What a relocation involves
- Setting up the IFSC entity under the relevant framework, with its own registration, premises and people, as for any new unit.
- Transferring assets, contracts, clients or fund interests from the existing vehicle.
- Tax on the transfer in the origin jurisdiction and in India, including any relocation relief that is available.
- Regulatory consents in the origin jurisdiction, and the consent of investors or counterparties where the documents require it.
- Exchange control. A financial institution set up in an IFSC is treated as a person resident outside India under the Foreign Exchange Management (International Financial Services Centre) Regulations, 2015, so a move from India to the IFSC is a cross-border transaction.
Moving an Indian business: section 147(5) and framework rules
Section 147 of the Income-tax Act, 2025 gives an eligible IFSC unit a 100% deduction of eligible income for 20 consecutive tax years, chosen by the unit, out of 25. For units commencing on or after 1 April 2026, section 147(5) adds a condition: the unit must not be formed by splitting up or reconstructing a business already in existence, subject to the exceptions in the section. Before 2026-27, the corresponding deduction was section 80LA of the Income-tax Act, 1961.
The test is aimed at moving existing onshore operations into the IFSC to obtain the deduction. A unit that takes over an Indian business's contracts, clients, staff or assets needs careful analysis before it is formed, not after.
Some IFSCA frameworks impose their own rules:
- A Global In-House Centre may not be set up by transferring existing contracts or work arrangements from its group entities in India.
- The BATF Regulations contain undertakings against setting up by splitting up, reconstructing or reorganising an existing Indian business.
An Indian parent investing in the IFSC entity also makes the overseas direct investment filings that apply to it.
Moving an offshore fund
Section 70(1) of the Income-tax Act, 2025 takes a fund relocation out of the capital gains charge: clause (t) covers the transfer of the original fund's assets to the resultant fund in the IFSC, and clause (u) the exchange by investors of their interests in the original fund for interests in the resultant fund. The relocation must take place on or before 31 March 2030, and the definitions of "original fund", "resultant fund" and "relocation" in the Table in section 70(2) must be met. These provisions continue the relief formerly in section 47(viiad) of the Income-tax Act, 1961. The conditions are set out in relocating an offshore fund.
A fund relocation typically involves:
- registering the FME and the IFSC scheme;
- restructuring the offshore vehicle by winding up or, where the origin jurisdiction permits, continuation;
- transferring the assets in exchange for units in the IFSC fund;
- obtaining investor consents; and
- completing the exit steps required in the origin jurisdiction.
Moving a foreign business or team
A foreign group moving an activity from another financial centre has no Indian splitting-up issue for the foreign business as such. But it still has to set up a unit that meets the IFSC framework in full. Two points are easily missed:
- The IFSC officers must actually take the decisions after the move.
- Client and counterparty contracts may need novation or consent.
The origin jurisdiction's own exit taxes, licensing withdrawals and notice periods will set much of the timetable.
Our approach
Relocation works best when the IFSC entity will have its own substance after the move: people with authority in GIFT City, decisions taken there, and records to show it. Moving only the booking leaves both the regulatory and the tax position exposed. We usually advise mapping what will move, and from where, before the IFSCA application is drafted. That map drives the section 147(5) analysis, the framework's own transfer rules and the consents needed.