More AIFs To Become Eligible To Get GIFT City Tax Incentives

Mumbai, July 5: The central government has been offering incentives to investors in order to promote investment in Gujarat International Finance Tec-City (GIFT), a global financial and tech hub, set up near Gandhinagar, in the state of Gujarat. The center intends to develop GIFT City as India’s International Financial Services Centre (IFSC). With a view to further incentivise the IFSC, union finance minister Nirmala Sitharaman has proposed several direct tax incentives in her budget speech on Friday.

She listed out these incentives as a 100% profit-linked deduction under section 80-LA in any 10-year block within 15-year period. The entities operating from the GIFT City will be exempted from dividend distribution tax (DDT) from current and accumulated income to companies and mutual funds (MFs). The exemption from short term and long-term capital gains, which has already been provided to set of Investors has been widened and category III alternative investment funds (AIFs) have also been included in the category. Capital gains arising out of interest payment on loan taken from non-resident Indians by such set of investors will also be exempted from capital gains. 

GIFT City is a planned business district in Gujarat. It is the new business destination offering competitive edge to financial services and technological related activities. It is spread across 886 acres of land with 62 million square feet of built up area, which includes office spaces and other infrastructure associated with it including residential buildings. GIFT City consists of conducive Multi-Service Special Economic Zone (SEZ) and an exclusive domestic area. 

Commenting on the proposal, V. Balasubramaniam, MD& CEO of India International Exchange IFSC (India INX) said, “The Union Budget presented lots of opportunities for the IFSC. Extending income tax exemption to 10 years from 5 years and exempting dividend distribution tax is very much welcome. Permitting Aircraft Financing and Leasing activity in IFSC will be a boost to GIFT City and help in bringing new business.

Another significant announcement by the government is the exemption of AIFS from the Capital Gains, which will attract them to move from other DTAA jurisdictions. Finally, fast-tracking the Unified IFSC Regulatory Authority will augur well to focus on growing the IFSC. We think over the next few years GIFT IFSC alone can provide US$ 1 trillion to Indian Industry and Infrastructure and will be a critical part of the US$ 5 trillion GDP target over next few years, he added.