What is the tax position of an IFSC unit, by period?
Since 1 April 2026, IFSC units are taxed under the Income-tax Act, 2025. The core benefit is section 147: a 100% deduction on eligible income for 20 consecutive tax years out of the first 25. Other provisions give relief on withholding, transaction taxes and investor income.
A treatise-grade working reference on the licensing, capital, conduct-of-business and tax framework for Tax Regime for IFSC Units at GIFT IFSC - every conclusion anchored in verbatim statutory and regulatory text.
GIFT IFSC competes head-on with Singapore, Dubai and Mauritius - on tax, on currency, and on access to India. Here is what actually moves the decision, before the regulatory detail below.
100% deduction on business income for any 20 consecutive years in a 25-year block under Section 147 of the Income-tax Act 2025 (Finance Act 2026), then a 15% concessional rate. MAT capped at 9%.
An IFSC unit is treated as a person resident outside India under FEMA - raise, hold and transact in USD / EUR / GBP, with full foreign-currency freedom and no rupee-conversion drag.
Foreign and NRI investors can hold up to 100% - without the aggregate ownership caps that constrain comparable onshore vehicles.
Unlike a purely offshore hub, GIFT IFSC sits on Indian soil and aligns with national policy - an offshore base that is also a door into one of the world's largest growth markets.
IFSC-exchange transactions are free of Securities and Commodity Transaction Tax and stamp duty; services rendered by IFSC units are zero-rated for GST.
A single unified regulator (IFSCA) under the IFSCA Act 2019, an independent judiciary, and a treaty-anchored legal order - certainty, not just headline rates.
The opportunity is real, but every benefit carries a condition - and that is where counsel at the threshold earns its place.
The IFSC tax regime is the thread running through every other head. Under the Income-tax Act, 2025 (in force from 1 April 2026, replacing the 1961 Act), the IFSC unit deduction - historically Section 80LA - is carried forward and, following Union Budget 2026-27, enhanced. It remains a structured incentive, not a blanket exemption, and every benefit carries a condition.
Tax is where our GIFT City practice meets the firm's foundational income-tax litigation strength. We advise on structuring to qualify for and preserve the deduction, on the foreign-currency and commencement conditions, on the investor-level reliefs, and - if a position is ever questioned - on representing it before the authorities.
The conditions for this head, turned into a tool you can use now. Indicative only - built to orient your thinking before we map it to your facts.
Estimate the indicative shape of the income-tax holiday for an IFSC unit.
Illustration only - not a tax opinion. Deduction historically Section 80LA; carried into the Income-tax Act, 2025 as Section 147 and extended by Budget 2026-27 to 20 consecutive years out of 25, post-holiday income at a concessional 15%. Assumes income in convertible foreign exchange and 100% qualifying.
Indicative tool - not legal or tax advice. Confirm against current IFSCA regulations and your facts.
The IFSC tax regime is what makes GIFT City competitive - here is the architecture every investor should price in.
Indicative only - not legal advice. Figures and steps are anchored to the applicable IFSCA regulations; confirm the current position before acting.
Section 147 of the Income-tax Act, 2025 allows a unit of an International Financial Services Centre to deduct 100% of its qualifying income for any 20 consecutive tax years it chooses out of 25 years beginning with the relevant tax year. The longer period was enacted by the Finance Act, 2026 and applies from tax year 2026-27. The deduction replaces section 80LA of the Income-tax Act, 1961.
Read the guide →The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026, starting with tax year 2026-27. For IFSC units, section 80LA of the 1961 Act becomes section 147, and the deduction period lengthens from 10 years out of 15 to 20 out of 25. Earlier years stay under the 1961 Act.
Read the guide →In any year outside the 20 deduction years, whether after they end or before a deferred window starts, the unit's eligible income is taxed. Section 218 of the Income-tax Act, 2025 sets a 15% rate on income referred to in section 147(3). Other income is taxed at the rates in force.
Read the guide →A unit with little or no taxable income because of the section 147 deduction may still pay a minimum tax: minimum alternate tax for companies and alternate minimum tax for other persons. Both are in section 206 of the Income-tax Act, 2025, and the Finance Act, 2026 changed how minimum alternate tax credit works. The result depends on the unit's legal form, its tax regime and the year.
Read the guide →Non-resident investors in IFSC funds and IFSC-listed instruments benefit from specific exclusions in the Income-tax Act, 2025. These cover transfers of certain securities on IFSC exchanges, income from qualifying IFSC funds, some derivative income, and interest and lease payments by IFSC units. Each relief is tied to a defined instrument, payer or condition, so the exact scope depends on the instrument.
Read the guide →Two CBDT notifications under section 400(1), read with section 147, of the Income-tax Act, 2025 remove tax deduction at source on specified payments to IFSC units. Both apply from 1 April 2026. The relief works only after the unit gives the payer a statement-cum-declaration in Form No. 1(N), and only for the 20 tax years the unit has chosen for its section 147 deduction.
Read the guide →IFSC units are units in a Special Economic Zone. Supplies made to them for authorised operations are zero-rated under the IGST Act, 2017. GIFT City's official summaries state that services received by IFSC units, and services they provide to other IFSC or SEZ units and to offshore clients, are not subject to GST, and that transactions on IFSC exchanges attract no GST. Services supplied into the domestic tariff area are a different matter.
Read the guide →GIFT City's official summaries state that transactions on IFSC exchanges are exempt from securities transaction tax, commodities transaction tax and stamp duty. Gujarat's stamp-duty exemption for IFSC units runs for ten years from 4 August 2020, according to the State's GIFT City guide. Income tax on the gain is a separate question.
Read the guide →Transactions between an IFSC unit and its group are subject to the transfer pricing rules in Chapter X of the Income-tax Act, 2025. Because the unit may be claiming a 100% deduction under section 147, the tax authorities look closely at whether profit is being shifted into it. A defensible arm's length price, supported by real functions in GIFT City, is the protection.
Read the guide →IFSC entities transact in specified foreign currencies and keep accounts in a foreign currency where their framework requires it. They follow Indian accounting standards for company-law purposes and file IFSCA returns on top. Several tax computations, including minimum alternate tax and the section 147 report, are built on those accounts, so currency, audit and returns need to be planned together.
Read the guide →The official instruments and regulator pages this guide relies on. Check the current version on the issuer's site before acting.