GIFT City IFSC: the zone regime
| Measure | Rule | Basis |
|---|---|---|
| Income deduction for 20 of 25 years (s.147) | IFSC units deduct 100% of eligible income for 20 consecutive years out of 25 from tax year 2026-27 (previously 10 of 15); offshore banking units for 20 consecutive years. Budget 2026-27 proposed a 15% rate afterwards; it is not in the Finance Act 2026. | Finance Act 2026; Budget 2026-27 memorandum |
| MAT and AMT at 9% | Under s.206 of the Income-tax Act 2025, IFSC units deriving income solely in convertible foreign exchange pay MAT (companies) or AMT (others) at 9%, plus surcharge and cess. Other companies in the old regime pay a final 14% MAT. | Income-tax Act 2025, s.206 |
| No STT, CTT, stamp duty or GST | Transactions on GIFT IFSC exchanges are exempt from securities and commodities transaction taxes and stamp duty. No GST applies to services received by IFSC units or supplied to IFSC units or offshore clients. | GIFT City, Doing Business in GIFT City 2024 |
| Non-resident investor exemptions | Exempt: non-residents’ interest on money borrowed by an IFSC unit; their income from NDFs and offshore or OTC derivatives with an IFSC banking unit; and, not only in the IFSC, FIIs’ interest and gains on government securities from 1 April 2026. | Taxation and Other Laws (Amendment) Act 2026; GIFT City guide |
| Aircraft and ship leasing | Per the Economic Survey 2025-26, 33 aircraft lessors (303 aviation assets) and 34 ship lessors (28 vessels) operated from GIFT IFSC. Foreign banks with an IFSC banking unit can finance aircraft and ship leasing. | Economic Survey 2025-26 |
| Treasury centres, GICs and one regulator | IFSCA, set up in April 2020, regulates IFSC business in place of RBI, SEBI, IRDAI and PFRDA. Finance companies may run global or regional corporate treasury centres; GIFT IFSC also admits Global In-house Centres. | GIFT City, Doing Business in GIFT City 2024 |
The scheme-by-scheme status of these measures, including the treasury-centre deemed-dividend rule and the offshore fund manager safe harbour, is on the central incentives page.
Corporate tax at a glance
Rates for tax year 2026-27, the first year under the Income-tax Act 2025, which replaced the 1961 Act from 1 April 2026. Effective rates add surcharge and the 4% health and education cess. Treaty rates can be lower where treaty conditions are met. Effective rate = base rate × (1 + surcharge) × 1.04.
| Tax | Rate or rule | Note |
|---|---|---|
| Corporate tax: concessional regime (s.200) | 22% + 10% surcharge + 4% cess = 25.168% effective, whatever the level of income | Optional for any Indian company, including a foreign-owned subsidiary. Most deductions and exemptions are given up; MAT does not apply. |
| Corporate tax: normal regime | 30%, or 25% if turnover in FY2024-25 was up to ₹400 crore. Surcharge 7% on income above ₹1 crore, 12% above ₹10 crore; 4% cess | Top effective rate 34.944% (30% band). Deductions and incentives remain available, but MAT applies. |
| Foreign company: branch or permanent establishment | 35% on income other than special-rate income. Surcharge 2% on income above ₹1 crore, 5% above ₹10 crore; 4% cess | Effective 36.40% (income up to ₹1 crore), 37.128% (₹1–10 crore), 38.22% (above ₹10 crore). |
| Minimum alternate tax (MAT, s.206) | 14% of book profit (was 15%) from tax year 2026-27; a final tax for companies in the old regime, with no new MAT credit | Credit built up to 31 March 2026 is usable only after moving to the new regime, up to 25% of the year’s tax (domestic companies). |
| 15% regime for new manufacturing companies (s.201) | Closed to new entrants: only companies that began manufacturing or production by 31 March 2024 qualify | Budget 2026-27 left corporate tax rates unchanged (only the MAT rate was cut) and added no replacement regime; new manufacturers compare s.200 with the normal regime. |
| Dividends paid to a non-resident parent | 20% withholding under domestic law, plus surcharge and cess | Taxed in the shareholder’s hands. Treaties can reduce withholding on dividends, interest, royalties and technical fees, subject to treaty conditions. |
Note: An IFSC unit that claims the s.147 deduction and stays in the old regime pays MAT at 9% rather than 14%, provided its income is solely in convertible foreign exchange.
Withholding, capital gains, buy-backs, GST and transfer pricing
Domestic-law rates for tax year 2026-27, before surcharge and cess unless stated. The applicable treaty may reduce withholding where its conditions are met.
| Tax | Rate or rule | Note |
|---|---|---|
| Royalties and fees for technical services | 20% on payments to a foreign company, plus surcharge and cess | A lower treaty rate may apply, subject to treaty conditions. |
| Capital gains of non-residents: listed shares | Short-term (s.196): 20%. Long-term (s.198): 12.5% on gains above ₹1.25 lakh | Plus surcharge and cess. Treaty exemptions are open to challenge under GAAR (Tiger Global, January 2026). |
| Capital gains of non-residents: unlisted shares | Long-term: 12.5%. Short-term: at the rate for other income, 35% for a foreign company | Plus surcharge and cess; treaty relief subject to treaty conditions. |
| Share buy-backs | Taxed as capital gains in the shareholder’s hands from 1 April 2026, no longer as dividend | Promoters pay an additional tax on buy-backs under s.68 of the Companies Act 2013. It takes long-term gains, and short-term gains on listed shares, to 22% where the promoter is an Indian company and 30% for any other promoter, including a foreign parent (before surcharge and cess). |
| GST (from 22 September 2025) | Two main rates, 5% (merit) and 18% (standard), plus 40% for a select few goods and services | Approved by the 56th GST Council on 3 September 2025. Tobacco products were initially kept on earlier rates and compensation cess. |
| Transfer-pricing safe harbour: IT services | 15.5% operating margin on cost for software, ITeS, KPO and contract R&D, for taxpayers within the ₹2,000 crore eligibility threshold (raised from ₹300 crore) | Budget 2026-27; notified with the 2026 rules. Approval is automated and the option can run for five years. |
The Tiger Global decision (Supreme Court, January 2026) denied India–Mauritius treaty benefit and rejected grandfathering protection under GAAR, per the Khaitan & Co and KPMG notes listed under sources.
For the full cross-sector treatment see corporate tax, withholding and capital gains, GST and customs and transfer pricing.
What to check next
- Decide between the s.200 concessional regime and the normal regime for an onshore entity; an IFSC unit claiming s.147 needs the old regime.
- Confirm that an IFSC unit’s income is solely in convertible foreign exchange before relying on the 9% MAT.
- Check which non-resident exemptions apply to each product (IFSC-unit borrowings, NDFs, OTC derivatives, government securities).
- Model treaty relief on dividends and capital gains with GAAR in mind after the Tiger Global ruling.
- Confirm the current status of the proposed 15% post-deduction IFSC rate before it enters any forecast.