Tax & Structural Advisory for IFSC

Tax & Structural Advisory for GIFT City IFSC Units in Gandhinagar

GIFT City's IFSC offers one of the most competitive tax regimes in the world for financial services businesses. The combination of Section 80LA tax holidays, GST exemptions, capital gains exemptions, and dividend tax exemptions creates an effective tax rate near zero for compliant IFSC entities. Morry's Business, operating from Gandhinagar adjacent to GIFT City, provides specialised tax and structural advisory to maximise these benefits for IFSC units of all types.

Section 80LA: The 10-Year Income Tax Holiday

Section 80LA of the Income Tax Act provides a 100% deduction on profits and gains of an IFSC unit for any 10 consecutive assessment years chosen by the unit, out of the first 15 years of operation. This means an IFSC entity pays zero corporate income tax on its profits during the chosen 10-year block. The critical planning decision is when to begin the 10-year block — ideally when the unit begins generating significant taxable profits. Morry's Business models projected profit ramp-up for each client and recommends the optimal start year to maximise the value of the tax holiday.

GST Exemptions and Zero-Rating for IFSC Units

Services provided by IFSC units to non-resident clients are zero-rated under GST (export of services) — meaning no GST is charged and full ITC is available on inputs. Services received by an IFSC unit from the Domestic Tariff Area (DTA) attract GST in the hands of the DTA supplier, but the IFSC unit can claim a GST refund on many of these. Specific GST exemptions also apply to services provided by IFSCA-regulated entities. We conduct a GST planning review for each new GIFT City client to optimise the GST position across their DTA and IFSC operations.

MAT and AMT for IFSC Entities

IFSC companies are subject to a reduced Minimum Alternate Tax (MAT) of 9% (instead of 15% for domestic companies). Importantly, for units that have opted for the Section 115BAA domestic tax regime (22% flat), MAT does not apply. Some IFSC entities — particularly fund management companies with book profits significantly different from taxable profits — may face MAT exposure even during the Section 80LA holiday period. We model MAT and AMT (Alternate Minimum Tax for LLPs) impact separately and advise on whether the Section 115BAA election should be made to eliminate MAT risk.

Capital Gains and Dividend Tax Exemptions

Several capital gain and dividend exemptions are uniquely available to IFSC entities and their investors. Long-term capital gains on transfers of securities listed on IFSC stock exchanges (NSE IFSC and BSE-Ebix) by non-residents are exempt under Section 10(4D). Dividends paid by IFSC companies are exempt from dividend distribution (now applicable at investor level), and NRI investors receiving dividends from IFSC companies may claim DTAA benefits. IFSC AIFs enjoy pass-through status — ensuring investors are taxed at their own applicable rate rather than at fund level.