Boost for IFSC: The 20-Year Tax Holiday#
Making India a Global Financial Hub#
To compete with global financial hubs like Singapore, Dubai, and London, the Indian government established the International Financial Services Centre (IFSC) in GIFT City, Gujarat.
To attract offshore banking units, global aircraft leasing companies, and foreign portfolio investors (FPIs), the old tax regime offered a 100% tax holiday for 10 out of 15 years. While lucrative, global corporations argued that 10 years was too short to justify relocating massive offshore capital structures.
The 20-Year Tax Holiday under ITA 2025#
The Income Tax Act, 2025 answers this demand with the most aggressive tax incentive in Indian history.
Under the new provisions, any unit set up in the IFSC can claim a 100% deduction of their business income for any 20 consecutive years out of the first 25 years of operation.
Who Benefits?#
- Offshore Banking Units (OBUs): Foreign banks can set up branches in GIFT City to lend to Indian corporates in foreign currency without paying a single rupee of Indian corporate tax on the interest earned for two decades.
- Aircraft & Ship Leasing: The ITA 2025 completely exempts the royalty and lease rent paid by Indian airlines (like Air India or IndiGo) to leasing companies set up in the IFSC. This forces global lessors to shift their bases from Ireland to Gujarat.
- Global Family Offices: High-Net-Worth foreign investors setting up family offices or Alternative Investment Funds (AIFs) in the IFSC will pay zero tax on their capital gains derived from trading in Indian derivatives on the NSE IFSC exchange.
Exemption for Non-Residents#
The Act also sweetens the deal for the foreign clients of these IFSC units. If a non-resident individual (or foreign company) trades in bonds, global depository receipts (GDRs), or derivatives on a recognized stock exchange located in the IFSC, the resulting capital gains are completely exempt from Indian tax, regardless of whether they have a PAN in India.
This 20-year absolute tax certainty is designed to trigger a massive influx of foreign direct investment (FDI) into GIFT City, positioning India as the undisputed financial capital of the developing world by 2030.