Setting Up in GIFT City IFSC: Entities, IFSCA Routes and Tax

What GIFT City IFSC is

GIFT City in Gandhinagar, Gujarat, houses India’s International Financial Services Centre (IFSC). Financial services in the IFSC are regulated by a single regulator, the International Financial Services Centres Authority (IFSCA), set up under the International Financial Services Centres Authority Act, 2019. The IFSC sits within a special economic zone, so a unit there also deals with the SEZ authorities.

Businesses set up in the IFSC to carry on financial services in foreign currency, such as fund management, lending and leasing, treasury operations, banking, insurance and capital market activities, and a range of ancillary services. This guide covers the main entity options, the IFSCA registration routes, the income-tax deduction and the practical sequence of steps.

Step one: define the activity

IFSCA regulates by activity. The regulation that applies to the proposed business decides the permitted legal form, the capital or net worth requirement, the key personnel and the ongoing compliance. Before choosing a structure, it helps to write down:

• the exact services to be offered and the currencies involved;
• the target clients, whether non-residents, residents investing overseas under the applicable limits, or group entities;
• whether the parent is already regulated by a financial sector regulator in India or abroad;
• the people who will be based in the IFSC.

Entity options

The forms available depend on the regulation. The common ones are:

• Company: a new company, subsidiary or joint venture incorporated under the Companies Act, 2013. This is the most widely available form.
• Limited liability partnership: permitted for some activities. For example, under the IFSCA (Fund Management) Regulations, 2025 a fund management entity may be a company or an LLP, but a Registered FME (Retail) cannot be an LLP.
• Branch: an existing Indian or foreign entity can set up a branch for some activities. A branch FME must belong to an entity already registered or regulated by a financial sector regulator. Under the IFSCA (Finance Company) Regulations, 2021, a branch is known as a finance unit.

A branch keeps the business within the parent’s balance sheet, while a subsidiary ring-fences it. The choice also affects capital, governance, tax and exit.

IFSCA registration routes

Fund management

The IFSCA (Fund Management) Regulations, 2025, published on 19 February 2025, provide for three categories of fund management entity (FME):

• Authorised FME: for venture capital schemes for accredited investors or investors above specified thresholds, and family investment funds;
• Registered FME (Non-Retail): for restricted schemes raised by private placement from accredited investors, portfolio management services and certain investment trust activities;
• Registered FME (Retail): for retail schemes open to all investors, including public investment trusts and exchange traded funds, in addition to the activities of the other categories.

Every FME needs a principal officer, and registered FMEs also need a compliance officer, with the qualification and experience set out in the regulations. Net worth is prescribed separately for each category. Expertvuw’s IFSCA FME registration page covers this route.

Finance companies and finance units

The IFSCA (Finance Company) Regulations, 2021 cover lending, leasing (including aircraft and ship leasing), investment activity, global or regional corporate treasury centres and a set of non-core activities. A finance company cannot accept public deposits. The minimum owned fund depends on the activities undertaken. An amendment notified in May 2026 allows special purpose vehicles administered by a trust and company service provider to undertake leasing or financing with the Authority’s approval. See Expertvuw’s IFSC finance company page.

Other activities

Banking units, insurance and reinsurance entities, capital market intermediaries, TechFin and ancillary service providers, and bullion market participants each have their own IFSCA regulations. The IFSCA (TechFin and Ancillary Services) Regulations, 2025 cover service providers such as trust and company service providers.

The Single Window IT System

From 1 October 2024, IFSCA requires applicants seeking to set up a unit in the IFSC to apply through its Single Window IT System (SWIT), under its circular dated 30 September 2024. SWIT brings together the application for IFSCA licence, registration or authorisation, the approval of the SEZ authorities, GSTN registration and, where relevant, no-objection certificates or approvals from the RBI, SEBI and IRDAI.

The circular lists some exceptions that continue to follow separate application processes, including payment services, bullion activities, market infrastructure institutions, bookkeeping and accounting services, and education by international branch campuses.

The IFSC tax deduction under the Income-tax Act, 2025

The Income-tax Act, 2025 applies from tax year 2026-27. The deduction formerly in section 80LA of the Income-tax Act, 1961 is now section 147 of the 2025 Act, “Deductions for income of Offshore Banking Units and Units of International Financial Services Centre”.

The Finance Act, 2026 substituted the relevant sub-sections with effect from 1 April 2026. As amended:

• a unit of an IFSC can claim a deduction of 100 per cent of eligible income for any 20 consecutive tax years out of 25 years, at its option, beginning with the relevant tax year (broadly, the year in which it obtained the required permission or registration). The earlier period was 10 consecutive years out of 15;
• eligible income includes income from business referred to in the section carried on in the IFSC, together with certain income from the transfer of leased aircraft or ships;
• for a unit that commences operations on or after 1 April 2026, the deduction is available only if the unit is not formed by splitting up, reconstruction or reorganisation of, or transfer of, a business already in existence in India;
• the claim must be supported by an accountant’s report and a copy of the permission or registration obtained under the relevant law.

The deduction is one part of the tax position. Other provisions of the 2025 Act, indirect tax, and the treatment of the parent or investors also need review. The accountant’s report is issued by an independent chartered accountant.

Practical steps

1. Scope the activity and identify the IFSCA regulation, eligibility conditions and capital requirement.
2. Choose the entity form: company, LLP or branch, as permitted.
3. Arrange premises in GIFT IFSC; the application needs premises details.
4. Identify key personnel who meet the qualification and experience requirements and will be based in the IFSC as required.
5. Incorporate or register the entity or branch, with objects covering the IFSC activity.
6. Apply through SWIT, covering IFSCA registration, SEZ approval, GST registration and any RBI, SEBI or IRDAI NOC.
7. Complete post-approval steps: capital infusion, bank accounts, FEMA reporting where the investment comes from abroad or from an Indian parent, and commencement.
8. Set up ongoing compliance: IFSCA periodic reporting, AML/CFT obligations, SEZ reporting, company law and tax filings.

The time needed typically depends on the activity, the completeness of the application and queries from the regulators. Expertvuw’s IFSC unit setup page outlines the process. Expertvuw’s team can help you assess the right structure and registration route, with licensed work such as certification handled by independent professionals.

Sources

• Income Tax Department – Income-tax Act, 2025, section 147 (as amended by the Finance Act, 2026)
• IFSCA – Circular on Single Window IT System for registration and approval from IFSCA, SEZ authorities, GSTN, RBI, SEBI and IRDAI, 30 September 2024
• IFSCA – IFSCA (Fund Management) Regulations, 2025 (as amended)
• IFSCA – IFSCA (Finance Company) Regulations, 2021
• Union Budget 2026-27 – Budget speech (IFSC deduction proposal)