Should You Set Up An Entity In GIFT City?

Practical guide: entity types, investment thresholds, repatriation, taxation, GST & withholding taxes

GIFT City (Gujarat International Finance Tec-City) has matured from a bold idea into India’s functioning International Financial Services Centre (IFSC). If you’re considering a presence there, you probably want clear, current answers to practical questions: what kinds of entities can be set up? are there minimum capital or investment thresholds? how easy is repatriation? what tax and withholding rules apply? does GST bite? Below is the summarised version, laying emphasizes on IFSCA publications, regulatory releases and leading professional-service guidance. Key points are cited so you can dig deeper.

Executive summary (quick answers)

• Who can set up? Banks (IBUs/IBCs), fund managers and AIFs, insurers and reinsurers (IIOs), leasing companies (aircraft/ship), fintechs, captive/global in-house centres (GICs), brokers/exchanges, professional services and ancillary firms – in company, branch or other forms as permitted by IFSCA.
• Entity forms: IFSC units may be set up as companies, subsidiaries/branches of foreign entities, LLPs or other forms subject to sector rules and IFSCA approvals.
• Minimum capital / investment thresholds: Sector-specific. Examples: IFSC Banking Units (IBUs) typically require minimum USD 20 million provided by the parent (IBC USD 50m guideline), insurance entities require large paid-up capital (e.g., INR 100 crore for direct insurers; INR 200 crore for reinsurers) while fund-management schemes’ minimum corpushas been reduced to USD 3 million (from USD 5m) for many schemes. Investor minimums (for AIFs) remain material (e.g., SEBI/IFSC investor thresholds such as USD150,000 for certain AIF investors).
• Repatriation: Largely liberal IFSC units transact in freely convertible foreign currency and profits, dividends and foreign-currency receipts can generally be repatriated subject to the normal compliance and RBI/IFSCA rules. RBI relaxations (including LRS remittances into IFSC FCAs) have further improved flows for resident remitters.
• Taxation: IFSC units enjoy a 100% tax exemption on profits for any 10 consecutive years out of a 15-year block (tax holiday). Other benefits include exemptions/reliefs on capital gains in certain cases, concession/relief on MAT and exemptions on some interest/lease receipts to non-residents. Exact applicability depends on the unit, date of set-up and election choices.
• Withholding taxes: Not universally zero. Certain payments (e.g., dividends to non-residents) attract concessional withholding (often cited at ~10%), while other flows (certain lease rentals, interest to non-resident financiers, etc.) have specific exemptions during tax holiday periods or subject to conditions and filings. Check sector notices exemptions are often conditional.
• GST / Indirect taxes: Offshore financial services rendered to non-residents by IFSC units are generally zero-rated or exempt (SEZ/IFSC rules). Funds, custodial and many cross-border financial services are effectively zero-rated, but claiming the benefit usually requires SEZ/IFSC registration and compliance (GST returns, documentation). Domestic/INR transactions conducted from the Domestic Tariff Area (DTA) still attract GST.

Who may / should set up an entity in GIFT IFSC?

GIFT IFSC targets entities that serve cross-border, foreign-currency, or non-resident clients or need offshore-style flexibility. Typical candidates include:

• Banks and Banking Units (IBUs/IBCs): foreign and domestic banks wanting to run international banking, treasury and capital-markets business from India.
• Fund managers, alternative investment funds (AIFs), family offices and asset managers: running India/Asia-facing funds or global feeder structures. Fund rules have been relaxed to lower corpus thresholds (see below).
• Insurance and reinsurance companies / IFSC Insurance Offices (IIOs): direct insurers, reinsurers, MGAs and captive insurers.
• Aircraft/ship leasing and other equipment leasing: GIFT has been promoted as a leasing hub (tax/withholding advantages for lease rentals in some periods).
• Fintechs, exchanges, capital markets intermediaries, custodians, brokers: for cross-border payments, trading, custody and listing activity.
• Global in-house centres and professional services: GICs, legal/accounting advisors and compliance firms that service IFSC clients.

Permissible legal forms: companies, wholly-owned subsidiaries, branches (in sector-permitted cases), LLPs and other forms permitted by IFSCA. Some activities (e.g., stockbroking, banking) have additional eligibility criteria (e.g., branch allowed if already regulated in home jurisdiction).

What finance / investment thresholds (minimum capital) apply?

Thresholds are sector-specific. Below are the practical, commonly relied figures (always check the latest IFSCA/regulator circular for your sector):

• Banking (IFSC Banking Unit / IBC): Parent must provide regulatory capital; minimum USD 20 million for an IBU; USD 50 million guideline for an IBC/subsidiary (authority may specify otherwise). Exposure and leverage limits also apply.
• Insurance / Reinsurance (IIO): Minimum paid-up capital (indicative): INR 100 crore for direct insurers; INR 200 crore for reinsurers. Lighter capital may apply for MGAs/service companies (e.g., INR 5 lakh) or unincorporated structures subject to assigned capital equivalence.
• Fund Management / AIFs: IFSCA reduced some thresholds to spur activity: minimum scheme corpus reduced to USD 3 million for many schemes (press release Feb 2025). Manager contribution rules (seed capital / sponsor contributions) and investor minimums (e.g., USD150,000 for certain AIF investors) still apply under SEBI/IFSCA guidance. For specific AIF categories the thresholds differ.
• Leasing / Aircraft & Ship: No single universal minimum, but sectoral tax and stamp-duty reliefs (time-limited in some cases) and specific regulatory filings apply. Banking/financial backers must meet prudential capital.

Takeaway: minimums vary – banks and insurers face high entry capital, funds and fintechs face lower corpus/seed requirements since recent relaxations (notably the 2025 changes for fund minimum corpus).

How easy is repatriation of funds?

Repatriation from IFSC units is intentionally liberal:

• IFSC transactions are generally conducted in freely convertible foreign currencies and foreign-currency bank accounts (FCAs) are standard for IFSC units. IFSCA/FEMA rules treat IFSC units as a jurisdiction “outside India” for many financial flows.
• Profits, dividends and interest earned by IFSC units can typically be repatriated subject to compliance with IFSCA and RBI/FEMA rules; several categories of receipts (e.g., interest to non-resident financiers, certain lease rentals) have specific favourable tax treatments.
• Resident remittances to IFSC FCAs: RBI have relaxed LRS rules to allow resident individuals to remit to IFSC FCAs for permitted purposes (improves capital flows and personal remittances into IFSC structures).

Practical note: repatriation is operationally straightforward compared with many onshore restrictions, but you still need to follow mandated reporting (FETERS reporting for IBUs, IFSCA/RBI filings) and documentary compliance.

Taxation – what’s the headline picture?

Key headline incentives (current to 21 Jan 2026):

• Tax holiday: IFSC units can claim 100% income-tax exemption for any 10 consecutive assessment years out of a 15-year block (subject to meeting conditions for being an IFSC unit and the nature of the activity). This is the central incentive that drives many placements in GIFT.
• MAT / new tax regime: MAT rules have been adjusted in guidance, and some concessions apply (reduced effective MAT for qualifying IFSC units) but the exact position can vary depending on election of tax regime and subsequent amendments; professional tax advice is essential.
• Other exemptions/reliefs: exemptions or favourable treatment for interest income earned by non-resident financiers from IFSC units, concession / exemption on lease rentals in certain cases, and potential capital-gains reliefs for qualifying transactions. These are often conditional and/or time-limited (some benefits were made specifically to attract aircraft/ship leasing until certain dates).

Important caveat: Tax incentives may depend on the date of incorporation and on specific filings/elections. Some sectoral benefits (e.g., on lease rentals or ship leasing) were promoted with cut-off dates or transitional relief, check the current IFSCA/Finance Ministry notifications for your use case.

Withholding taxes – are there WHTs?

• Not a blanket zero-rate. Some payments from IFSC units to non-residents have concessional withholding rates (dividends often cited at ~10% WHT to non-resident shareholders), while others may be exempt (e.g., interest earned by non-resident financiers in certain cases; lease rentals may be exempt during tax holiday periods).
• Sectoral specificities: leasing, financing and fund payments have bespoke rules. For example, ship/aircraft leasing guidance referenced no withholding on certain payments during the tax holiday period but these were subject to compliance and time limits.

Practical step: confirm withholding positions in advance and consider tax-treaty interplay and documentation (Form filings, FATCA/CRS, beneficial-owner certifications). Professional tax structuring is commonly used to lock in favourable outcomes.

GST and other indirect taxes

• GST on cross-border financial services: Financial or advisory services provided from IFSC/GIFT to non-resident clients are generally zero-rated or exempt (many funds and custodial services are treated as zero-rated supplies if the unit is SEZ/IFSC registered and compliance is done). This materially reduces indirect tax cost for cross-border services.
• Domestic/INR business: Any INR-denominated services to domestic clients (conducted from the Domestic Tariff Area or DTA portion) attract GST as usual. IFSC units that want to claim SEZ/IFSC zero-rating benefits must maintain required documentation and GST filings.
• Other indirect taxes: Securities transaction tax (STT), commodities transaction tax (CTT) and stamp duty have special positions in IFSC (often reduced/waived for qualifying IFSC transactions) – check sectoral IFSCA and state notifications, as stamp-duty reliefs may be granted by the state (Gujarat) for specific asset classes/time periods.

Practical compliance & regulatory pointers

• Single regulator: IFSCA is the unified regulator for IFSC activities (banks, funds, insurance & capital-markets in the IFSC fall under IFSCA). This reduces overlap with RBI/SEBI/IRDA in day-to-day licensing (though formal interactions with home regulators and subject-matter rules remain).
• Approvals & documentation: sectoral licences, parent-regulator no-objection letters (for banks), minimum capital proof, PPM filing for funds, and GST/SEZ registrations are typical steps. IBUs must report foreign-exchange transactions (FETERS) and meet disclosure/AML/CFT norms.
• Time-limited/conditional incentives: a number of attractive benefits (e.g., specific stamp-duty or leasing reliefs) have conditions or sunset provisions – always check the effective date and whether your intended activity falls within the relief timeline.

Recent (2024–Jan 2026) policy developments to note

• Fund minimum corpus easing (2025): IFSCA reduced minimum scheme corpus thresholds for fund managers to USD 3 million in 2025 to encourage fund set-ups and relocations. This is a major change that makes IFSC funds accessible to smaller managers.
• RBI/LRS adjustments: RBI clarified and relaxed resident remittances under LRS into IFSC FCAs for permitted uses, helpful for resident investors and principals moving capital into IFSC structures.
• Sectoral clarifications: IFSCA and state authorities continued to issue sectoral guidance (banking handbook drafts, insurance FAQs, ship & aircraft leasing guidance). These incremental rules refine capital, reporting and tax positions for specific industries.

Checklist – what you need before you decide

1. Identify the activity: banking, fund management, insurance, leasing, fintech, etc. Each has bespoke entry rules.
2. Confirm minimum capital/corpus and home-regulator NOCs required for your sector (banks/insurance require significant capital and home-regulator sign-offs).
3. Tax structuring: decide whether to elect for tax holiday benefits and confirm withholding positions for your expected payment streams. Engage tax counsel for treaty/withholding optimisation.
4. GST & SEZ registration: if you will provide offshore services, ensure you can meet SEZ/IFSC zero-rating conditions and GST compliance.
5. Banking & FX operations: plan to operate in FCAs; confirm repatriation and remittance flow with your banking partner and IFSCA/RBI requirements.
6. Operational set-up: office, data centre, staffing (ability to hire foreigners under IFSC norms), local service providers and back-office.

Bottom line – is it worth it?

For businesses with cross-border revenues/clients, foreign-currency needs, fund-raising, leasing or treasury ambitions, GIFT IFSC now offers a compelling, India-based alternative to offshore hubs, attractive tax holidays, more liberal FX/repatriation, lower fund corpus thresholds (since 2025), and a single regulator. However, the benefit depends on sector specifics (banking and insurance still require higher capital; withholding/tax positions can be conditional). Because regulatory and tax detail matters, most entrants work with specialist legal and tax counsel at the planning stage.