GIFT City IFSC for Foreign Companies in 2026: Who Sets Up and Why

Written by CA Nandini Hasija, Krystal7 Consultants. Last updated 23 October 2026.

GIFT IFSC in Gandhinagar, Gujarat is India's international financial services centre. The International Financial Services Centres Authority (IFSCA), set up on 27 Apr 2020 under the IFSCA Act, 2019, registers every unit. Foreign groups use it for funds, banking units, aircraft and ship leasing, fintech, treasury and global in house centres. Units deal in foreign currency, and a financial institution or branch there counts as non resident under FEMA. Section 147 of the Income Tax Act, 2025 gives a 100 percent deduction for 20 consecutive years out of 25.

This page explains who sets up in GIFT IFSC and why, and which activities IFSCA permits. It covers the tax position under the Income Tax Act, 2025, the currency and FEMA rules and the approval route. It ends with a structural comparison with Singapore and Dubai.

What is GIFT City IFSC and who regulates it?

GIFT IFSC is a financial centre inside the GIFT multi services special economic zone in Gandhinagar. It is India's first IFSC, as IFSCA's own website puts it. A single regulator, IFSCA, governs every financial product, service and institution there. Indian tax law gives its units a long deduction and several exemptions.

The legal chain has three links:

1. The SEZ Act. Section 18 of the Special Economic Zones Act, 2005 lets the Central Government approve an IFSC inside an SEZ. Section 3(1)(g) of the IFSCA Act adopts that meaning.
2. The IFSCA Act, 2019. Act No. 50 of 2019 created the Authority under section 4. Section 12 gives it the duty to develop and regulate financial products, services and institutions in an IFSC.
3. The transfer of powers. Under section 13, IFSCA exercises inside an IFSC the powers of RBI, SEBI, IRDAI and PFRDA. The First Schedule lists these regulators.

The IFSCA About Us page records that these four regulators supervised IFSC business before 27 Apr 2020. A fund manager, a bank branch and a reinsurer in GIFT IFSC now deal with one regulator, headquartered in GIFT City itself.

The IFSC is part of India, but it works offshore in three practical ways. Units transact in foreign currency. FEMA treats a financial institution or branch there as a person resident outside India. Indian tax law exempts or deducts most of their eligible income for a long period. The rest of this page takes each point in turn.

Which activities can a foreign company carry on in GIFT IFSC?

A foreign group can run most regulated financial businesses in GIFT IFSC, plus support services for its own group. IFSCA's legal database listed 41 regulations on 23 Oct 2026. The ones foreign groups use most cover fund management, banking, finance companies, capital market intermediaries, global in house centres and ancillary services.

Activity	Governing instrument (as listed by IFSCA)	Date or version	Typical foreign user
Fund management	IFSCA (Fund Management) Regulations, 2025	IFSCA/GN/2025/002, 10 Feb 2025 (press release 19 Feb 2025); amended up to 10 Sep 2026	Asset managers, family offices, venture funds
Banking	IFSCA (Banking) Regulations, 2020	IFSCA/2020-21/GN/REG004, 18 Nov 2020; consolidated to 14 Jul 2023	Foreign and Indian banks running dollar books
Finance company (lending, factoring, treasury)	IFSCA (Finance Company) Regulations, 2021	IFSCA/2020-21/GN/REG010, 25 Mar 2021; amended 1 Jul 2022	Group finance arms, treasury centres
Aircraft leasing	Finance Company Regulations with the Framework for Aircraft Lease	Framework updated as on 15 Nov 2023; the IFSCA page also links a later revised framework	Lessors serving Indian and foreign airlines
Ship leasing	Finance Company Regulations with the Framework for Ship Leasing	Framework 16 Aug 2022; updated 23 Jun 2023	Ship owners and lessors
Global in house centre	IFSCA (Global In House Centres) Regulations, 2025	IFSCA/GN/2025/012, 24 Dec 2025; 2020 regulations repealed by regulation 21	Financial groups moving back office work
Fintech and techfin	FinTech Entity Framework, 2022; IFSCA (TechFin and Ancillary Services) Regulations, 2025; IFSCA FinTech Sandbox Framework, 2026	2022, 2025 and 2026	Payments, regtech and wealthtech firms
Book keeping, accounting, tax and compliance services	IFSCA (Book keeping, Accounting, Taxation and Financial Crime Compliance Services) Regulations, 2024	2024	Firms serving clients outside India
Broking, advisory and other market services	IFSCA (Capital Market Intermediaries) Regulations, 2025	2025	Brokers, advisers, custodians

Sources: IFSCA legal database and activity pages, read 23 Oct 2026. We write regulation titles without the hyphens IFSCA uses, in line with our house style.

The list matters for one reason. IFSCA registers activities, not companies. A single entity can hold more than one registration, but each activity needs its own approval under its own instrument. The section 147 deduction also follows the approved activity, as the tax section below explains.

How do fund managers set up in GIFT IFSC?

A fund manager registers as a Fund Management Entity (FME) under the IFSCA (Fund Management) Regulations, 2025, then files each scheme with IFSCA. The 2025 regulations replaced the earlier fund framework. IFSCA issued a transition circular on 8 Apr 2025 for entities registered under the older rules.

The Fund Management page shows the current text as amended up to 10 Sep 2026. The regulations were notified as IFSCA/GN/2025/002 on 10 Feb 2025. Chapter II covers registration of an FME, in three categories: Authorised FME, Registered FME (Non Retail) and Registered FME (Retail). Chapter III covers venture capital, restricted, retail and special situation schemes. Regulation 8(1) points to the Second Schedule for the net worth an FME must keep. We take the net worth and minimum corpus figures from the consolidated text for each engagement, because IFSCA amends them.

Foreign managers use GIFT IFSC for three reasons we see often:

1. One dollar vehicle. A scheme in IFSC can pool money from investors in many countries in one fund, denominated in foreign currency.
2. Exemptions in Schedule VI. Schedule VI to the Income Tax Act, 2025 exempts several kinds of fund income. The table further down lists them.
3. Relocation of offshore funds. Schedule VI, serial 10 exempts capital gains on a fund's relocation to IFSC, on conditions.

IFSCA's circulars also cover co investment schemes (21 May 2025) and family investment funds (1 Mar 2023). A differential distribution framework for venture capital and restricted schemes followed on 25 Sep 2026. Read the circular for your scheme type before you file.

What can banks and finance companies do in GIFT IFSC?

A bank can open an IFSC Banking Unit (IBU) as a branch or an IFSC Banking Company (IBC) as a subsidiary. A non bank group can register a Finance Company, or a Finance Unit if it uses a branch. Both deal in foreign currency, and a finance company keeps its balance sheet in US dollars.

The IFSCA (Banking) Regulations, 2020, consolidated to 14 Jul 2023, let an Indian bank, a foreign bank or both act as the parent. The IFSCA (Finance Company) Regulations, 2021 split activities into core and non core.

Entity	Legal form	Minimum capital or owned fund	Instrument
IFSC Banking Unit (IBU)	Branch of the parent bank	USD 20 million, or higher if IFSCA specifies	Banking Regulations, 2020
IFSC Banking Company (IBC)	Subsidiary of the parent bank	USD 50 million, or higher if IFSCA specifies	Banking Regulations, 2020
Finance Company, one or more core activities	Subsidiary, joint venture or new company under the Companies Act, 2013	Higher of USD 3 million and the regulatory capital IFSCA sets	Finance Company Regulations, 2021, Schedule
Finance Company, non core activities only (for example operating leases)	Company; LLP or trust allowed for non core only	Higher of USD 0.2 million and the amount needed for the specific registration	Finance Company Regulations, 2021, Schedule
Global or Regional Corporate Treasury Centre	Finance Company	Higher of USD 0.2 million and the amount in the framework (USD 0.2 million in the 2025 framework)	Finance Company Regulations, 2021, Schedule; treasury centre framework
Finance Unit	Branch of a foreign or Indian entity	As for a Finance Company with the same activities	Finance Company Regulations, 2021, regulation 3(3)

Sources: the consolidated texts linked above. The finance company figures come from the text as amended up to 1 Jul 2022.

Regulation 5(1)(ii) of the Finance Company Regulations lists the core activities. They include lending, securitisation, financial lease, factoring, investment, derivatives and treasury centres. Regulation 5(1)(iii) lists non core activities. Examples are merchant banking, trusteeship, portfolio management and operating leases, including of aircraft and ships.

A corporate treasury centre is a common use for a non financial group. It lets a group pool and lend dollars to its own entities. IFSCA first issued its framework on 25 Jun 2021. The current text is Circular IFSCA/24/2024-Banking-FC/01 of 4 Apr 2025, updated as on 9 Jun 2025. It repealed the 2021 framework. It sets a minimum owned fund of USD 0.2 million.

Budget 2026 (Annexure to Part B, item 4(vii), 1 Feb 2026) proposed easing the deemed dividend rule for these centres. The Finance Act, 2026 enacted it. It substituted clause (v) of section 2(40) of the Income Tax Act, 2025, from 1 Apr 2026. That clause takes an advance or loan between two group entities out of "dividend" when three conditions hold:

1. One group entity is a Finance Company or Finance Unit set up as a global or regional corporate treasury centre.
2. The other group entity is located outside India.
3. The parent or principal entity of the group is listed on a stock exchange outside India.

The countries or territories for conditions 2 and 3 are those the Central Government specifies by notification. Before you lend, check that the countries involved appear in that notification.

How does aircraft and ship leasing work in GIFT IFSC?

A lessor registers as a Finance Company or Finance Unit for operating leases, under the Finance Company Regulations read with IFSCA's leasing frameworks. The lessor leases aircraft or ships to airlines and shipping lines in India or abroad. Tax law then exempts or deducts most of its income.

The Aircraft Leasing page lists the Framework for Aircraft Lease updated as on 15 Nov 2023 and links a later revised framework. Read the revised text before you plan. The Central Government notified aircraft leases as financial products on 16 Oct 2020. Other enablers on the same page include:

1. A DGFT notice of 31 Aug 2021 allowing aircraft imports by IFSC leasing entities.
2. A DGCA exemption of 19 Sep 2022 from the no objection certificate for aircraft import by IFSC leasing units.
3. An MCA notification of 3 Oct 2023 exempting certain aviation transactions from parts of the Insolvency and Bankruptcy Code, 2016.
4. Notifications adding aircraft ground support equipment (12 Apr 2022) and aviation training simulation devices (11 Apr 2023) as leasable financial products.

Ship leasing follows the same path. The Ministry of Finance notified ship leases as financial products on 7 Jan 2022. IFSCA issued its Framework for Ship Leasing on 16 Aug 2022 and updated it on 23 Jun 2023. A clarification of a lessor's permitted activities followed on 2 Apr 2024. A Commerce Ministry notification of 4 Jul 2023 covers the import, export and procurement of ships by an IFSC unit from the domestic tariff area.

Leasing is where the income tax relief is widest. Section 147(3)(d) deducts income from transferring a leased aircraft or ship. Schedule VI exempts three kinds of leasing income. Serial 6 covers royalty and interest on leases paid to non resident lessors. Serial 8 covers gains on selling shares of the leasing company. Serial 11 covers dividends from an IFSC unit company.

Section 147(3)(d) and serials 6 and 8 need the leasing unit or company to have started operations by 31 Mar 2030. Serial 11 asks that the unit is primarily engaged in aircraft or ship leasing, and it states no start date.

What are fintech entities and global in house centres in IFSC?

A fintech entity registers under IFSCA's FinTech Entity Framework, 2022, or tests a product in the IFSCA sandbox. A global in house centre (GIC) is a unit set up by a financial institution group to deliver financial services support to that group. It serves non resident group entities, and Indian group entities only up to 10 percent of its revenue for the year. GICs now follow the IFSCA (Global In House Centres) Regulations, 2025.

The FinTech page lists three instruments:

1. The FinTech Entity Framework, 2022, for direct authorisation of fintech firms.
2. The IFSCA (FinTech Incentive) Scheme, 2022, with implementation guidelines and FAQs.
3. The IFSCA FinTech Sandbox Framework, 2026, with an FAQ and a list of sandbox entities.

IFSCA's legal database adds a fourth instrument, the IFSCA (TechFin and Ancillary Services) Regulations, 2025, for technology and support providers.

For GICs, the Global In House Centres page shows Notification No. IFSCA/GN/2025/012 of 24 Dec 2025. It marks the 2020 regulations (IFSCA/2020-21/GN/REG 003 of 13 Nov 2020) as repealed. The 2025 regulations cover registration, functioning, fit and proper rules and the principal officer and compliance officer. A GIC unit works in a specified foreign currency and keeps its balance sheet in one.

A GIC in IFSC suits a bank, insurer or asset manager that wants an Indian back office billing in dollars. A technology or engineering group usually sets up an ordinary global capability centre in the domestic tariff area instead. Our guide to global capability centre setup in India covers that route.

A technology group that picks that route can compare Bengaluru, Hyderabad, Pune and Gurugram in our guide to the best Indian city for a tech company.

What tax holiday does an IFSC unit get under the Income Tax Act, 2025?

Section 147 of the Income Tax Act, 2025 deducts 100 percent of an IFSC unit's eligible income. The unit picks any 20 consecutive tax years out of 25. The Finance Act, 2026 (Act No. 4 of 2026) made this change from 1 Apr 2026. Before it, the window was 10 consecutive years out of 15.

Section 147 replaced section 80LA of the Income Tax Act, 1961. Its parts work as follows:

1. Who qualifies (147(1)). A scheduled or foreign bank with an Offshore Banking Unit in an SEZ, and any unit of an IFSC.
2. How long (147(2)). Twenty consecutive tax years for an Offshore Banking Unit. Twenty consecutive tax years out of 25 for an IFSC unit, at its option. An Offshore Banking Unit whose ten year period ended on 31 Mar 2025 gets a further ten years from 1 Apr 2026.
3. Which income (147(3)). Income from approved business activities of an IFSC unit set up in an SEZ. It also covers income from transferring an aircraft or ship leased by a unit that began operations by 31 Mar 2030.
4. Paperwork (147(4)). The return must carry an accountant's report in Form 35 (old Form 10CCF). It must also carry a copy of the IFSCA registration.
5. No recycling (147(5)). A unit starting on or after 1 Apr 2026 gets no deduction if someone formed it by splitting up an existing Indian business.
6. Start of the clock (147(6)). The 25 year window runs from the tax year in which IFSCA granted the permission or registration.

Two more sections complete the picture. Section 218 taxes section 147(3) income at 15 percent, with the rest of the income at normal rates. The Budget 2026 Annexure (Part B, item 4(vi)) said this rate applies after the deduction period ends. Section 206 charges minimum alternate tax at 9 percent of book profit, plus surcharge and cess. It applies to a company that is an IFSC unit and earns only in convertible foreign exchange. The Income Tax Department's MAT and AMT page states this rate.

Point	Income Tax Act, 1961	Income Tax Act, 2025 (from tax year 2026-27)
Deduction for IFSC units	Section 80LA, 100% for 10 consecutive years out of 15	Section 147, 100% for 20 consecutive years out of 25
Deduction for Offshore Banking Units	Section 80LA(1), ten consecutive years	Section 147, 100% for 20 consecutive years
Accountant's report	Form 10CCF	Form 35
Rate after the deduction period	Normal company rates	15% on section 147(3) income (section 218)
MAT for a unit earning only in convertible foreign exchange	9% (section 115JB)	9% (section 206)
Units formed by splitting up an Indian business	No bar in the IFSC clause	No deduction if the unit starts on or after 1 Apr 2026 (section 147(5))

Sources: sections 147 and 218 and the MAT and AMT page on incometaxindia.gov.in; the Income Tax Department's Form 35 mapping; Budget 2026 Annexure to Part B, item 4(vi).

Which Schedule VI exemptions matter to foreign investors and lessors?

Schedule VI to the Income Tax Act, 2025 lists income of eligible persons in an IFSC that is not part of total income. Section 11 gives it effect. It has 12 serials, which gather the IFSC exemptions in one place.

Serial	Person	Income exempt	Key condition
1 to 4	Specified fund	Gains on capital assets traded on an IFSC exchange, gains on securities, income from securities issued by non residents, income from a securitisation trust	Consideration in convertible foreign exchange; exempt only to the extent attributable to units held by non residents (or to an Offshore Banking Unit's investment division), computed as prescribed
5	Non resident	Income from non deliverable forwards and offshore or over the counter derivatives	Contract with an Offshore Banking Unit or with a Foreign Portfolio Investor that is an IFSC unit; prescribed conditions
6	Non resident	Royalty or interest on lease of an aircraft or ship	Paid by an IFSC unit that started operations by 31 Mar 2030
7	Non resident	Income from a portfolio managed by a portfolio manager	Received in an account with an IFSC Offshore Banking Unit; only income accruing outside India
8	Non resident, or an IFSC unit primarily in aircraft or ship leasing	Gains on transfer of equity shares of a domestic company that is an IFSC aircraft or ship leasing unit	Company started operations by 31 Mar 2030; ten tax year limit
9	Unit holder of a specified fund	Income from the fund or from transfer of units	Nil conditions
10	Non resident or specified fund	Gains on transfer of shares by the resultant fund when an offshore fund relocates to IFSC	Gains would not have been taxable without the relocation; exempt only to the extent attributable to non resident units
11	A unit of an IFSC	Dividends from a company that is an IFSC unit	The unit is primarily engaged in leasing an aircraft or a ship; no start date stated
12	Non resident	Interest payable by an IFSC unit	Money borrowed on or after 1 Sep 2019

Source: Schedule VI to the Income Tax Act, 2025 on incometaxindia.gov.in, read 23 Oct 2026. We have paraphrased the columns.

A foreign investor in a GIFT IFSC fund should check two points before investing. First, the fund must be a "specified fund" as Schedule VI defines it. Second, the exemption covers only the income types listed, so Indian listed equity gains may still be taxed. Our page on GAAR for foreign companies explains why the commercial substance of the fund matters too.

Is there a sunset date for GIFT IFSC tax benefits?

Section 147 sets no start deadline for an ordinary IFSC unit. Any unit that gets IFSCA registration can claim the 20 out of 25 year deduction. The leasing reliefs do have a sunset: the unit or company must begin operations by 31 Mar 2030.

The dates to track are these:

1. 31 Mar 2030. The leasing unit's start date for section 147(3)(d) and Schedule VI serials 6 and 8. It also applies to an Offshore Banking Unit's investment division under Note 1(b) of Schedule VI.
2. 31 Mar 2025. Note 1(g)(ii)(A) of Schedule VI sets this start date for an investment division that is a Category I FPI.
3. Ten years. Serial 8 covers a transfer in the ten tax years from the company's start year. Where that period ends before 1 Apr 2033, the ten tax years from 1 Apr 2023 also count.
4. 1 Apr 2026. From this date, section 147(5) blocks the deduction for a new unit carved out of an existing Indian business.

A lessor planning to start in 2030 or later should not assume the date will move again. Model the business without the leasing reliefs as well.

In which currency does an IFSC unit operate?

An IFSC unit transacts in foreign currency. Section 20 of the IFSCA Act, 2019 requires IFSC transactions in the foreign currency that regulations specify, made in consultation with the Central Government. Banking units use 11 specified currencies. A banking unit may keep a rupee account for administrative and statutory expenses and other purposes IFSCA specifies (regulation 17(1)).

The First Schedule to the IFSCA (Banking) Regulations, 2020, as consolidated on 14 Jul 2023, lists the currencies. They are USD, EUR, JPY, GBP, CAD, AUD, CHF, HKD, SGD, AED and RUB. IFSCA's Banking page lists the 14 Jul 2023 consolidated text and shows no later amendment. So this list stands as on 23 Oct 2026. Notification IFSCA/2023-24/GN/REG041 of 6 Jul 2023 inserted the "specified foreign currencies" definition and replaced the older reference to freely convertible currency.

Other activities follow the same pattern:

1. Finance companies. Regulation 6(1) of the Finance Company Regulations requires business in freely convertible foreign currency. Regulation 6(3) requires a US dollar balance sheet.
2. Reporting. Regulation 9(2) of the same regulations requires financial reporting to IFSCA in US dollars.
3. Global in house centres. Regulation 11 of the 2025 GIC regulations lets the unit operate in any specified foreign currency. It may keep a rupee account for administrative and statutory expenses.
4. Fees. SWIT collects IFSCA application fees in US dollars, per the SWIT circular of 30 Sep 2024.

For a foreign parent, this means capital comes in as dollars and the unit earns in dollars. Its books are usually kept in dollars too. Income tax and GST are still computed and paid in rupees. We set up the rupee expense account at the same time as the dollar account, so that rent, salaries and GST are not paid late.

How is an IFSC unit treated under FEMA?

FEMA treats a financial institution or branch set up in an IFSC as a non resident. Regulation 3 of FEMA 339/2015-RB of 2 Mar 2015 (G.S.R. 218(E), 23 Mar 2015) covers a financial institution, or a branch of one, set up in an IFSC. The Government of India or a regulator must permit or recognise it. The regulation treats it as a person resident outside India.

Two more regulations complete the rule. Regulation 4 lets the regulator decide the currency and the persons a unit may deal with. Regulation 5 says other FEMA regulations do not apply to the unit, unless they or RBI directions say otherwise.

In practice this has three effects:

1. Dealing with Indian residents is cross border. A loan from an IFSC finance company to a group company in Bengaluru comes from a non resident. The Indian borrower should test the loan against the external commercial borrowing rules. Our guide to ECB from a foreign parent covers them.
2. Indian individuals use the LRS. The Banking Regulations let a resident individual hold a foreign currency account with an IFSC banking unit. The account serves only transactions the Liberalised Remittance Scheme allows.
3. Indian companies investing in IFSC follow overseas investment rules. An Indian parent putting money into an IFSC unit treats it as an overseas investment. Our page on the ODI rules explains them.

One question comes up with every foreign parent. Does capital put into an IFSC company need an FC-GPR filing? Regulation 5 of FEMA 339/2015-RB switches off the other FEMA regulations for an IFSC financial institution, unless the regulations or RBI say otherwise. We found no provision on IFSC units in the RBI Master Direction on Foreign Investment in India, as updated on 15 Jun 2026. So we state no filing rule here.

We take a written view from the authorised dealer bank before the first allotment. We file Form FC-GPR if the bank asks for it.

What approvals does a foreign company need to set up in GIFT IFSC?

A foreign company needs IFSCA registration for its activity and an SEZ Letter of Approval for its unit. Since 1 Oct 2024, both go through IFSCA's Single Window IT System (SWIT). It also carries the GST registration and RBI, SEBI or IRDAI no objection certificate modules. The Unit Approval Committee, chaired by the Administrator (IFSCA), approves the unit, and the Administrator issues the Letter of Approval.

The SWIT circular of 30 Sep 2024 made the portal mandatory from 1 Oct 2024. It uses one Common Application Form with annexures for each business. Five activity groups still file in the older mode. They are course delivery by international branch campuses and offshore education centres, book keeping and compliance services, payment services, bullion clearing and trading members, and market infrastructure institutions. A catch all covers activities not yet on the portal.

The SEZ part follows the IFSCA SOP and FAQs. The SOP treats a Government of India notification dated 28 Feb 2024 as the cut off date. From then, the Approval Committee chaired by the Administrator (IFSCA) handles IFSC unit approvals.

Step	What happens	Authority	Form or document	Time limit stated
1	Agree office space with the co developer and get its Provisional Letter of Allotment and no objection certificate; incorporate the Indian company, or prepare the branch documents	Co developer; MCA	Letter of Intent; SPICe+	None stated
2	File the Common Application Form for the activity, and Form FA for the SEZ unit	IFSCA through SWIT	CAF; Form FA (rule 17, SEZ Rules, 2006)	None stated
3	Get regulator no objection where needed	RBI, SEBI or IRDAI through the SWIT module	NoC	None stated
4	Obtain Unit Approval Committee approval and receive the Letter of Approval	Approval Committee chaired by the Administrator (IFSCA)	Letter of Approval	None stated
5	Accept the terms of the Letter of Approval	Unit to the Administrator	Letter of acceptance	45 days
6	Execute the bond cum legal undertaking	Administrator and Specified Officer, GIFT SEZ	BLUT under rule 22, SEZ Rules, 2006	None stated
7	Apply for the tax exemption eligibility certificate and register for GST	Administrator; GSTN through SWIT	Eligibility certificate; GST registration	None stated
8	Sign the lease with the co developer, file a copy with IFSCA, and obtain the IFSCA Certificate of Registration	IFSCA through SWIT	Lease; Certificate of Registration	Lease copy within 6 months of the Letter of Approval

Sources: SWIT circular of 30 Sep 2024; IFSCA SOP and FAQs for IFSC unit applications; IFSCA's SWIT workflow chart for setting up a unit in GIFT IFSC. It carries no date or version.

We line up office space before step 2. IFSCA's workflow starts with a Letter of Intent and a Provisional Letter of Allotment from the co developer. The company also needs a PAN, a TAN and a bank account. Our foreign subsidiary service handles the incorporation and post incorporation steps.

Which legal form should a foreign company use in GIFT IFSC?

Most foreign groups use a new Indian company owned by the parent. Banks often use a branch (IBU) because the capital floor is lower. A Finance Unit is also a branch. LLPs and trusts fit only non core finance activities and some fund structures.

1. Indian company (subsidiary). Fund managers, finance companies, lessors and GICs use it. It ring fences liabilities and allows the widest choice of activities. It carries full Companies Act compliance, audit and board meetings.
2. Branch (IBU or Finance Unit). Banks and groups lending from an existing balance sheet use it. No new entity is needed, but the parent stands behind every branch liability.
3. LLP. It suits non core finance activities and some fund structures. Regulation 3(4) of the Finance Company Regulations lets an applicant for non core activities register as an LLP or a trust.
4. Trust. Fund schemes and non core finance activities use it. It needs a trustee and a trust deed that fits IFSCA rules.

The choice drives the tax answer. A subsidiary is a domestic company, so section 147 and the section 206 MAT rate for IFSC units apply to it. A branch is part of a foreign company. A foreign company is taxed at 35 percent before surcharge and cess on income not covered by section 147. Our guide to branch office versus subsidiary sets out the wider trade offs.

How does GIFT IFSC compare with Singapore and Dubai?

GIFT IFSC is a zone inside one country with its own regulator. Singapore has no separate financial zone: one national regulator covers the whole country. Dubai's DIFC is a financial free zone with its own regulator, its own civil and commercial laws and its own courts. This comparison covers structure only, not tax rates or costs.

Feature	GIFT IFSC (India)	Singapore	DIFC (Dubai, UAE)
What it is	An IFSC inside a multi services SEZ, approved under section 18 of the SEZ Act, 2005	The whole country is the financial centre; no separate zone	A financial free zone set up by a Federal Decree under Federal Law No. 8 of 2004
Financial regulator	IFSCA, a unified regulator exercising RBI, SEBI, IRDAI and PFRDA powers inside the IFSC	Monetary Authority of Singapore, the central bank and integrated financial regulator	Dubai Financial Services Authority, the independent regulator of financial services in or from the DIFC
Civil and commercial law	Indian law: Companies Act, 2013, Indian Contract Act and other national laws	Singapore law	DIFC's own civil and commercial laws; UAE federal civil and commercial laws do not apply; UAE criminal law still applies
Courts	Indian courts	Singapore courts	DIFC Courts of First Instance and Appeal
Currency rule	Transactions in foreign currency specified by IFSCA (section 20, IFSCA Act)	No zone level currency rule	Not covered in this comparison
Exchange control status	Unit is a person resident outside India under FEMA 339/2015-RB	Not applicable	Not applicable
Set up approval	IFSCA registration plus SEZ Letter of Approval through SWIT	MAS licence for regulated activities	DFSA authorisation for financial services, plus registration in the DIFC

Sources: IFSCA Act, 2019; FEMA 339/2015-RB; MAS Who We Are; DIFC Courts legal framework; DFSA overview. Read 23 Oct 2026.

The structural difference that decides most cases is market access. Only GIFT IFSC sits inside India. A unit there can lend to Indian borrowers and lease aircraft to Indian airlines, under Indian law and Indian courts. A Singapore or DIFC entity does the same business with India across a border. Where India is the main market, GIFT IFSC usually wins on structure. Where India is one market among many, groups often keep the regional hub abroad and add an IFSC unit for India facing business.

What changed in 2026

Item	Old rule	New rule	Date	Instrument
Deduction period for IFSC units	10 consecutive years out of 15 (section 80LA, 1961 Act)	20 consecutive years out of 25 (section 147(2)(b))	1 Apr 2026	Finance Act, 2026 (Act No. 4 of 2026)
Deduction period for Offshore Banking Units	10 consecutive years	20 consecutive years; a further ten years where the first ten ended on 31 Mar 2025	1 Apr 2026	Finance Act, 2026
Tax after the deduction period	Normal company rates	15% on section 147(3) income (section 218)	1 Apr 2026	Finance Act, 2026
Units formed by splitting up an Indian business	No bar in the IFSC deduction	No deduction for units starting on or after 1 Apr 2026 (section 147(5))	1 Apr 2026	Finance Act, 2026
Income tax law	Income Tax Act, 1961	Income Tax Act, 2025	1 Apr 2026	Act No. 30 of 2025
Accountant's report	Form 10CCF	Form 35	Tax year 2026-27	Income Tax Rules, 2026
Global in house centres	IFSCA (Global In House Centres) Regulations, 2020	2025 regulations; 2020 regulations repealed	24 Dec 2025	IFSCA/GN/2025/012
Deemed dividend on group loans to a treasury centre	Narrower exclusion in clause (v) of section 2(40), without the notified country mechanism	Loan between group entities excluded from "dividend" where one is a treasury centre Finance Company or Finance Unit, the other is in a notified country and the parent is listed abroad	1 Apr 2026	Finance Act, 2026 (section 2(40)(v), Income Tax Act, 2025)

What has happened since this page was first published?

We first published this page on 24 Feb 2026, three weeks after the Union Budget of 1 Feb 2026. At that date three items were proposals in the Finance Bill, 2026. They were the 20 out of 25 year deduction, the 15 percent rate and the treasury centre deemed dividend relief. These events followed:

1. 30 Mar 2026. The Finance Act, 2026 (Act No. 4 of 2026) received assent with the section 147, section 218 and section 2(40)(v) changes. They apply from 1 Apr 2026.
2. 1 Apr 2026. The Income Tax Act, 2025 and the Income Tax Rules, 2026 came into force. Form 35 replaced Form 10CCF.
3. 10 Sep 2026. An amendment to the IFSCA (Fund Management) Regulations, 2025 took effect. An earlier amendment took effect on 30 Jan 2026.
4. 25 Sep 2026. IFSCA issued a differential distribution framework for venture capital and restricted schemes.

Our page on Budget 2026 for foreign owned companies lists the other tax changes from the same Act.

Worked example

Scenario 1: choosing the 20 year window. A Singapore group registers IFSC FinCo Private Limited as a finance company in GIFT IFSC. IFSCA grants registration in tax year 2026-27. The 25 year window therefore runs from tax year 2026-27 to tax year 2050-51.

The company expects losses for its first three years while its loan book builds. It opts to start the deduction in tax year 2029-30. Twenty consecutive tax years then run to tax year 2048-49, inside the window. Tax years 2049-50 and 2050-51 fall outside the deduction.

Tax year	Eligible income (INR crore)	Section 147 deduction	Taxable section 147(3) income	Tax at 15% under section 218 (INR crore, before surcharge and cess)
2026-27 to 2028-29	Losses	Not claimed	Nil	Nil
2029-30 to 2048-49	20 a year (assumed)	100%	Nil	Nil (MAT may apply, see scenario 2)
2049-50	20	None	20	3.00
2050-51	20	None	20	3.00

At the 22 percent rate under section 200, the same INR 20 crore would pay INR 4.40 crore. Section 218 saves INR 1.40 crore a year before surcharge and cess. Had the company started its deduction in 2026-27, it would have wasted three loss years of the holiday.

Scenario 2: MAT during the holiday. In tax year 2030-31, IFSC FinCo earns only in convertible foreign exchange. Its book profit is INR 20 crore. Its taxable income is nil after the section 147 deduction.

Section 206 applies MAT at 9 percent of book profit to such a company. MAT is INR 20 crore × 9% = INR 1.80 crore, before surcharge and cess. So the effective cost of the holiday year is 9 percent, not zero. Our guide to MAT for foreign companies covers how book profit is computed.

Common mistakes

1. Starting the deduction in a loss year. The 20 years run consecutively once chosen. Fix: model the first five years and start the window in the first profitable year.
2. Assuming all income is covered. Section 147(3)(c) covers only approved business activities. Treasury income on surplus cash may fall outside. Fix: map each income stream to the IFSCA registration.
3. Forgetting Form 35. No accountant's report means no deduction under section 147(4). Fix: diarise Form 35 with the return due date each year.
4. Moving an Indian business into IFSC. From 1 Apr 2026, section 147(5) denies the deduction to a unit carved out of an existing Indian business. Fix: build new business in the IFSC unit, with fresh contracts and clients.
5. Paying expenses from the dollar account. Rent, salaries and GST are rupee payments. Fix: open the rupee expense account permitted by the regulations on day one.
6. Treating the unit as a resident for FEMA. Lending to an Indian group company is a cross border loan. Fix: run the ECB rules on the borrower's side before the first drawdown.
7. Missing the 45 day acceptance. The Letter of Approval terms need acceptance within 45 days. Fix: sign the acceptance as soon as the Letter of Approval arrives.
8. Planning a leasing start after 31 Mar 2030. Section 147(3)(d) and Schedule VI serials 6 and 8 need a start by that date. Fix: plan to commence operations before it, or model the business without the reliefs.

Checklist

1. Confirm that IFSCA permits the activity and identify the regulation or framework that governs it.
2. Choose the legal form: Indian company, branch, LLP or trust, as the regulation allows.
3. Agree office space with the co developer and obtain its Provisional Letter of Allotment and no objection certificate.
4. Incorporate the Indian company through SPICe+, or prepare the branch documents.
5. File the Common Application Form on SWIT, with Form FA for the SEZ unit.
6. Obtain any RBI, SEBI or IRDAI no objection certificate through the SWIT module.
7. Accept the Letter of Approval terms within 45 days and execute the bond cum legal undertaking.
8. Register for GST through SWIT and apply for the tax exemption eligibility certificate.
9. Sign the lease with the co developer and file a copy with IFSCA within 6 months of the Letter of Approval. Then obtain the IFSCA Certificate of Registration.
10. Open the US dollar operating account and the rupee expense account.
11. Model the 25 year window and choose the first year of the section 147 deduction.
12. File Form 35 with each return to claim the deduction.

Krystal7 sets up and runs IFSC units for foreign groups; email [email protected] with the activity you plan and we will map the approvals.

Frequently Asked Questions

What is GIFT City IFSC?+

GIFT IFSC is India's international financial services centre in Gandhinagar, Gujarat. It sits inside a multi services SEZ approved under section 18 of the Special Economic Zones Act, 2005. The International Financial Services Centres Authority, set up on 27 Apr 2020, regulates every financial product, service and institution there.

Who regulates GIFT IFSC?+

The International Financial Services Centres Authority (IFSCA) regulates it. Section 13 of the IFSCA Act, 2019 transfers the powers of RBI, SEBI, IRDAI and PFRDA to IFSCA for business inside an IFSC. So a bank, a fund and an insurer there all deal with one regulator.

Can a foreign company set up a unit in GIFT IFSC?+

Yes. A foreign company can set up an Indian subsidiary or, for banking and finance activities, a branch. The unit needs IFSCA registration for its activity and an SEZ Letter of Approval. Both are applied for through IFSCA's Single Window IT System since 1 Oct 2024.

What is the GIFT IFSC tax holiday under the Income Tax Act, 2025?+

Section 147 of the Income Tax Act, 2025 deducts 100 percent of an IFSC unit's eligible income for any 20 consecutive tax years out of 25. The window starts in the tax year of IFSCA registration. The Finance Act, 2026 extended it from 10 out of 15 years from 1 Apr 2026.

What replaced section 80LA?+

Section 147 of the Income Tax Act, 2025 replaced section 80LA of the Income Tax Act, 1961 from 1 Apr 2026. The accountant's report moved from Form 10CCF to Form 35 under the Income Tax Rules, 2026. The Finance Act, 2026 lengthened the deduction to 20 consecutive years out of 25.

How is IFSC income taxed after the deduction period ends?+

Section 218 of the Income Tax Act, 2025 taxes income referred to in section 147(3) at 15 percent. The rest of the unit's income is taxed at normal rates. The Budget 2026 Annexure said this rate applies after the deduction period expires. Surcharge and cess apply on top.

Does MAT apply to an IFSC unit?+

Yes, at a lower rate. Section 206 of the Income Tax Act, 2025 charges minimum alternate tax at 9 percent of book profit for a company unit in an IFSC that earns only in convertible foreign exchange. So a unit with a full section 147 deduction can still pay 9 percent.

Is there a sunset date for GIFT IFSC tax benefits?+

Section 147 has no start deadline for an ordinary IFSC unit. Leasing reliefs do have one. Section 147(3)(d) and Schedule VI serials 6 and 8 need the leasing unit to begin operations by 31 Mar 2030. Units starting from 1 Apr 2026 must also not be formed by splitting up an Indian business.

In which currency do IFSC units operate?+

IFSC units transact in foreign currency under section 20 of the IFSCA Act, 2019. The IFSCA (Banking) Regulations, 2020 list 11 specified currencies for banking units, including USD, EUR, GBP and JPY. Finance companies keep a US dollar balance sheet. A rupee account is allowed for administrative and statutory expenses.

Is an IFSC unit a resident of India under FEMA?+

A financial institution or branch set up in an IFSC is not. Regulation 3 of the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015 (FEMA 339/2015-RB) treats it as a person resident outside India. Its dealings with Indian residents are therefore cross border transactions under FEMA.

What is SWIT in GIFT IFSC?+

SWIT is IFSCA's Single Window IT System. Its Common Application Form covers IFSCA licences and registrations. Separate modules handle the SEZ Letter of Approval (Form FA), GST registration and RBI, SEBI or IRDAI no objection certificates. IFSCA's circular of 30 Sep 2024 made it mandatory for most activities from 1 Oct 2024.

Who issues the SEZ Letter of Approval for an IFSC unit?+

The Unit Approval Committee chaired by the Administrator (IFSCA) approves the unit, and the Administrator issues the Letter of Approval. IFSCA's SOP treats a Government notification dated 28 Feb 2024 as the date from which this route applies. The unit must accept the terms within 45 days and execute a bond cum legal undertaking under rule 22 of the SEZ Rules, 2006.

Can a non financial group use GIFT IFSC?+

Yes, mainly through a corporate treasury centre registered as a finance company, or an aircraft or ship leasing unit. IFSCA's treasury centre framework of 4 Apr 2025 sets a minimum owned fund of USD 0.2 million. Technology captives usually stay outside IFSC.

What is a global in house centre in IFSC?+

It is a unit set up by a financial institution group to serve that group from GIFT IFSC. It serves non resident group entities, and Indian group entities only up to 10 percent of its yearly revenue. It registers under the IFSCA (Global In House Centres) Regulations, 2025, notified as IFSCA/GN/2025/012 on 24 Dec 2025, which repealed the 2020 version.

How much capital does an IFSC Banking Unit need?+

Under the IFSCA (Banking) Regulations, 2020, the parent bank must provide at least USD 20 million for an IFSC Banking Unit, which is a branch. An IFSC Banking Company, which is a subsidiary, needs at least USD 50 million. IFSCA can specify higher amounts.

Is a loan from a group to its IFSC treasury centre a deemed dividend?+

Not if clause (v) of section 2(40) of the Income Tax Act, 2025 applies. It excludes a loan between two group entities where one is a treasury centre Finance Company or Finance Unit, the other sits outside India and the parent is listed abroad. The countries must be notified by the Central Government. The Finance Act, 2026 substituted the clause from 1 Apr 2026.

How does GIFT IFSC differ from DIFC in Dubai?+

GIFT IFSC applies Indian law and Indian courts, with IFSCA as regulator. The DIFC has its own civil and commercial laws and its own DIFC Courts, and federal UAE civil and commercial laws do not apply there. The DFSA regulates financial services in or from the DIFC.

Sources

• India Code, The International Financial Services Centres Authority Act, 2019 (Act No. 50 of 2019), https://www.indiacode.nic.in/bitstream/123456789/14009/1/A2019_____50.pdf
• IFSCA, Home page and About Us (establishment on 27 Apr 2020), read 23 Oct 2026, https://www.ifsca.gov.in/Pages/Contents/About_Us
• IFSCA, Legal database, list of regulations, read 23 Oct 2026, https://ifsca.gov.in/LegalDatabase/GetLegalDatabaseSubdetaile?index1id=1
• IFSCA, IFSCA (Banking) Regulations, 2020, consolidated as on 14 Jul 2023, https://ifsca.gov.in/Document/Legal/consolidated-ifsca-banking-regulations-as-on-july-14-202314082023111415.pdf
• IFSCA, IFSCA (Finance Company) Regulations, 2021, as amended up to 1 Jul 2022, https://ifsca.gov.in/Document/Legal/ifsca-finance-company-regulations-as-amended-upto-july-1-202214102022061351.pdf
• IFSCA, Fund Management page, read 23 Oct 2026, https://ifsca.gov.in/Pages/Contents/Fund_Management
• IFSCA, Global In House Centres page, read 23 Oct 2026, https://ifsca.gov.in/Pages/Contents/Global_In_house_Centres
• IFSCA, IFSCA (Global In House Centres) Regulations, 2025, IFSCA/GN/2025/012, 24 Dec 2025, https://ifsca.gov.in/Common/PreviewPdf?id=38fea9cc5969551d78bf00e670e2eeee&fileName=268967_20260101_0255.pdf
• IFSCA, IFSCA (Fund Management) Regulations, 2025, as amended up to 10 Sep 2026, https://ifsca.gov.in/Common/PreviewPdf?id=b64bc220b28b988fb41d045999a2a508&fileName=IFSCA__Fund_Management__Regulations__2025__as_amended_up_to_September_10__2026_20260914_0701.pdf
• IFSCA, Framework for Global/Regional Corporate Treasury Centres, Circular IFSCA/24/2024-Banking-FC/01, 4 Apr 2025, updated as on 9 Jun 2025, https://ifsca.gov.in/CommonDirect/ViewFile?id=f4ac1b5b4a9f69ca6f378d84bb21232c&fileName=grctc_framework_updated_as_on_june_09_202509062025030915_20250610_1224.pdf
• IFSCA, Banking page, read 23 Oct 2026, https://ifsca.gov.in/Pages/Contents/Banking
• IFSCA, Aircraft Leasing page, read 23 Oct 2026, https://ifsca.gov.in/Pages/Contents/Aircraft_Leasing
• IFSCA, Ship Leasing page, read 23 Oct 2026, https://ifsca.gov.in/Pages/Contents/Ship_Leasing
• IFSCA, FinTech page, read 23 Oct 2026, https://ifsca.gov.in/Pages/Contents/FinTech
• IFSCA, Circular on the Single Window IT System, 30 Sep 2024, https://ifsca.gov.in/Document/Legal/swit-circular-pdf30092024080524.pdf
• IFSCA, Workflow for setting up a unit in GIFT IFSC on the SWIT portal (undated flowchart), https://ifsca.gov.in/Common/PreviewPdfFront?id=29709e474fe6b066fc0cb19f7d375e22&fileName=Workflow_for_Setting_up_in_IFSC_on_the_SWIT_portal_V1_0_20260707_0523.pdf
• IFSCA, FAQs and SOP for processing of applications of IFSC units, https://www.ifsca.gov.in/Document/Developments/FAQs_SOP_for_Processing_of_Application_w.r.t._IFSC_Units.pdf
• Reserve Bank of India, Foreign Exchange Management (International Financial Services Centre) Regulations, 2015, FEMA 339/2015-RB, 2 Mar 2015, https://www.rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=9619
• Income Tax Department, Section 147, Income Tax Act, 2025, read 23 Oct 2026, https://www.incometaxindia.gov.in/w/section-147-91
• Income Tax Department, Section 218, Income Tax Act, 2025, read 23 Oct 2026, https://www.incometaxindia.gov.in/w/section-218-77
• Income Tax Department, Schedule VI, Income Tax Act, 2025, read 23 Oct 2026, https://www.incometaxindia.gov.in/w/schedule-vi-2
• Income Tax Department, Income Tax Act, 2025 as amended by the Finance Act, 2026 (section 2(40)(v) dividend), https://www.incometaxindia.gov.in/documents/d/guest/income_tax_act_2025_as_amended_by_fa_act_2026-pdf
• Income Tax Department, MAT and AMT (9 percent rate for an IFSC unit), read 23 Oct 2026, https://www.incometaxindia.gov.in/w/mat-and-amt
• Ministry of Law and Justice, Finance Act, 2026 (Act No. 4 of 2026), assent 30 Mar 2026, https://www.incometaxindia.gov.in/documents/d/guest/finance-act-2026-pdf-1
• Income Tax Department, FAQs and guidance notes on forms as per Income Tax Rules, 2026 (Form 35, old Form 10CCF), https://www.incometaxindia.gov.in/faqs-and-guidance-notes-on-forms-as-per-income-tax-rules-2026
• Ministry of Finance, Budget 2026-2027 Speech and Annexure to Part B, 1 Feb 2026, https://www.indiabudget.gov.in/doc/budget_speech.pdf
• Ministry of Finance, Memorandum explaining the provisions in the Finance Bill, 2026, 1 Feb 2026, https://www.indiabudget.gov.in/doc/memo.pdf
• DIFC Courts, Legal framework, read 23 Oct 2026, https://www.difccourts.ae/about/legal-framework
• Dubai Financial Services Authority, The DFSA, read 23 Oct 2026, https://www.dfsa.ae/about-dfsa/who-we-are/the-dfsa
• Monetary Authority of Singapore, Who We Are, read 23 Oct 2026, https://www.mas.gov.sg/who-we-are