GIFT IFSC offers numerous tax incentives for registered entities, providing significant savings and encouraging business growth in India's premier financial hub. Here’s a detailed look at the tax benefits:
Tax Benefits of GIFT IFSC Registered Entities
The GIFT International Financial Services Centre (IFSC) offers a plethora of tax incentives designed to attract international and domestic businesses. Here’s a comprehensive look at the tax benefits available for entities registered in GIFT IFSC:
Income Tax Benefits
1. For Non-Residents (NR), Overseas Citizens of India (OCI), and Foreign Entity Branches:
100% Tax Exemption: Business profits are fully exempt for 10 years out of the first 15 years of operation.
Minimum Alternate Tax (MAT): Reduced MAT rate of 9% for IFSC units.
No PAN and ITR Requirement: For income derived from Category I and II Alternative Investment Funds (AIFs), having a PAN and filing income tax returns are not mandatory.
No Additional Tax on Distributed Income: Mutual funds distributing income under Section 115R are not subject to additional tax.
Withholding Tax on IFSC Listed Bonds: A reduced withholding tax rate of 9% applies.
2. Capital Gains:
Short-term Capital Gains (Section 111A): Taxed at 15% if securities are listed on IFSC exchanges, regardless of Securities Transaction Tax (STT) payment.
Long-term Capital Gains (Section 112A): Taxed at 10% if securities are listed on IFSC exchanges, irrespective of STT payment.
Dividend Income: Dividends received by non-residents are taxed at a concessional rate of 10% plus applicable surcharge.
Exempt Income: Income distributed to non-residents will be exempt up to the amount taxed in the hands of the International Banking Unit (IBU) as a Foreign Portfolio Investor (FPI).
Portfolio Management Income: Income earned from portfolios managed by a manager in IFSC is exempt. The account needs to be maintained in an Offshore Banking Unit (OBU) in IFSC.
Indirect Tax Benefits
1. Custom Duty / Central Excise Duty:
- DTA to SEZ: No tax is applicable.
- SEZ to DTA: Liable to tax.
- Duty Drawback: Considered as deemed export and thus allowed.
2. Goods and Services Tax (GST):
- No GST: Exemptions on goods, services, and transactions conducted on IFSC exchanges.
- SEZ to DTA Supply: Treated as imports and subject to GST.
3. Central Sales Tax (CST):
- Exemption: Requirements of Form I are waived.
4. Securities Transaction Tax (STT) / Commodity Transaction Tax (CTT) / Stamp Duty:
- Exemptions: Transactions on IFSC exchanges are exempt from these taxes.
- No State Stamp Duty: Exempt for 10 years in aircraft leasing, financing, and insurance businesses.
Sector-Specific Benefits
1. Aircraft Leasing:
Exemption on Sale of Equity Shares: Income from the sale of equity shares of an IFSC unit engaged in aircraft leasing is exempt if sold to a non-resident or another IFSC unit engaged in aircraft leasing.
Conditions: Operations must commence before April 1, 2026, and capital gains should arise within 10 years of commencement or by the Assessment Year 2035-36.
2. Ship Leasing:
- Tonnage Tax Regime: Entities can opt for this regime within three months from the end of their tax holiday period.
The above tax benefits make GIFT IFSC a highly attractive destination for businesses seeking to optimize their tax liabilities while enjoying the advantages of a robust and innovative financial ecosystem. For more detailed information or personalized advice, consulting with tax professionals or the IFSCA directly is recommended.
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Disclaimer: This post is for informational purposes only and does not constitute professional advice. While efforts are made to ensure accuracy, we do not guarantee the completeness or reliability of the information provided. Any reliance is at your own risk. Consult professionals for specific advice.
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