GIFT City: building India’s global financial centre

This article was written by Aditya Vikram Dua, Partner and Head of Financial Services at SNG & Partners in India

Gujarat International Finance Tec-City, or GIFT City, has rapidly emerged as India’s most significant experiment in building an international financial hub within its own borders. Developed as a globally benchmarked financial and technology centre in Gujarat, GIFT City houses India’s first operational International Financial Services Centre (IFSC) and is intended to serve as a gateway for international capital, foreign currency transactions and cross-border financial activity.

Its importance lies in the fact that it offers a specialised legal, regulatory and tax framework through which India-linked international finance can increasingly be conducted from within India rather than through traditional offshore centres such as Singapore, Dubai or Mauritius. Operating under the unified supervision of the International Financial Services Centres Authority (IFSCA), GIFT City provides an offshore-style ecosystem while remaining firmly rooted in Indian law.

The legal and regulatory architecture of GIFT City

At its foundation, the IFSC at GIFT City exists within the framework of the Special Economic Zones Act 2005, which provides the ring-fenced structure necessary for specialised international business activity. Its modern regulatory identity, however, comes from the International Financial Services Centres Authority Act 2019, under which IFSCA was established as the unified regulator for financial institutions, financial services and financial products in IFSCs in India.

This marked a significant shift in India’s regulatory approach. Traditionally, regulatory oversight of the financial sector was fragmented across multiple authorities, including the Reserve Bank of India, the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority of India and the Pension Fund Regulatory and Development Authority. The creation of IFSCA brought these regulatory strands together, at least for the purposes of the IFSC, under a single specialised authority. For international participants, that unified framework carries obvious value. It reduces regulatory fragmentation, offers greater clarity and allows the IFSC to function as a coherent financial jurisdiction rather than a collection of overlapping exemptions.

Over the past few years, the IFSCA framework has developed into a multi-sector regulatory ecosystem. Banking activity is governed by the IFSCA (Banking) Regulations 2020, finance companies operate under the International Financial Services Centres Authority (Finance Company) Regulations 2021, insurance business is regulated under the IFSCA (Registration of Insurance Business) Regulations 2021 and capital market intermediaries are covered by the IFSCA (Capital Market Intermediaries) Regulations 2021.

The growth of GIFT City as a listing and fund management jurisdiction has been supported by the International Financial Services Centres Authority (Listing) Regulations 2024 and the IFSCA (Fund Management) Regulations. In parallel, the regulatory environment has been made more accessible through the Single Window IT System, which is aimed at streamlining approvals, registrations and operational compliance.

A defining feature of this ecosystem is the exchange control treatment accorded to IFSC entities. Under the relevant FEMA framework, qualifying financial institutions or branches established in the IFSC are treated as persons resident outside India for specified purposes. This allows IFSC entities to function in a foreign currency environment and undertake cross-border transactions within a legal framework that is materially more flexible than the ordinary onshore regime.

Business opportunities in GIFT City

What makes GIFT City increasingly compelling is the diversity of commercial opportunities it now supports. Although it was initially viewed largely through the lens of banking and capital markets, the ecosystem has evolved into a broader financial platform offering opportunities across funds, insurance, treasury operations, support centres, leasing, professional services and technology-led financial services.

One of the clearest areas of growth is the alternative investment fund space. GIFT City has emerged as a serious fund jurisdiction for India-linked and cross-border fund structures, especially as sponsors and managers seek a platform that combines international familiarity with Indian proximity. Historically, many India-focused fund managers preferred offshore jurisdictions because they offered a foreign currency environment, tax efficiency, global investor comfort and regulatory flexibility. GIFT City increasingly seeks to replicate those advantages while allowing managers to remain closely connected to Indian deal flow, talent and market access.

The fund management framework in GIFT City now supports multiple categories of fund management entities and schemes, including venture capital structures, restricted schemes and other specialised vehicles. This allows for inbound funds investing into India, outbound funds investing offshore, feeder vehicles, family investment structures and more niche products such as special situation funds. The appeal of GIFT City for AIFs lies in the combination of a dedicated regulatory regime, an internationally marketable platform, tax incentives and a foreign currency ecosystem that aligns more comfortably with global LP expectations. It also supports India’s wider policy objective of relocating or internalising fund management activity that was previously routed through offshore centres.

Another important pillar of opportunity lies in global capability centres for financial services groups, which are recognised in the IFSC framework as global in-house centres. GIFT City is increasingly positioned as a destination for financial institutions looking to centralise support functions such as treasury operations, compliance, data processing, technology support, financial reporting, analytics and other middle-office or back-office services.

The logic here is straightforward. India already offers a deep talent pool in finance, analytics, legal support and technology. GIFT City builds on that strength by placing such operations within a regulatory environment specifically tailored to financial sector groups and cross-border service delivery.

For global financial services organisations, this makes GIFT City more than a low-cost support base. It offers a regulated environment that is structurally aligned with the needs of the financial sector, supported by both central incentives and state-level policies in Gujarat aimed at encouraging technology, IT-enabled services and global capability centres. As more institutions look to rationalise global support operations while remaining close to India’s talent pool, GIFT City is well placed to become an increasingly important centre for such activity.

Insurance and reinsurance form another major area of opportunity. The IFSC insurance regime allows Indian and foreign insurers and reinsurers, as well as certain branches and corporate vehicles, to establish an International Financial Service Centre Insurance Office and undertake life, general, health insurance or reinsurance business. This is strategically important because it supports India’s broader ambition to build domestic capacity for cross-border insurance and reinsurance rather than ceding that space to foreign centres. GIFT City is particularly relevant as a reinsurance platform, offering a structured and internationally benchmarked regulatory environment from which offshore business and India-linked risks may be serviced.

For insurers, the advantages of GIFT City lie in its ability to combine access to India-related opportunities with a more liberalised and internationally competitive platform. For the broader Indian market, the growth of insurance and reinsurance activity in the IFSC can contribute to deeper risk markets, stronger pricing capacity and reduced dependence on external centres for specialist risk transfer arrangements.

The rise of GIFT City has also created meaningful space for professional service providers, including law firms and other advisers. As financial institutions, fund managers, insurers and finance companies establish operations in the IFSC, the need for technical legal and regulatory advice has grown in tandem. This is especially visible in areas such as fund structuring, debt listing, exchange control analysis, finance company regulation, insurance structuring, leasing, treasury operations and ancillary service frameworks.

FEMA and tax incentives supporting GIFT City

The growth of GIFT City is underpinned not only by regulatory specialisation but also by a set of incentives that materially improve the commercial case for operating from the IFSC. Broadly, these incentives fall into two categories: exchange control relaxations under the FEMA framework and tax benefits under Indian law.

The FEMA treatment of IFSC entities is one of the regime’s most important commercial features. A qualifying financial institution or branch operating from the IFSC is treated as a person resident outside India for specified purposes. This enables IFSC units to operate in freely convertible foreign currencies and facilitates cross-border investment, financing and treasury activity in a manner that is much more aligned with international financial practice. In commercial terms, this significantly reduces the exchange control friction that would ordinarily arise in an onshore Indian structure.

This treatment has multiple practical consequences. IFSC units can support foreign currency transactions and offshore-style fund flows with greater ease. Investments by IFSC entities into Indian businesses may be treated through the lens of foreign investment, while certain borrowings by Indian residents from IFSC banking units may fall within external commercial borrowing treatment. Resident individuals may also access certain investments in IFSC products under the Liberalised Remittance Scheme, subject, of course, to applicable conditions. The result is a framework that allows capital to move into and out of India-facing structures in a manner that is more internationally functional, without detaching those structures from the Indian legal system.

Tax incentives further strengthen the GIFT City proposition. The most prominent of these is the profit-linked income tax deduction available to eligible IFSC units under the Income-tax Act. The Union Budget 2026–27 extended the tax holiday for companies operating in GIFT City from 10 years to 20 consecutive years within a 25-year window. After the 20-year exemption ends, companies are subject to a concessional 15% corporate tax, which is significantly lower than the standard Indian corporate tax rates of 25%–35% applicable elsewhere in India. For many businesses, particularly fund management entities, finance companies, insurers and support service providers, this is a significant driver of platform economics.

In addition, IFSC units benefit from a reduced MAT or AMT rate of 9%, with further relief where companies opt for the newer domestic tax regime. Depending on the nature of the activity, additional exemptions or concessional treatment may also apply in relation to interest income, specified securities, capital gains and certain investor-level income streams. Transactions on IFSC exchanges also benefit from relief from securities transaction tax, commodities transaction tax and, in relevant cases, stamp duty. In the context of funds and capital market activity, these measures play an important role in reducing transaction costs and making the jurisdiction more competitive.

Indirect tax benefits are equally relevant. Services received by IFSC units and services supplied to other IFSC or SEZ units or offshore clients typically benefit from GST relief, while domestic procurements for authorised operations may receive zero-rated treatment through the SEZ framework. These are not merely technical concessions; they have a real impact on operational efficiency and cost structure.

There are, in addition, several corporate law relaxations available to companies operating in the IFSC. Notifications issued by the Ministry of Corporate Affairs provide certain exemptions and modifications from the Companies Act 2013 for specified IFSC public companies, including greater flexibility in relation to board processes, committee requirements, financial year alignment with foreign holding companies and aspects of share capital and managerial appointments. These measures complement the fiscal regime by reducing the compliance burden and making the jurisdiction easier to operate from.

At the state level, Gujarat has also introduced policy incentives for IT, IT-enabled services and global capability centres, including support for capital expenditure, operating costs, electricity duty and employment-related contributions.

Conclusion

GIFT City today stands at the centre of India’s effort to build a globally relevant financial services ecosystem within its own territory. It’s no longer merely a policy aspiration or a future-facing project. Its significance is especially visible in the sectors where momentum is strongest.

More broadly, GIFT City reflects a deeper shift in India’s financial policy. Rather than continuing to rely on foreign jurisdictions to intermediate India-linked capital and financial activity, India is seeking to build its own internationally credible gateway. That ambition is now taking concrete form.

If regulatory evolution, market participation and institutional support continue at the present pace, GIFT City is likely to become not only India’s principal international financial services platform but also one of the most consequential financial reforms in the country’s recent history.