GIFT City Tax Benefits: Capital Gains, ITR Disclosure & Investor Guide

Various tax concessions can be availed through investments in a GIFT city, or by establishing a unit there. Gujarat International Finance Tec-City (GIFT) is the first and only International Financial Services Center (IFSC) situated in India. Tax holidays, concessional tax rates, and exemptions are available for specified investments made by taxpayers upon satisfaction of certain conditions.

What is an IFSC?

An International Financial Services Centre (IFSC) is an entity that promotes international activities onshore. Units rendering services related to capital markets, banking, insurance and financial services, fintech, airport leasing, ship leasing, etc., are allowed to establish their units in IFSCs. India’s only recognised IFSC is the Gujarat International Finance Tec-City (GIFT), situated in Gandhinagar. They are governed by the International Financial Services Centres Authority (IFSCA), established under an act of parliament.

Tax Benefits available to GIFT City Investments

The following are the popular tax benefits available to investments made in GIFT City.

Transfer of Specified Securities by Non-Residents - 47(viiab)

If specified securities are transferred by a non-resident on a recognised stock exchange in the IFSC, and the proceeds are received in foreign currency, the transaction itself is not considered a transfer, and no capital gains are attracted. The following securities are not subject to tax when traded on a stock exchange in GIFT City.

• Foreign currency-denominated bond; 
• Unit of a Mutual Fund 
• Unit of a business trust;
• Foreign currency-denominated equity share of a company; 
• Unit of Alternative Investment Fund,
• Bonds or Global Depository Receipts (GDR) u/s 115AC
• Derivatives
• Rupee-Denominated Bonds of Indian Companies

Beneficial Minimum Alternative Tax

Companies situated in GIFT city enjoy a concessional MAT at 9%, against the normal rate of 15%.be

Beneficial Alternative Minimum Tax 

Units in IFSC that are not companies also enjoy a concessional Alternative Minimum Tax rate, compared with the normal rate of 18.5%.

No STT

Sale, purchase, and trading of securities through stock exchanges in GIFT City are exempt from Securities Transaction Tax, making IFSC investments an attractive option for residents and non-resident investors alike.

Section 80LA - Tax Holiday for IFSC Units

A unit established in GIFT City can claim a tax holiday for 10 consecutive years out of the first 15 tax years. However, this tax benefit is available only to the business income earned by the entity. Other income, like rental income, interest, which does not form part of the core business activity, is not covered under this section.

No Withholding Tax on Specified Payments to IFSC Units

Units established in GIFT City can submit Form-1 and claim an exemption from TDS deductions on their specific income. 

GIFT City ITR Disclosure Rules — What Resident Indians Must Know

GIFT City investments are considered investments made outside India, for residents and non-residents. Additional compliance requirements may apply in certain cases, such as disclosures, tax deductions, and collections. 

Schedule FA and FSI disclosures

Ordinary residents who have invested in securities through IFSC may be required to disclose their investment details in the Schedule FA and FSI. All investment holdings made during the calendar year that overlaps the financial year need to be disclosed in Schedule FA, irrespective of whether they generate income or not. However, all income generated from such investments must be disclosed in Schedule FSI (Foreign Source Income). These requirements apply to investments made in GIFT City, such as business entities directly established there, and to foreign securities purchased through IFSC stock exchanges.

TCS on GIFT city remittances

Since remittances to GIFT City are treated at par with overseas remittances, TCS provisions that apply to Liberalised Remittance Scheme (LRS) remittances made towards IFSC apply. Remittances exceeding ₹10 lakhs are subject to 20% TCS.

ITR Filing Checklist for GIFT City Investors

The following points need to be kept in mind by GIFT City investors while filing ITR.

• Keep documents like IFSC account statement, broker statement, Form 26AS, and AIS handy, and cross-verify all income sources while filing ITR.
• If you are a non-resident, claim your applicable exemptions on the sale of specified securities. Investments made through IFSC enjoy significant tax exemptions and benefits, and they can be fully utilised by non-resident taxpayers to maximise their tax savings.
• Disclose all foreign income and investments made through IFSC exchanges, as well as direct investments made within GIFT City. Schedule FA and FSI disclosures are mandatory in most such cases.
• The due date for filing ITR for assessees who traded in derivatives, including intraday, through IFSC exchanges for AY 2026-27 (FY 2025-26) is 31st August, 2026, whereas others shall file their returns by 31st July, 2026.
• If the income from IFSC investments is subject to tax in more than one country, the assessee can avail of the DTAA provisions and claim foreign tax credit accordingly.
• In such situations, it is necessary to file Form 67 within the applicable due date. Keep other documents, such as the Tax Residency Certificate (TRC), Tax Identification Number (TIN), and proof of double tax payment, handy.