Advith

Advith Consulting
2025-03-15

GIFT City – Reinforcing India’s Global Presence

GIFT City (Gujarat International Finance Tec-City) - India’s first International Financial Services Center (IFSC) - signifies India’s bold leap into becoming a global leader in finance and technology. With the vision of creating a world-class finance and IT zone for India to serve the entire world, GIFT City is emerging as a global financial and technology hub providing businesses with unparalleled accelerated growth. It is not just about businesses; with a cutting-edge infrastructure, business friendly environment, high quality talent, global connectivity and top-notch quality of life- it is about creating a full-fledged sustainable ecosystem standing out at global level. Gift City, which was conceptualized in 2007 and introduced in the Union Budget for 2015-16, witnessed significant growth with the formation of the International Financial Services Center Authority (IFSCA) in 2020. Moving abroad for international financial services for regulatory advantages is no longer necessary, as GIFT City provides such an environment with all regulatory benefits. Let us delve into the framework of GIFT City and the opportunities it offers for setting up and expanding businesses.

Strategic Location and Development of GIFT City

Regulatory Framework

GIFT City operates with a unique regulatory framework specially designed to cater to the needs of the global hub:

IFSCA was established in 2020 under the International Financial Services Centers Authority Act, 2019. It is a unified authority for the development and regulation of financial products, financial services and financial institutions in IFSC in India. Notably, IFSCA replaces key domestic regulators such as RBI (Reserve Bank of India), SEBI (Securities and Exchange Board of India), PFRDA (Pension Fund Regulatory and Development Authority) and IRDAI (Insurance Regulatory and Development Authorities of India). All the powers of these regulators vest with IFSCA in the GIFT IFSC.
Any entity set up in the GIFT IFSC and registered with IFSCA is deemed to be resident outside India for FEMA (Foreign Exchange Management Act) purposes and it must conduct business in foreign currency. It will not be subject to FEMA regulations which are applicable to persons incorporated in India. However, such entities are treated as Residents from the Income Tax perspective with a pool of tax benefits.
IFSCA has issued numerous regulations specifically addressing varied businesses to align with the best global practices. A few such key recent regulations are depicted below:

*Note: All such regulations are available in detail on the IFSCA website:International Financial Services Centres Authority*

Opportunities at GIFT IFSC

While the Domestic Tariff Area serves domestic needs, the Special Economic Zone provides the world as a playground for businesses that come under permissible sectors, as notified by IFSCA from time to time. In this section, let us explore diverse opportunities within GIFT IFSC and touch upon a few businesses in detail, with eligibility to operate, conditions and advantages of setting up operations in GIFT IFSC.

Who can set up operations at GIFT IFSC?

1.FinTech and TechFin

FinTech Entity (FE) framework was introduced by the IFSCA in 2022. This framework covers entities offering
- FinTech (Creating new business models, applications, processes or products in financial services typically targeting consumers – B2C) like Paytm, Zerodha, Cred, Pinelabs, etc.
- TechFin (Technological solutions that support financial products and services generally focusing on B2B) like Infosys, Wipro, Mambu, InsureCRM, etc.
This framework allows such entities to enter GIFT IFSC through 2 routes.
- Direct Authorization: Allows certain categories of technology entities to gain entry provided they use technology in their core product or service or business model, and they have a revenue-earning track record for at least one of the last three financial years.
- Regulatory Sandbox: Allows entities to test new financial products and services in a real-time environment with actual customers, under controlled conditions. This helps promote innovation, ensuring consumer protection and staying within regulatory guidelines.
Further, the FinTech Incentive Scheme provides grants up to ₹ 75 Lakhs to various categories of FinTech innovation, fostering a thriving ecosystem within GIFT City.
Entities, along with benefiting from significant tax advantages offered by the GIFT ecosystem, also can enjoy Gujarat state’s Information Technology/Information Technology enabled Services (IT/ITeS) policy which offers additional incentives.

2.Asset Management

Unlike domestic regulations, where the fund is required to obtain registration with SEBI, the IFSCA regulates at the Fund Management Entity (FME) level. This provides fund managers with greater flexibility and ease of doing business. Once the FME obtains registration from IFSCA, it can launch multiple funds under different categories by filing an intimation and payment of applicable fees, without requiring separate registrations. However, such categories will have their own set of permissible activities, investment options and conditions (like net worth and corpus requirements, appointment of Principal Officers, KMPs, Compliance and Risk Managers, Fund Managers, entity structures and many more).

Categories under Fund Management Entity

3.Global In-house Centers (GICs)

Global In-house Centers handle tasks such as customer onboarding, transaction processing, data analysis, etc. They are usually established in low-cost jurisdictions to provide back-office support for their holding companies. With GIFT City and IFSCA GIC Regulations 2020, global MNCs can set up their GICs as a one-stop support for all their group companies with low setup and operational costs when compared to other IFSCs. GICs can be established as a Company, an LLP, a branch or in any other form, meant to service non-resident entities within its parent financial services group based out of FATF-compliant jurisdictions. GICs set up in GIFT City must hire new employees; however, existing employees in supervisory roles may be relocated with approval from IFSCA limited to 20% in such category. All services provided by GICs must be directly linked to financial products and services.

4.Ancillary Services

The Ancillary Services framework was introduced by IFSCA in 2021. It enables global ancillary service providers (which include professional services, consultancy firms, audit firms, trustee services, etc.) to set up their units at GIFT City IFSC. This strategic inclusiveness of diverse sectors aids in enhancing the financial ecosystem and acts as a support system for financial entities operating within the IFSC.

Permissible Activities

Legal, compliance and secretarial services
Audit services
Professional and management consultancy services
Asset management support
Trusteeship service
Any other services as approved by IFSCA from time to time.

Eligibility criteria to be an Ancillary Service Provider

Any existing or newly incorporated entity set up in the IFSC
Any Indian or foreign incorporated entity by establishing a branch or a subsidiary

Eligible Recipients under Ancillary Service Framework

Entities set up in IFSC
Financial services entities from foreign jurisdictions for various activities in the IFSCs in India or other related activities overseas
Indian entities who propose to open, set up or carry out operations in IFSCs or foreign jurisdictions, provided consideration is received in freely convertible foreign currency

5.BATF Services (Book-keeping, Accounting, Taxation & Financial crime compliance Services)

IFSCA’s BATF regulations are intended to make GIFT City a center of global outsourcing, creating mass employment opportunities. While other regulations require service recipients to be regulated by IFSCA or to be in the domain of BFSI (Banking, Financial Services and Insurance), BATF is unique and focuses on the nature of its service and not on the sector in which the service recipient is operating. With the introduction of BATF regulations, Book-keeping, Accounting, Taxation & Financial crime compliance Services come out of Ancillary Services which has limitations on servicing non-BFSI clients.

Permissible Activities

Book-keeping Services: Classifying and recording financial transactions, including payroll ledgers, in books of account and other related documents (excluding payroll and taxation services).
Accounting Services (without attestation/assurance):
- Review of financial statements or other accounting information
- Compiling or preparing financial statements, income statements, balance sheets, or other financial information.
- Analyzing financial statements and providing related accounting support services, excluding auditing
Taxation Services:
- Providing tax consultation, tax preparation, and tax planning services.
- Advising and guiding on tax matters and preparing and filing various tax returns (including all forms of direct or indirect taxes, cesses, duties, or levies)
Financial Crime Compliance Services: Ensuring compliance with AML (Anti-Money Laundering) and CFT (Combating the Financing of Terrorism) measures and adhering to FATF recommendations and related activities.

Eligibility Criteria and conditions

BATF Service Provider must register as a Company or an LLP. It cannot be established by splitting up, reconstructing or reorganizing which is already in existence in India.
The Service Recipient must be a non-resident (BATF entities are meant to compete with global entities and not with the entities in India) and not reside in a high-risk jurisdiction identified by FATF (Financial Action Task Force).
As mentioned earlier, there is no sector restriction for a Service Recipient.
Employee transfers/relocations should not exceed 20% of the total number of employees in BATF entity.
There are further conditions regarding the appointment of Principal Officer, Compliance Officer, minimum office space, currency of operations and certain reporting requirements.

Process of Application – Setting up a Unit at Gift City

Pool of Benefits

To achieve the intended objective, the Government has provided several tax incentives for IFSC units at GIFT City. Below is an overview of key advantages among the pool of tax benefits that a GIFT IFSC can enjoy:

Way Forward & Conclusion

With over 750 entities already registered under IFSCA, GIFT City is rapidly emerging as a global financial hub, backed by a strong regulatory framework, world-class infrastructure, and competitive tax incentives. IFSCA is in the process of strengthening its global ties with premium international forums of financial regulators and by way of entering bilateral MOUs with counterparts across the world. The proposed processes of single-window clearance for approvals (in place of the current approvals required by both SEZ authorities and IFSCA) and improved regulatory clarity with extended coverages will further ease operations and encourage more units to come in. To ensure long-term success, GIFT City must balance attracting global capital with benefiting the local economy through robust policies and periodic evaluations. With continuous innovation, it has the potential to become a leading international financial center, reinforcing India’s global financial presence.

Also Read: What Is Virtual Finance Office?

Also Read: The Power of Virtual Finance Office (VFO)

Contributors

N Srilatha Bhat linkedin
Kuldeep Sarma linkedin
Poonam Vernekar linkedin

Blogs