How Foreign Companies Can Enter India via GIFT City IFSC

Last Updated on: 21st April 2025, 01:43 pm

Why Foreign Companies Are Eyeing GIFT City

India is rapidly positioning GIFT City IFSC (International Financial Services Centre) as a compelling destination for foreign investment, offering global companies an opportunity to enter the Indian market through a highly regulated, tax-efficient, and globally competitive ecosystem.

India’s Push to “Onshore Offshore” Financial Services

For decades, Indian capital and talent have flowed to offshore financial hubs like Singapore, Dubai, and Hong Kong. GIFT City was envisioned to reverse this trend — creating a world-class, onshore hub with offshore benefits. Backed by the IFSCA, India’s first unified financial regulator, GIFT City enables foreign investors to operate in USD, enjoy SEZ-level benefits, and avoid regulatory fragmentation.

The strategy is clear: onshore the offshore—whether it’s fund management, insurance, fintech, or aircraft leasing.

Rising Interest Post-2019 Reforms

A wave of regulatory reforms since  2019, including introduction of provisions pertaining to direct listing of Indian companies on IFSC exchanges in 2024, expansion of scope for permissible investments by alternative investment funds (AIFs), and enhanced currency derivative trading, have drastically improved ease of doing business for foreign players.

As of December 2024, over 766 entities have set up operations in GIFT City, including global banks, asset managers, and fintech startups.

These policy moves have cemented GIFT City’s position as India’s international financial hub for MNCs looking for long-term exposure in South Asia.

GIFT City vs Other International Financial Centres

Compared to established IFCs like DIFC (Dubai), Singapore, or Hong Kong, GIFT City offers:

• Unified regulation under IFSCA, vs multi-regulator complexity elsewhere
• Significant tax holidays (10-year), vs standard tax regimes in DIFC/Singapore
• SEZ infrastructure with smart city planning
• Lower setup and compliance costs
• Access to Indian talent pool at globally competitive rates

With political stability, a booming domestic market, and high digital penetration, GIFT City gives MNCs a strategic base to scale both into India and across emerging Asia.

What Is GIFT City IFSC?

GIFT City IFSC, or the International Financial Services Centre in Gujarat International Finance Tec-City, is India’s flagship global financial hub designed to attract foreign investment and international financial institutions. It functions as a foreign jurisdiction on Indian soil, enabling cross-border financial services with regulatory, tax, and operational advantages.

Definition and Background

Established in 2015, GIFT City IFSC is a part of a multi-services SEZ in Gandhinagar, Gujarat, aimed at providing a globally competitive financial ecosystem. It is India’s first and only active IFSC, developed to rival international hubs like Dubai International Financial Centre (DIFC), Singapore, and Hong Kong.

The IFSC allows entities to deal in foreign currencies, access global capital markets, and conduct offshore transactions—without being subject to India’s standard financial regulations like FEMA.

Role of IFSCA: India’s First Unified Regulator

In 2020, the International Financial Services Centres Authority (IFSCA) was established as the sole regulator for all financial activities in GIFT City IFSC. It consolidated powers from four Indian regulators—RBI, SEBI, IRDAI, and PFRDA—creating a one-stop regulatory body to ease operations and reduce red tape.

IFSCA’s mandates include:

• Regulating financial products and services in IFSC
• Granting licenses across sectors (banking, funds, insurance, fintech)
• Driving innovation via the FinTech Sandbox and Innovation Hub
• Creating a globally aligned, transparent, and agile financial regime
  

Regulatory Independence & Global Appeal

What sets GIFT City IFSC apart is its regulatory autonomy. Under the IFSCA Act, GIFT operates with its own rulebook—allowing faster approvals, minimal compliance bottlenecks, and zero overlap with domestic financial laws unless specifically notified.

This makes GIFT City ideal for:

• Global banking units
• Foreign portfolio investors (FPIs)
• Offshore funds
• Insurance and reinsurance branches
• Digital asset experiments (under sandbox)
  

Overview of Key Sectors Operating in GIFT City IFSC

Sector	Opportunities in IFSC
Banking	Offshore Banking Units (IBUs), trade finance, ECBs, global treasury centers, structured deposits, and FPI services for NRIs
Capital Markets	International stock exchanges (NSE IFSC, India INX), debt and derivative listing, Depository, Clearing Corporations, and DR trading
Insurance	Indian & Foreign insurers, global reinsurers, captive insurance, and cross-border underwriting through IFSC Insurance Offices (IIOs)
Asset Management	Fund Management Entities (FMEs), Alternate Investment Funds (AIFs), Mutual Funds, Angel & VC Schemes, Family Investment Funds
Fintech	Regulatory sandbox, cross-border digital lending, payment innovation, account issuance, e-money, escrow, and merchant acquisition services
Leasing	Aircraft and ship leasing with tax exemptions, redomiciling structures, and safe harbor rules
Sustainable Finance	ESG debt listings (USD 15.4 Bn cumulative), green fund incentives (fee waivers for 1st 10 ESG funds), and regulatory framework to combat greenwashing
Allied/Support Services	Global in-house centers, legal & consultancy services, accounting & audit, education, R&D, and fintech accelerators

As of December 2024, GIFT City houses 2 international stock exchanges, 16 insurance entities, 25 insurance intermediaries, 139 fund management entities, 198 registered fund schemes, and a growing number of fintechs and banks operating through International Banking Units (IBUs).

Benefits of Setting Up in GIFT City IFSC for Foreign Investors

Setting up in GIFT City IFSC offers foreign investors a range of regulatory, tax, and operational benefits designed to match or surpass global financial hubs like Dubai and Singapore. Here’s why global businesses are choosing GIFT City:

1. Tax Incentives

• 100% tax holiday for 10 consecutive years out of 15
• No capital gains tax in certain cases, securities transaction tax (STT), or stamp duty
• Exemption from GST on export services from the IFSC SEZ
  

2. Currency Flexibility

• Conduct transactions in freely convertible foreign currencies like USD, EUR, etc.
• Indian residents and NRIs can open foreign currency accounts within IFSC
  

3. Regulatory Ease under IFSCA

• Single-window approval system for all financial licenses
• IFSCA acts as the sole regulator—combining powers of RBI, SEBI, IRDAI, and PFRDA
• Faster approvals and reduced compliance
  

4. Global Access with No FEMA Restrictions

• No Indian exchange control laws (FEMA) apply within the IFSC
• Offshore clients and contracts can be serviced seamlessly
• Ideal for cross-border funds, loans, derivatives, and insurance
  

5. World-Class Smart City Infrastructure

• Located in a dedicated SEZ zone with Grade A office spaces
• Plug-and-play commercial spaces, global connectivity, and 24×7 utility services
• Close proximity to Ahmedabad International Airport
  
  

Who Can Set Up in GIFT City IFSC?

GIFT City IFSC is open to a wide range of international businesses looking to access the Indian and global markets through a tax-efficient, regulation-light environment. Here’s a quick overview of who can set up operations in India’s international financial hub:

Foreign Banks

• Can establish IFSC Banking Units (IBUs)
• Offer services like offshore lending, trade finance, and treasury operations
• Regulated by IFSCA Banking Regulations
  

Insurance and Reinsurance Companies

• Can open IFSC Insurance Offices (IIOs) or reinsurance branches
• Allowed to underwrite cross-border risks and global policies
• Benefit from capital requirement relaxations and tax exemptions
  

Fund Managers: AIFs, Mutual Funds & PMS

• Set up Alternative Investment Funds (AIFs), Mutual Funds, and Portfolio Management Services
• Enjoy zero capital gains tax, 10-year tax holiday
• Can raise capital globally and invest in India and abroad
  

Fintech Firms

• Eligible to operate under the IFSCA FinTech Sandbox
• Engage in cross-border payments, digital lending, tokenization, and neo banking
• Access to Innovation Hub, relaxed net worth norms for startups
  

Aircraft & Ship Leasing Companies

• Allowed to lease aircraft, engines, and maritime assets
• Benefit from zero GST, no withholding tax, and faster depreciation
• Easy registration with IFSCA + DGCA
  

Holding Companies & Treasury Units

• Global companies can set up treasury centers or regional HQs
• Manage group finances, intercompany loans, hedging, and liquidity
• Use GIFT IFSC as a global financial control tower
  

Legal Structures Available to Foreign Companies in GIFT City IFSC

Foreign companies looking to enter India via GIFT City IFSC can choose from a variety of flexible legal structures, each tailored to specific business models and regulatory needs. Here are the key options:

Company (Private/Public Ltd. with ‘IFSC’ suffix)

• Incorporate a company under the Companies Act, 2013 with “IFSC” in the name
• Must have a registered office in the GIFT City SEZ
• Enjoy relaxations under company law: no CSR for 5 years, fewer compliance burdens
• Suitable for full-scale operations like funds, banks, insurers, fintechs
  

Most common entry route for foreign investors setting up a new entity

Branch Office

• Foreign companies with an existing presence can open a branch in GIFT City
• Treated as a non-resident unit under FEMA
• No prior RBI approval needed; governed by IFSCA regulations
• Ideal for banks, insurance offices, and global service units
  

Efficient structure for expanding global operations into India

LLP (Limited Liability Partnership)

• Registered under the LLP Act, 2008
• Offers flexibility with less compliance than a company
• Can be used by consulting, advisory, and fintech entities
• Eligible for SEZ benefits and IFSCA registration
  

Good fit for capital-light or partnership-driven businesses

Foreign Portfolio Investor (FPI) Entities

• FPIs can register in GIFT City IFSC via SEBI or IFSCA
• Invest in Indian securities, derivatives, and listed instruments
• Benefit from tax exemptions on capital gains, stamp duty
• Can pool funds globally and route them via IFSC
  

Preferred by institutional investors and hedge funds

Investment Fund Vehicles (AIFs & Mutual Funds)

• Register as Alternative Investment Funds (Cat I, II, III) or IFSC Mutual Funds
• Allowed to raise funds from global investors
• Can invest in India, global markets, or both
• No GST on management fees, no capital gains tax on offshore investments
  

Over 198 funds are already operating in GIFT City as of December 2024. (Source: IFSCA)

Step-by-Step Process to Set Up in GIFT City IFSC

Foreign businesses planning to enter India through GIFT City IFSC can follow a streamlined process facilitated by the IFSCA’s single-window clearance system. Here’s a quick step-by-step guide:

1. Present Your Business Use Case

Begin with an in-person or virtual meeting with officials from IFSCA and GIFT City to demonstrate your business model and explain how it aligns with IFSC objectives.

2. Secure Office Space

Identify and finalize office space within the GIFT SEZ area. Sign an agreement with a developer and obtain the Provisional Letter of Allotment (PLOA).

3. Submit Applications

Prepare and submit two parallel applications:

• SEZ application to the GIFT City Administrator for unit setup approval
• IFSCA application for business registration or license
  

4. UAC Hearing

IFSCA will schedule a Unit Approval Committee (UAC) meeting to evaluate your proposal. Be prepared to present your business case and respond to queries.

5. Receive Approvals

Upon approval, the Administrator will issue a Letter of Approval (LOA) for SEZ operations. Simultaneously, IFSCA will provide in-principle registration approval.

6. Fulfill Compliance Requirements

Submit:

• Bond-cum-LUT to the Administrator
• Obtain Eligibility Certificate from IFSCA
• Complete essential registrations: RCMC, IEC, GST, etc.
  

7. Open Bank Accounts

Set up your Foreign Currency and SNRR (Special Non-Resident Rupee) accounts in GIFT IFSC and obtain final IFSCA approval.

8. Launch Operations

Once all approvals and compliance requirements are fulfilled, you’re ready to kickstart operations from your GIFT IFSC unit.

Key Regulatory Bodies & Licenses Required in GIFT City IFSC

One of the biggest advantages of operating in GIFT City IFSC is the presence of a single unified regulator—IFSCA, which simplifies compliance and speeds up approvals across sectors. Here’s a breakdown of the key licenses required by sector:

Sector	Regulator	License/Registration Required
Banking	IFSCA	IFSC Banking Unit (IBU) License
Capital Markets	IFSCA	Broker/Dealer Registration, Clearing Member License, Market Infrastructure Institution (MII) Registration (for exchanges, clearing corps, depositories)
Insurance	IFSCA	IFSC Insurance Office (IIO) Approval / Registration for Insurers, Reinsurers, and Intermediaries
Funds & Asset Management	IFSCA	Fund Management Entity (FME) Registration, AIF/MF Scheme Approval, PMS License
Fintech & Payment Services	IFSCA	Regulatory Sandbox Registration, Payment System Provider Authorization, Account Issuance / E-Money License
Leasing (Aircraft/Ship)	IFSCA + GIFT SEZ	Registration as Finance Company/Unit; No Objection/Approval for Aircraft or Ship Leasing Business
Allied Services	IFSCA/GIFT SEZ	Registration under support services (legal, audit, R&D, global in-house centers) as per business activity

Banking: IBU License

Banks—both Indian and foreign—can set up IFSC Banking Units (IBUs) to conduct offshore lending, trade finance, and treasury operations.
No CRR/SLR requirements, full foreign currency operations, and no priority sector norms.

Capital Markets: Broker/Dealer License

Entities participating in international exchanges (India INX, NSE IFSC) need to register as brokers, dealers, or clearing members with IFSCA.
Allowed to trade in global stocks, bonds, derivatives, DRs, and commodities.

Insurance: IIO Approval

Foreign insurers and reinsurers must obtain IFSCA approval to operate as an IFSC Insurance Office (IIO).
Engage in cross-border reinsurance, captive insurance, and global underwriting from India.

Funds: AIF / Mutual Fund Registration

Fund managers can launch:

• Alternative Investment Funds (AIFs) – Cat I, II, III
• IFSC Mutual Funds
  Tax-neutral structures, no capital gains tax on offshore investments, and global investor access.
  

Tax Incentives and Exemptions for Foreign Companies in GIFT City IFSC

GIFT City IFSC offers one of the most lucrative tax regimes in Asia, making it a top destination for foreign companies entering India. Here are the key tax benefits available to businesses operating from the GIFT City SEZ:

Corporate Tax Exemption

• 100% income tax exemption for any 10 consecutive years out of 15 years
• Ideal for fund managers, banks, insurers, fintech, etc.
  

GST: Zero-Rated for SEZ Units

• No GST on export of services or transactions between SEZ units
• Input tax credit (ITC) available on eligible inward supplies
  

Capital Gains Exemption

• No capital gains tax for non-resident investors investing in specified securities traded on IFSC exchanges in certain scenarios
  

Customs Duty Waiver

• No customs duty on import of capital goods, equipment, or raw materials used for authorized operations
• Includes aircraft, tech infrastructure, servers, etc.
  

Stamp Duty Exemption

• Documents executed by or in favor of SEZ units are exempt from stamp duty under Gujarat state policies
  

CSR & Audit Relaxation

• Corporate Social Responsibility (CSR) provisions not applicable for first 5 years
• Internal audit exemptions for IFSC companies unless mandated by their Articles of Association
  

Common Challenges and How to Navigate Them in GIFT City IFSC

While GIFT City IFSC offers world-class infrastructure and tax benefits, foreign companies may still face some initial hurdles. Here’s a breakdown of key challenges and how to overcome them:

Perception of GIFT City Being Remote

Challenge: Some global firms perceive GIFT City as less connected compared to hubs like Mumbai, Dubai, or Singapore.
Solution:

• Opt for co-working spaces and flexible leases
• Leverage remote onboarding options for teams
• The ecosystem is rapidly maturing, with top banks, fintechs, and funds already operational
  

Legal Unfamiliarity

Challenge: Navigating Indian SEZ laws, IFSCA regulations, and company incorporation can seem complex.
Solution:

• Work with local legal and compliance advisors experienced in IFSC operations
• Firms like Treelife help with entity setup, licensing, and post-entry compliance
  

Currency Convertibility Restrictions

Challenge: INR is not freely convertible within IFSC, which may limit domestic interface.
Solution:

• Use foreign currency accounts (USD, EUR) permitted under IFSC norms
• Design FEMA-compliant structures for inward/outward investments
  

Regulatory Clarity in Newer Sectors

Challenge: Fintechs, digital asset firms, and new-age businesses may face evolving guidelines.
Solution:

• Monitor IFSCA’s Innovation Sandbox for regulatory updates
• Engage in direct consultations with IFSCA for sector-specific clarity
  

Wrapping Up, GIFT City IFSC is rapidly emerging as a premier destination for foreign companies entering the Indian market, offering a powerful combination of tax incentives, regulatory ease, and access to a growing financial ecosystem. With unified oversight from the IFSCA, world-class infrastructure, and opportunities across banking, funds, insurance, fintech, and leasing, GIFT City enables businesses to operate with global flexibility on Indian soil. Despite initial setup challenges, the long-term benefits make it a strategic choice for foreign investors, multinational corporations, and financial institutions seeking to tap into India’s international financial hub.