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The Finance Minister Nirmala Sitharaman introduced some important changes in the International Financial Services Centre norms.
The new and updated provisions announced by the FM in her budget document will come in effect from April 1, 2025. The proposed changes by the financial minister include some provisions around extension of sunset dates for schemes, additional exemptions and inclusion of certain new rules.
While talking about the announcements made in the budget, Tapan Ray, MD and Group CEO, GIFT City said "The Union Budget 2025 reinforces the government’s commitment to making GIFT City IFSC a global financial hub. The proposed tax incentives and regulatory simplifications will attract global investors, fund managers, and businesses, strengthening India’s financial ecosystem. With these measures, GIFT City is set to become a competitive and business-friendly destination on the global financial map. It will play a key role in driving India’s growth in the international financial services sector."
Some of the key initiatives taken by the government for the IFSC in the budget are following:
- Redemption proceeds on life insurers irrespective of its investment amount will be fully exempted from income tax. There will be no limit of Rs.2.50 lakh per annum on ULIPs and Rs.5 lakh on other schemes
- The budget has also exempted the capital gains and dividend income for the non-residents on the ship leasing units
- Any advance or loan between two group entities will not be treated as dividend income, if the group to which the IFSC-based entity belongs is listed outside Indian territory
- The sunset date for several tax concessions that were allowed till 31 March 2025, has been extended to 31 March, 2030. This includes deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre, exemption on transfer of assets and other related provisions
- The budget has also claimed to simplify the regime for fund managers based out of IFSC. The fund managers have been allowed a window period of 4 months to fulfil the requirement of fund investment being not more than 5% of the fund assets
- The income of non-residents generated through the transfer of undeliverable forward contracts, offshore derivative investments, over the counter derivatives will not be included in the total income to calculate capital gains
- The transfer of the retail schemes and the ETFs to the scheme in the IFSC will not be considered while calculating the capital gains
- There will be an exemption up to 31 March, 2030, on the dividend, interest or long-term capital gains from the investments made in India. This includes sovereign fund and pension funds