Side by side
| Question | IFSC unit | SEZ unit outside the IFSC | DTA business |
|---|---|---|---|
| Regulator of financial activity | IFSCA | The usual Indian regulators (RBI, SEBI, IRDAI) for any financial activity | The usual Indian regulators |
| Exchange control (FEMA) | Generally treated as a person resident outside India | Resident in India | Resident in India |
| Currency of business | Foreign currency, with limited rupee exceptions such as administrative expenses | Rupee business is normal | Rupee business is normal |
| Income tax | Eligible units can claim the section 147 deduction under the Income-tax Act, 2025 | SEZ tax rules applicable to the unit's date of set-up | Taxed normally |
| Indirect tax | SEZ treatment of supplies | SEZ treatment of supplies | No SEZ treatment |
| Approvals | IFSCA registration plus SEZ unit approval, with IFSCA acting as SEZ administrator | Development Commissioner approval | None specific to GIFT City |
How each row works in practice
Regulation. Inside the IFSC, section 13 of the IFSCA Act, 2019 transfers to IFSCA the powers that RBI, SEBI, IRDAI and PFRDA hold under the Acts listed in its First Schedule, so far as they concern financial products, services and institutions. Outside the IFSC those powers stay where they are.
Exchange control. GIFT City's guide states that a financial institution set up as a branch or entity in the IFSC is deemed a person resident outside India for exchange-control purposes. The SEZ and DTA businesses next door are residents. See IFSC units under FEMA.
Currency. IFSCA's frameworks require IFSC units to transact in specified foreign currencies. Several frameworks allow a rupee account only to meet administrative and statutory expenses.
Income tax. Section 147 of the Income-tax Act, 2025 gives an eligible IFSC unit a deduction of 100% of qualifying income for 20 consecutive tax years out of 25. It replaced section 80LA of the Income-tax Act, 1961 from 1 April 2026. See Section 147.
Indirect tax. GIFT City's guide records that there is no GST on services received by an IFSC unit, or on services it provides to IFSC or SEZ units or offshore clients, but that GST applies to services provided into the DTA. See GST and customs.
Approvals. IFSCA's SWIT workflow (V1.0, July 2026) runs the SEZ and regulatory steps together: a joint application on SWIT to IFSCA as SEZ administrator and as regulator, consideration by the Unit Approval Committee, a Letter of Approval issued through the SEZ Online portal, and a bond-cum-legal undertaking in Form H. See SEZ unit approval.
A common misreading
A lease in a GIFT City tower does not make a business an IFSC unit. The unit must be approved for the IFSC and registered for an IFSCA-permitted activity. Until both are in place, it is not entitled to the IFSC treatment in any of the rows above.
Equally, an IFSC unit selling into India is crossing a border for FEMA and customs purposes, even though the buyer may be a few kilometres away. A payment from an Indian resident to an IFSC unit, or a service supplied by the IFSC unit into the DTA, is analysed as a cross-border transaction.
Groups with a presence in more than one space
Some groups want both an IFSC unit and an Indian operation in GIFT City, for example an IFSC fund manager and a domestic advisory company in the DTA. Points to settle at the outset:
- Separate legal positions. The two operations have different regulators, different exchange-control status and different currencies of account. Shared staff, premises and systems need documented arrangements.
- Transactions between them. Services and payments between the IFSC unit and the DTA business are cross-border for exchange control and may be relevant for transfer pricing. See Transfer pricing.
- Tax claims. The section 147 deduction is limited to the eligible IFSC unit's qualifying income. Income booked in the wrong entity does not qualify.