Finance minister Nirmala Sitharaman has proposed several additional tax benefits to make it attractive for investors to operate out of the International Financial Services Centre (IFSC) at Gujarat International Finance Tec-City (GIFT City) located in Gandhinagar.
Sops announced in the Budget include extending income tax waiver of up to 10 years from 5 years, exemption from dividend distribution tax from current and accumulated income to companies and mutual funds, exemptions on capital gains tax to Category-III AIFs and interest payment on loan taken from non-residents.
“Also, key measures related to aircraft leasing business, reinsurance business and tax benefits, etc will enable significant offshore finance activities to take place from India,” said Tapan Ray, MD & group CEO at GIFT City. Through the Global Securities Market (GSM) platform, India INX has raised $344.62 billion from 13 debt issues. The GSM is a debt listing platform managed by India INX.
In June, Adani Green Energy through its three subsidiaries became the first issuer of green bonds on that platform. Green bonds of three subsidiaries of Adani Green Energy worth $500 million were listed.
At IFSC, a non-resident is currently not required to pay capital gains tax on transfer of specified securities made on a recognised stock exchange in the IFSC. This benefit is proposed to be extended to Category-III AIFs where all unit holders are non-residents.
“Permitting aircraft financing and leasing activity in IFSC will be a boost to GIFT City and help in bringing new business,” said V Balasubramaniam, MD & CEO of India International Exchange IFSC. A series of tax concessions have already been provided to businesses being carried out from the IFSC.
At present, dividend distribution tax (DDT) is not levied on distribution of dividend by a company located in IFSC if the same is distributed out of current income. It is proposed to extend this benefit of exemption to distribution out of accumulated profit which has been accumulated by the unit after April 1, 2017 from operations in IFSC.
In order to facilitate setting up of mutual funds in the IFSC, it is proposed that there would be no additional tax on distribution of any amount on or after September 1, 2019, by a specified mutual fund out of its income derived from transactions made on a recognised stock exchange located in any IFSC.