GIFT City's Tax Package, Decoded - And Why the Sunset Clauses Are Not Where You Think They Are

Ask most people what makes GIFT City attractive and you will hear some version of "it is tax-free." That is close enough to be useful as a headline and vague enough to get a client into trouble if it is the entire brief they walk away with. The real package is more specific, more conditional, and - crucially - several of its expiry dates have quietly moved further out than a lot of circulating material still assumes.

The core holiday

The centrepiece is Section 80LA of the Income-tax Act: a 100% deduction of total income for any 10 consecutive assessment years out of a 15-year block, starting from the year an entity obtains its IFSCA registration. This is a genuine tax holiday, not a reduced rate - and the entity gets to choose which ten of the fifteen years to claim it, which matters for planning around a business that may take a few years to reach profitability.

Alongside it: Minimum Alternate Tax at a reduced 9% of book profits (against 15–18.5% elsewhere), and no MAT liability at all if the entity opts into the new corporate tax regime.

The transaction-level exemptions

Beyond the headline holiday, GIFT IFSC strips out several transaction-level costs that add up in aggregate: no customs duty on goods imported into the IFSC, no GST on services imported from outside India or moving within the IFSC or from the rest of India into it, no stamp duty on IFSC real estate agreements, and exemption from Securities Transaction Tax and Commodity Transaction Tax on IFSC exchange transactions. None of these are dramatic individually, but together they remove a layer of transaction friction that a mainland Indian structure simply carries as a cost of doing business.

Dividends get specific treatment too: a concessional 10% withholding rate on dividends paid to non-resident shareholders, and - usefully for Indian groups with a GIFT City subsidiary - a deduction for dividends received from that subsidiary against dividends the parent later distributes, which mitigates cascading taxation up the chain.

The provisions that matter most for funds

Two provisions do a lot of quiet work for the fund-management ecosystem specifically. Section 9A provides that fund-management activity conducted in the IFSC on behalf of an eligible offshore fund does not, by itself, create a taxable business connection in India for that fund - a safe harbour that lets an offshore fund's manager physically sit in GIFT City without dragging the fund itself into the Indian tax net. Section 10(4G) exempts income a non-resident receives from a portfolio managed through an Offshore Banking Unit account in the IFSC, to the extent that income accrues outside India.

Where the outdated advice creeps in

A meaningful number of client memos and secondary sources still cite sunset clauses - the deadlines by which an entity must have commenced operations to qualify for certain exemptions - as falling somewhere between 2024 and 2026. That was true once. The Finance Act, 2025 moved every one of these deadlines out to a common date: 31 March 2030, effective 1 April 2025. Specifically:

• Section 9A(8A) (relaxed conditions for IFSC-based fund managers of offshore funds) - originally 31 March 2024, now 2030.
• Section 10(4D) (capital-gains exemption for an Offshore Banking Unit's investment division) - originally 31 March 2025, now 2030.
• Section 10(4F) (royalty/interest income from aircraft or ship leasing by an IFSC unit) - originally 31 March 2025, now 2030.
• Section 10(4H) (capital-gains exemption on transfer of shares in an IFSC aircraft-leasing company) - originally 31 March 2026, now 2030.
• Section 80LA(2)(d) (deduction for income from transfer of a leased aircraft or ship by an IFSC unit) - originally 31 March 2025, now 2030.
• Section 47(viiad) (tax-neutral relocation of funds into an IFSC) - also extended to 2030.

Depending on which provision an older memo was citing, that is anywhere from a four-year to a six-year runway beyond what it assumed - and it materially changes the urgency calculus for a client wondering whether they have "missed the window." In practically every case, they have not.

The takeaway

The tax package is real, but it is a stack of specific provisions with specific conditions, not a blanket exemption - and at least two of its most important deadlines are further away than commonly assumed. Before telling a client they need to move fast to catch a sunset clause, check the current date against the current notification. The answer, as of now, is usually more relaxed than the received wisdom suggests.