish their subsidiaries or branches. This ease of entry draws leading offshore banks, capital market players, and multinational corporations, making GIFT City an attractive location for international investment.

SEBI’s Relaxed Investment Norms

In May 2024, Securities and Exchange Board of India (SEBI) announced relaxed investment norms for Non-Resident Indians (NRIs) and Persons of Indian Origins (PIOs) in FPIs based in GIFT City. The new rules allow NRIs to own up to 100% of global funds, removing the earlier cap of 50% for individual and combined holdings by NRIs and OCIs under the regulations of the IFSCA. This change simplifies investment options for NRIs, further enhancing GIFT City’s appeal as a leading destination for global businesses.

GIFT-IFSC is gradually establishing itself as a key player in the global financial landscape with a quantifiable contribution to the country’s economic growth. While there is still a considerable room for innovation and improvement, with continued policy support and infrastructure development, it is poised to play a pivotal role in shaping the future of India’s financial services sector.