IFSC Services for GIFT City Units
For three decades Indian institutions did their offshore business offshore. Fund structures sat in Mauritius and Singapore, aircraft leasing sat in Dublin, and the fees, the jobs and the regulatory oversight sat outside India. The International Financial Services Centre at GIFT City was created to reverse that, and the regime that now governs it is genuinely competitive rather than merely available.
That said, an IFSC unit is not a light-touch entity. It sits under a single regulator with real supervisory powers, it carries substance and physical presence expectations, and its tax position depends on obtaining the correct authorisation for the correct activity. A structure that is commercially sound but incorrectly authorised will not get the benefits it was built for.
N D Savla & Associates advises Indian and foreign groups on IFSC entry, authorisation and ongoing compliance, working alongside our GIFT IFSC setup assistance team. We look first at whether an IFSC unit is actually the right vehicle for the intended activity, because the answer is sometimes no.
What Are IFSC Services and Who Provides Them?
IFSC services cover the advisory, authorisation and compliance work required to establish and operate a financial services entity inside an International Financial Services Centre. The scope runs from choosing the correct entity form and authorisation category through to the ongoing regulatory reporting an authorised unit owes to IFSCA.
The IFSC framework permits a wide range of activities that would be restricted or heavily conditioned in domestic India. The main categories are:
- IFSC Banking Units established by Indian and foreign banks for foreign currency lending, trade finance and treasury
- Fund management entities and alternative investment funds registered under the IFSCA fund management framework
- Insurance and reinsurance offices, including branches of Indian and foreign insurers
- Aircraft and ship leasing and financing entities
- Capital markets participants trading on the IFSC exchanges and the bullion exchange
- Global in-house centres providing support services to offshore financial groups
- Finance companies, treasury centres and ancillary service providers including legal, accounting and consultancy units
Ancillary service providers are frequently overlooked. Professional firms, technology providers and administration businesses serving IFSC entities can themselves be authorised as ancillary service units, which changes both their regulatory position and their tax treatment.
Who Needs IFSC Advisory Services?
Four groups account for most GIFT IFSC applications, and their concerns are quite different from one another.
Indian Fund Managers Relocating Offshore Structures
Managers running India-focused funds from Mauritius, Singapore or Cayman are the largest single category. The question is rarely whether GIFT works technically, but whether existing investors will accept redomiciliation and how the transition is sequenced. We handle this alongside our fund structuring practice so the IFSC analysis and the fund terms are considered together rather than in sequence.
Foreign Financial Institutions Entering India
For an overseas institution, an IFSC unit offers access to Indian counterparties and talent without the full domestic licensing burden. The comparison that matters is against a conventional Indian subsidiary or branch, and the right answer depends on whether the intended clients are offshore, domestic, or both.
Corporates Setting Up Treasury and Global In-House Centres
Large Indian groups with overseas operations use IFSC treasury centres to manage foreign currency exposure, intra-group funding and offshore borrowings under a regime built for it. The design question is what genuinely needs to sit in the IFSC as against the existing corporate treasury.
Aircraft, Ship and Equipment Lessors
Leasing was one of the clearest gaps the IFSC was designed to fill, since Indian carriers historically leased almost entirely from Irish and other foreign lessors. The regime now supports domestic leasing platforms, but the residual value, tax depreciation and cross-border enforcement analysis has to be done properly at structuring stage.
How Did India's IFSC Framework Develop?
The IFSC did not arrive fully formed. It took roughly fifteen years and a change of regulatory philosophy to become workable.
Before 1991: A Closed Capital Account
Under the pre-liberalisation regime, foreign exchange was controlled through the Foreign Exchange Regulation Act, 1973, and cross-border financial services were tightly restricted. The idea of an Indian jurisdiction competing for offshore financial business was not merely absent from policy, it was contrary to it.
1991 to 2005: Liberalisation and the SEZ Framework
Liberalisation from 1991 progressively opened the current account and parts of the capital account, and FERA was replaced by the far more permissive Foreign Exchange Management Act, 1999. The Special Economic Zones Act, 2005 then created the legal vehicle within which an IFSC could later be located, though the SEZ framework was designed principally for goods and manufacturing rather than financial services.
2007 to 2015: GIFT City and a Multi-Regulator Start
GIFT City was conceived as a joint venture with the Government of Gujarat and construction began in the late 2000s. The IFSC framework became operational in 2015, but with regulation divided between the Reserve Bank of India, SEBI and IRDAI according to activity. Applicants faced three or four regulators for a single business plan, which proved to be the principal constraint on take-up.
2019 to 2020: A Unified Regulator
Parliament passed the International Financial Services Centres Authority Act, 2019, and IFSCA became operational on 27 April 2020 with its headquarters at GIFT City. Section 13 of that Act consolidated into one authority the powers otherwise held by the four domestic regulators, in so far as they relate to financial products, services and institutions within an IFSC. This single change is what made the centre commercially viable.
The Position Today
IFSCA has since issued dedicated frameworks for banking, fund management, insurance, capital markets, aircraft and ship leasing, bullion and fintech, and has operated a regulatory sandbox. The India International Bullion Exchange established GIFT as the routing point for bullion imports. The centre is now past proof-of-concept, and the practical question for a new applicant is no longer whether the regime works but which authorisation category fits the business.
What Are the Tax and Regulatory Advantages of an IFSC Unit?
The advantages fall into three groups, and it is worth being precise about each because the headline summaries circulating in the market are frequently wrong.
Direct Tax Treatment
Section 80LA of the Income Tax Act, 1961 permits a deduction of one hundred per cent of eligible business income for ten consecutive assessment years, selected by the unit out of a fifteen-year window running from the year the permission or registration is obtained. Because the ten years are chosen rather than fixed, the selection should be planned around the projected profit curve rather than claimed from year one by default.
Exemptions for Non-Resident Investors
Sections 10(4E), 10(4F) and 10(4G) exempt specified categories of income earned by non-residents from transactions carried out on IFSC exchanges and from specified IFSC units, including certain derivative income, aircraft lease rentals and portfolio management income. These exemptions attach to the investor rather than the unit, which is precisely why they matter when marketing a GIFT-domiciled fund to offshore capital.
Indirect Tax and Transaction Costs
Services provided by an IFSC unit to offshore recipients generally fall outside domestic GST, and specified transactions on IFSC exchanges are exempt from securities transaction tax, commodities transaction tax and stamp duty. Together with the concessional minimum alternate tax rate, these reduce the frictional cost of transacting to levels comparable with competing offshore centres.
Foreign Exchange Treatment
An IFSC unit is treated as a person resident outside India under the FEMA framework for most operational purposes, allowing it to hold and transact in foreign currency, borrow offshore and deal with non-resident counterparties without the restrictions applying to domestic entities.
Transactions between an IFSC unit and its Indian parent or associated enterprises remain fully within the transfer pricing regime. A structure that shifts profit into the IFSC without corresponding functions, assets and risk will not survive scrutiny, and the tax holiday makes such arrangements more visible rather than less.
What Is the Step-by-Step Process to Set Up in GIFT IFSC?
The sequence below assumes a new unit. An existing offshore structure being redomiciled follows the same path with an additional migration workstream.
- Define the activity and identify the authorisation category. Map the intended business against the IFSCA frameworks for banking, fund management, insurance, capital markets, leasing, finance company or ancillary services. This determines everything downstream.
- Test the commercial case against alternatives. Compare the IFSC route against a domestic entity, a foreign branch or continuing in an existing offshore jurisdiction, taking account of investor acceptability and migration cost, not tax alone.
- Choose the entity form and incorporate. Select between a company, LLP or branch structure, incorporate the Indian entity where required, and align its objects with the proposed authorised activity.
- Secure space and SEZ approval. Obtain a letter of approval as a unit in the SEZ at GIFT City and execute the lease for qualifying office space, since physical presence is a substantive requirement rather than a formality.
- Prepare and file the IFSCA application. Submit the application for the relevant authorisation with the business plan, financial projections, fit-and-proper documentation for the promoters and key managerial personnel, and the governance and compliance framework.
- Respond to regulatory queries. Address IFSCA observations on the business model, capital adequacy, outsourcing arrangements and risk management, supported by documents rather than assurances.
- Complete post-authorisation setup. Open the required foreign currency accounts, appoint the compliance officer and other mandated functions, implement the anti-money-laundering framework, and commence operations within the permitted timeline.
- Establish the ongoing compliance calendar. Put in place the periodic regulatory reporting to IFSCA, the SEZ reporting, the tax filings including the Section 80LA claim, and the transfer pricing documentation for intra-group transactions.
Step eight is where most avoidable difficulty arises. The 80LA claim, the transfer pricing position and the regulatory reporting are usually handled by three different people, and the inconsistencies between them surface at assessment. Our GIFT regulatory and tax advisory team keeps these aligned from the first year.
Which Activities Fit Which IFSC Authorisation?
The table maps common business objectives to the authorisation route. It is indicative; the correct category depends on the detailed activity description.
| Business Objective | Typical IFSC Route |
|---|
| Managing an India-focused or global fund | Fund management entity with scheme registration |
| Foreign currency lending and trade finance | IFSC Banking Unit |
| Cross-border reinsurance placement | IFSC insurance office or intermediary |
| Aircraft or ship leasing platform | Finance company undertaking leasing |
| Group treasury and offshore borrowing | Finance company or global treasury centre |
| Bullion import and trading | Participation in the IFSC bullion exchange |
| Support services to offshore financial group | Global in-house centre |
| Professional or administration services to IFSC units | Ancillary service provider |
How Does IFSC Work Across Different Sectors?
The regime reads differently depending on what the applicant actually does.
Asset Management and Alternative Funds
For fund managers the decisive factors are investor familiarity, treaty access and the cost of running the manager entity. GIFT now supports a range of scheme structures, and the manager and the fund can both be domiciled in the IFSC. The migration analysis for an existing offshore vehicle is materially more complex than a fresh launch, and should be run in parallel with the AIF application process rather than after it.
Banking and Corporate Finance
IFSC Banking Units operate in foreign currency and serve offshore and eligible domestic clients under a distinct prudential framework. For a corporate borrower, the practical attraction is access to foreign currency funding within Indian jurisdiction, which shortens documentation and dispute resolution timelines compared with a genuinely offshore lender.
Insurance and Reinsurance
Insurance offices in the IFSC can write and place cross-border risk under IFSCA supervision. The capital, solvency and reinsurance-placement rules differ from the domestic regime, and an insurer operating both domestically and in the IFSC has to maintain genuinely separate governance rather than treating the unit as a division.
Technology, Fintech and Support Operations
Fintech firms can access the IFSCA regulatory sandbox for cross-border payments, foreign exchange products and technology-led financial services. Support operations should note the distinction between an authorised global in-house centre and an ordinary SEZ back office, which look similar physically but sit under entirely different regimes.
Why Choose N D Savla & Associates for IFSC Services?
IFSC work rewards firms that are willing to say when the structure does not make sense. Much of the value is in the first conversation.
Authorisation Category Decided Before Anything Is Filed
We map the intended activity to the correct IFSCA framework before incorporation, because an entity incorporated with the wrong objects or the wrong capital structure has to be unwound rather than amended. This is the decision that determines both cost and timeline.
Tax Positions Built to Be Defended
The Section 80LA year selection, the substance case for the unit and the international transfer pricing documentation for intra-group flows are prepared as one connected position. A tax holiday claimed without supporting substance is an assessment risk rather than a benefit.
Honest Comparison Against the Alternatives
We will model the IFSC route against a domestic entity, an overseas branch or staying where the group already is, and present the comparison rather than the conclusion. For some businesses the IFSC is transformative; for others it adds a regulated entity without a corresponding benefit.
Continuity After Authorisation
Authorisation is the start of the obligation. Our GIFT legal and compliance support covers the periodic IFSCA reporting, SEZ filings, audit and tax compliance, so the unit does not drift out of compliance in its second and third years when attention has moved elsewhere.
A Mumbai Team Working With a Gandhinagar Regulator
Most of our clients are headquartered in Mumbai while their IFSC unit sits in Gandhinagar, and the finance team stays in Mumbai. We work where the decision-makers are, and file directly with IFSCA. Our offices at Andheri East, Charni Road, Vashi, Thane, New Panvel and Panaji support that arrangement.
Frequently Asked Questions on IFSC Services
What is an IFSC and where is India's IFSC located?
An International Financial Services Centre is a jurisdiction within India that provides financial services to non-residents and to residents in foreign currency, under a regulatory regime designed for cross-border business. India's first and currently only operational IFSC is at Gujarat International Finance Tec-City, or GIFT City, in Gandhinagar. It is regulated by the International Financial Services Centres Authority, which was established under the IFSCA Act, 2019 and became operational on 27 April 2020.
Who regulates entities set up in GIFT IFSC?
The International Financial Services Centres Authority is the single unified regulator. Section 13 of the IFSCA Act, 2019 empowers it to exercise the powers that the Reserve Bank of India, SEBI, IRDAI and PFRDA would otherwise exercise, in so far as they relate to financial products, services and institutions within an IFSC. This replaced the earlier position where four separate regulators had overlapping jurisdiction over the same zone.
What tax benefits are available to an IFSC unit?
Section 80LA of the Income Tax Act, 1961 allows a hundred per cent deduction of eligible business income for ten consecutive assessment years out of fifteen, counted from the year in which the permission or registration is obtained. Sections 10(4E), 10(4F) and 10(4G) exempt specified categories of non-resident income arising from transactions on IFSC exchanges. Concessional treatment also applies to minimum alternate tax, and specified transactions are exempt from securities transaction tax and commodities transaction tax.
Is a GIFT IFSC unit the same as an SEZ unit?
No, and confusing the two is a common and costly error. GIFT City contains a Special Economic Zone, and the IFSC sits within that SEZ, but they are separate regimes. An IT or back-office company located in the GIFT SEZ outside the IFSC is not regulated by IFSCA and does not receive IFSC tax treatment. Eligibility depends on the nature of the activity and the specific authorisation obtained, not on the physical address alone.
How is an IFSC unit treated under foreign exchange law?
A unit in an IFSC is treated as a person resident outside India under the Foreign Exchange Management Act framework for most purposes, which is what allows it to transact in foreign currency and deal with offshore counterparties without the restrictions applying to domestic entities. Transactions between an IFSC unit and its Indian parent or affiliates remain subject to transfer pricing rules and must be priced at arm's length.