GIFT City’s most powerful selling point is tax. The combination of a 10-year income tax holiday for units, zero capital gains tax on specific instruments for non-residents, zero Securities Transaction Tax, zero Goods and Services Tax on financial services, and zero stamp duty on IFSC exchange transactions is a package that no other jurisdiction in India can match.

This post goes through every major GIFT City tax benefit in detail: what it is, who it applies to, and what the conditions are. It also covers what the tax picture looks like for resident Indians versus NRIs, and what compliance obligations apply.

 

Key Takeaways • For non-resident investors in specific instruments: zero capital gains tax in India on transfer of specified securities on IFSC exchanges. • For all investors: zero Securities Transaction Tax (STT), zero Commodity Transaction Tax (CTT), and zero stamp duty on IFSC exchange transactions. • For IFSC units (businesses): 100 percent income tax exemption for any 10 consecutive years within a 15-year block period under Section 80LA. Extended to March 2030 by Budget 2025. • For financial services within IFSC: generally exempt from the 18 percent GST that applies on mainland India. • Resident Indians are still subject to Indian income tax on global income. The capital gains exemption applies to non-residents, not to residents. Residents benefit mainly from the STT, CTT, and stamp duty exemptions.

 

 

 

Tax Benefit 1: Zero Capital Gains Tax for Non-Residents

This is the flagship benefit that drives significant NRI interest in GIFT City investments.

For non-resident investors, the transfer of specified securities on a recognised stock exchange located in an IFSC (India INX or NSE IFSC) is not treated as a transfer for Indian income tax purposes, if the consideration is received in foreign currency. This means no capital gains tax in India on the proceeds.

The specific instruments covered by this zero capital gains treatment for non-residents include:

• Units of investment funds set up in the IFSC (mutual funds, AIFs) on IFSC exchanges.
• Units of business trusts, such as Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) listed on IFSC exchanges.
• Bonds and debentures listed on IFSC exchanges.
• Derivatives traded on IFSC exchanges.
• Equity shares of companies incorporated in the IFSC.
• Units of ETFs listed on IFSC exchanges.

 

Condition: This zero capital gains treatment applies to non-residents whose consideration from the sale is received in foreign currency. The instrument must be traded on a recognised IFSC stock exchange. Important: Resident Indians are taxed on global income in India. The zero capital gains benefit for GIFT City investments applies to non-residents, not to ordinary residents.

 

For UAE-based NRIs, the UAE currently has no personal income tax. Combined with zero Indian capital gains tax on IFSC instruments, the effective combined tax rate on eligible GIFT City capital gains can be zero. For US-based NRIs, US capital gains tax still applies. Consult a US CPA and an Indian CA before investing.

 

Tax Benefit 2: Zero Securities Transaction Tax (STT)

Every equity trade on NSE or BSE on mainland India attracts Securities Transaction Tax (STT). The STT rate for equity delivery transactions is 0.1 percent on the value of the trade (0.1 percent on the buy side and 0.1 percent on the sell side for delivery trades). For intraday and F&O trades, separate STT rates apply.

At GIFT City exchanges (India INX and NSE IFSC), no STT applies on any transaction.

This is a significant saving for frequent traders and institutional investors. On a Rs. 1 crore equity trade at GIFT City, the STT saving alone is Rs. 1 lakh versus the same trade on a mainland Indian exchange.

 

Transaction Type	STT on Mainland NSE/BSE	STT on GIFT City Exchanges
Equity delivery (buy)	0.1% of trade value	Zero
Equity delivery (sell)	0.1% of trade value	Zero
Equity intraday (sell)	0.025% of trade value	Zero
Options (sell side)	0.1% on option premium	Zero
Futures (sell side)	0.02% of contract value	Zero
Commodity derivatives	CTT applicable	Zero CTT

 

Tax Benefit 3: Zero Stamp Duty

Stamp duty applies to the transfer of securities in India. On most securities transfers on mainland exchanges, stamp duty ranges from 0.003 percent to 0.015 percent of the transaction value depending on the security type and whether the transaction is delivery or non-delivery.

Transactions executed on IFSC exchanges are completely exempt from stamp duty.

 

Tax Benefit 4: Zero GST on Financial Services

On mainland India, financial services are subject to Goods and Services Tax (GST) at 18 percent. This applies to fund management fees, advisory fees, brokerage, and other transaction costs. For a fund manager charging a 1.5 percent management fee, the investor effectively pays 1.77 percent after 18 percent GST (1.5 percent plus 18 percent of 1.5 percent).

Within GIFT City IFSC, financial services rendered by IFSC units are generally exempt from GST under Notification No. 9/2017 of the Integrated Tax Rate and subsequent amendments. This applies to:

• Fund management fees charged by IFSC fund managers.
• Advisory fees charged by IFSC intermediaries.
• Banking services within the IFSC.
• Services rendered to clients located outside India (treated as export of services, zero-rated under GST).
• Intra-IFSC transactions between two IFSC units.

 

Over a 5 to 10 year investment horizon in a fund with annual management fees, the GST exemption alone can save a meaningful amount relative to an equivalent mainland fund charging the same nominal fee.

 

Tax Benefit 5: 10-Year Income Tax Holiday for IFSC Units

Business entities that set up units in GIFT City IFSC (fund managers, banks, brokers, insurance companies, fintech entities) are eligible for a 100 percent income tax exemption on business income for any 10 consecutive years chosen from a 15-year block period, under Section 80LA of the Income Tax Act.

This tax holiday applies to:

• Asset Management Companies (AMCs) operating in IFSC.
• International Banking Units (IBUs) of banks.
• IFSC insurance offices.
• Fund administrators.
• Treasury centres.
• FinTech service providers (extended via Budget 2025).
• Aircraft and ship leasing entities.

 

Budget 2025 extended the deadline for entities to commence operations and qualify for the benefit through March 31, 2030. This gives five years of policy certainty for businesses considering setting up in GIFT City.

Important: The 10-year tax holiday under Section 80LA applies to the business income of IFSC units, not to investment income. Other income like rental income and interest not forming part of core business activity is not covered under this section. Minimum Alternate Tax (MAT) at 9 percent of book profits still applies to company entities in IFSC. MAT does not apply to companies that have opted for the new tax regime under Section 115BAA.

 

Tax Benefit 6: Life Insurance Proceeds Tax-Free

From April 1, 2025, maturity proceeds from life insurance policies issued by IFSC insurance offices are tax-exempt in India. This applies to both NRI and resident Indian policyholders.

Global and Indian insurers operating in GIFT City offer USD-denominated policies where premiums are paid in foreign currency and claims are settled in foreign currency. The tax-free maturity proceeds combined with the foreign-currency denomination (eliminating INR depreciation risk on the policy value) make GIFT City insurance products attractive for NRIs.

 

Tax Benefit 7: Reduced Dividend Withholding Tax

For non-resident investors in companies incorporated in GIFT City IFSC, dividends are taxed at 10 percent in the hands of the shareholder. The standard rate for dividends from non-IFSC Indian companies for non-residents is 20 percent. This 10 percentage point difference improves post-tax returns on dividend income from IFSC entities.

 

Tax Benefit 8: Interest Income Exemptions

For non-resident investors, interest income from specific IFSC instruments enjoys tax exemptions:

• Interest on long-term bonds or rupee-denominated bonds listed on an IFSC exchange after July 1, 2023: subject to 9 percent withholding tax (WHT). Bonds listed before that date: 4 percent WHT.
• Interest income from foreign currency deposits held with IBUs in GIFT City: fully exempt from Indian income tax for NRI depositors (same treatment as FCNR deposits).
• Certain interest income on money lent to IFSC businesses through approved entities may qualify for tax exemptions subject to regulatory conditions.

 

Tax Position for Resident Indians vs. Non-Residents: Summary

The tax picture at GIFT City is materially different depending on whether you are a resident Indian or a non-resident.

Tax Benefit	Non-Resident Investor (NRI/OCI/PIO/Foreign)	Resident Indian Investor
Capital gains on IFSC securities	Zero Indian tax if proceeds in foreign currency on recognised IFSC exchange	Taxable as per standard capital gains rates (LTCG/STCG per Finance Act 2024)
STT on IFSC exchange trades	Zero	Zero (same benefit)
CTT and stamp duty on IFSC trades	Zero	Zero (same benefit)
GST on IFSC financial services	Exempt	Exempt (same benefit)
Interest income from IFSC deposits	Tax-free in India (same as FCNR for NRIs)	Taxable as per slab rate (same as interest from mainland bank deposits)
Life insurance maturity from IFSC	Tax-exempt in India	Tax-exempt in India (same benefit from April 2025)
Tax return filing (IFSC only income)	May not need to file ITR if TDS is deducted by IFSC unit	Mandatory. IFSC investments must be disclosed in Schedule FA and Schedule FSI

 

Compliance Requirements to Keep in Mind

GIFT City’s tax benefits come with compliance requirements that investors must follow carefully:

For resident Indians

• IFSC investments must be disclosed in Schedule FA (Foreign Assets) and Schedule FSI (Foreign Source Income) in the Indian Income Tax Return.
• All investment holdings during the calendar year that overlaps the financial year must be disclosed in Schedule FA, regardless of whether they generated income.
• Remittances to GIFT City by residents fall under the Liberalised Remittance Scheme (LRS). Remittances exceeding Rs. 10 lakh attract 20 percent Tax Collected at Source (TCS) under LRS. Claim TCS credit when filing the ITR.

For non-resident investors

• NRIs do not need to obtain a PAN or file an ITR in India if TDS is deducted by the IFSC unit making payment and all income is from IFSC-exempt categories.
• A Tax Residency Certificate (TRC) from your country of residence is generally required to claim DTAA benefits.
• Tax treatment in your home country still applies. GIFT City benefits are India-side exemptions. Consult a tax professional in your country of residence.

  

 

 

Frequently Asked Questions

What is the capital gains tax on GIFT City investments?

For non-resident investors, the transfer of specified securities on a recognised IFSC stock exchange (India INX or NSE IFSC) where consideration is received in foreign currency is not treated as a transfer for Indian income tax purposes. This effectively means zero capital gains tax in India on such transactions. For resident Indians, capital gains from GIFT City investments are taxable in India at standard rates per the Finance Act 2024 (LTCG at 12.5 percent for equity held over 12 months above Rs. 1.25 lakh, STCG at 20 percent for equity held under 12 months).

Is there STT on GIFT City exchange transactions?

No. Securities Transaction Tax (STT), Commodity Transaction Tax (CTT), and stamp duty are all completely exempt on transactions executed on GIFT City exchanges (India INX and NSE IFSC). This applies to all investors, both resident Indians and non-residents. The STT saving on a Rs. 1 crore equity delivery trade is Rs. 1 lakh compared to the same trade on a mainland Indian exchange.

Is GST charged on GIFT City financial services?

Financial services rendered by IFSC units are generally exempt from GST under the applicable GST notification. Fund management fees, advisory fees, banking services, and intra-IFSC transactions are typically GST-free. Services provided to clients outside India are treated as export of services and are zero-rated. This means the same management fee at a GIFT City fund manager effectively costs you less after tax than the same fee at a mainland fund manager who charges 18 percent GST on top.

What is the 10-year tax holiday at GIFT City?

Entities (businesses) that set up units in GIFT City IFSC are eligible for a 100 percent income tax exemption on business income for any 10 consecutive years chosen from a 15-year block under Section 80LA of the Income Tax Act. This applies to AMCs, banks, insurance companies, fund administrators, treasury centres, and FinTech providers in GIFT City. Budget 2025 extended the deadline to qualify (commencement of operations) through March 31, 2030.

Can a resident Indian benefit from GIFT City tax exemptions?

Resident Indians benefit from some GIFT City tax advantages, specifically the zero STT, zero CTT, zero stamp duty, and zero GST on IFSC financial services. However, the zero capital gains tax treatment for IFSC securities applies to non-residents, not to resident Indians. Resident Indians are taxed on global income in India and capital gains from IFSC investments follow standard Indian capital gains rates. Resident Indians must disclose IFSC investments in Schedule FA and FSI in their ITR.

Is TCS collected on LRS remittances to GIFT City?

Yes. For resident Indians, remittances to GIFT City are treated as Liberalised Remittance Scheme (LRS) remittances. Remittances under LRS exceeding Rs. 10 lakh in a financial year attract Tax Collected at Source (TCS) at 20 percent. This TCS is not a final tax. It is a credit that can be claimed when you file your annual Income Tax Return. The net effect on your tax liability depends on your total income, but you need to plan for the upfront TCS cash outflow.

Do NRIs need to file ITR in India for GIFT City investments?

NRIs who earn income solely from IFSC investments where the IFSC unit has deducted TDS at source generally do not need to obtain a PAN or file an ITR in India. This is a significant compliance simplification compared to mainland Indian investments, where NRIs typically need a PAN and may need to file returns. However, if an NRI has other India-sourced income (NRO interest, rental income, etc.) that requires filing, the IFSC income and assets should be included in the return.

How does GIFT City compare to Dubai or Singapore for NRI tax efficiency?

GIFT City’s advantage over Singapore and Dubai for India-focused investing is direct access to Indian markets with IFSC-level tax benefits, which in some cases exceed treaty benefits available through those jurisdictions. For a UAE-based NRI with zero home-country income tax, investing through GIFT City can achieve zero Indian capital gains on eligible instruments with full repatriation. From April 2026, mutual funds and ETFs can relocate from Singapore or Mauritius to GIFT City without capital gains tax on the relocation, making GIFT City increasingly competitive as a fund domicile.

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