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India Announces Tax Exemptions for Non-Resident Investments in IFSC Offerings

The Indian government, in a move to enhance the attractiveness of the International Financial Services Centre (IFSC), has announced a new tax exemption for non-resident investors. This exemption applies to investments in financial products offered by capital market intermediaries based in the IFSC. Notified on Friday, this tax incentive was initially introduced in the budget last year and is conditioned on the non-resident earning income from such investments through a bank account held with the Offshore Banking Unit in the IFSC.

The exemption aims to transform the IFSC into a more appealing investment hub. Rajesh Gandhi, a partner at Deloitte India, commented on the significance of this relaxation. He noted that it would enable non-residents to claim tax exemptions on incomes generated from financial products offered by intermediaries in GIFT City, thereby boosting the financial offerings and solutions available in this zone.

Sunil Gidwani, Partner- Financial Services at Nangia Andersen LLP, highlighted the expected impact of this exemption. According to him, foreign clients of brokers who trade various financial products on the IFSC stock exchanges would be among the primary beneficiaries. He added that this expansion of the exemption was much anticipated, as it provides a more level playing field for these intermediaries compared to the portfolio management service platform providers.

In summary, this policy adjustment is a strategic step by the Indian government to increase the global competitiveness of the IFSC, making it a more lucrative option for non-resident investors and bolstering the range of financial services and products available in the country’s financial market.


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