ATK
New Delhi [India], October 27: India has witnessed an unprecedented surge in foreign portfolio investments (FPI) in recent months, with more than USD 10 billion flowing into the equity markets during the last quarter alone. As net FPI investments reach an impressive USD 19.09 billion in the current calendar year, the nation's allure as an emerging market continues to grow. One of the key contributors to this growth story is the International Financial Services Centre (IFSC) Gift City, which has emerged as a prominent financial hub for global transactions.
1. Enormous Potential of the GIFT City
Maya Sharan Singh, the Director of Lares Algotech, a hedge fund management company, emphasizes the enormous potential of IFSC Gift City as a catalyst for India's growth as a global financial hub. He states, "The IFSC Gift City represents a significant step in India's journey towards becoming a formidable player in the global financial landscape. Its growth is poised to make India a global hub for international financial services. With a business-friendly ecosystem, state-of-the-art infrastructure, and tax incentives, the city offers an unparalleled opportunity for global businesses to flourish."
2. Foreign Direct Investment (FDI) Flow In India
India's robust economy has attracted a substantial USD 46 billion in Foreign Direct Investment (FDI) during the fiscal year 2023, marking an impressive 89 per cent growth since fiscal year 2014. Notably, Singapore has emerged as the primary source of FDI into India, making a substantial 37 per cent contribution. Followed by Mauritius 13.32 per cent and the United States 13.13 per cent share. Singapore and Mauritius have played a crucial role in strengthening India's FDI inflows. This increase in FDI is a testament to India's growing attractiveness as an investment destination.
3. Numerous Benefits GIFT City Offers to Foreign Portfolio Investors (FPIs)
"GIFT City offers a host of benefits to Foreign Portfolio Investors (FPIs), including tax exemptions on capital gains from Indian securities, a streamlined regulatory environment, access to diverse financial products and services, and seamless global connectivity. Moreover, the presence of international financial institutions and global banks within GIFT City provides FPIs with access to valuable expertise and resources, further enhancing their investment opportunities in India," said Maya Sharan Singh.
4 Tax advantages of AIFs in the IFSC, GIFT City
Establishing Alternative Investment Funds (AIFs) in GIFT City comes with enticing tax advantages. This includes the opportunity for a complete exemption from business income tax for 10 out of 15 consecutive years. Furthermore, entities located in GIFT City also enjoy relief from the Goods and Services Tax (GST).
Category I and Category II Alternative Investment Funds (AIFs) are granted tax pass-through status under Indian income-tax regulations. Income earned by non-resident investors from offshore investments through Category I and II AIFs is not subject to taxation in India.
Category III AIFs enjoy lower taxes on capital gains and interest if they meet specified criteria. They can also claim tax exemptions on business income. In GIFT City, Category III AIFs get a 100 per cent tax exemption for transferring specific securities if paid in foreign currency and all units are held by non-residents.
5. The Future of GIFT City
"The International Financial Services Centre (IFSC) Gift City is undeniably a powerhouse for India's aspirations in the global financial market. With its remarkable growth, business-friendly environment, state-of-the-art infrastructure, and attractive tax incentives, it stands as a symbol of India's emergence as a formidable global financial player" said Maya Sharan Singh.
As IFSC Gift City continues to evolve and thrive, it is clear that it will remain a key catalyst for India's journey towards becoming a significant player in the international financial services sector.
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