The deadline for tax neutrality on relocation of offshore funds to GIFT City has been extended till March 31, 2030. The benefits on relocation have been extended to retail schemes and exchange traded funds (ETFs). This will help attract a large number of India centric mutual funds and ETFs to relocate to IFSC and will boost the “onshoring the offshore” vision of the government.
In a bid to boost fund management activity in GIFT IFSC, most of the conditions under section 9A may be removed if the fund management entity is set up in GIFT IFSC before March 31, 2030. “This will incentivise fund managers to relocate their fund management activity either from overseas or mainland India,” said Rajesh Gandhi, Partner, Deloitte India.
The safe harbour regime under Section 9A of the Income Tax Act provides that fund management activity carried out through an eligible fund manager acting on behalf of eligible investment fund will not constitute business connection in India, subject to conditions. The regime has not taken off as some of these conditions have been too onerous to comply.
The tax exemption available for offshore derivative instruments (ODIs) has been extended to ODIs issued by non-banks or FPIs based in Gift City. The proposed exemption will encourage increase in OTC derivatives and ODI business from IFSC instead of offshore jurisdictions, said experts.
“The revised Section 9A will simplify the regulatory framework for global fund managers, while the extension of tax exemptions for offshore derivative instruments under Section 10(4E) to non-banks and/or broker dealers will make GIFT City an even more attractive destination for international investment,” said Jaiman Patel, Partner, EY India.
He added that the inclusion of retail schemes and ETFs in the tax-neutral relocation regime will encourage the transfer of more funds to GIFT City, boosting its growth as a competitive and dynamic financial centre.
