GIFT City Company Set-up: IFSC Unit Steps and Tax Holiday

GIFT City is a special economic zone in Gandhinagar with an International Financial Services Centre inside it. A company set up there as an IFSC unit gets a regulatory status and a tax package no other Indian city offers: for foreign exchange purposes it is treated as a person resident outside India, while for tax and company law it stays Indian.

The package is generous but narrow. It is meant for financial services and certain support services, earned in foreign currency, by a business with real people in GIFT City. This guide covers who can set up, the approvals and their order, the tax holiday and other reliefs, and the substance rules that decide whether the benefits survive scrutiny.

Who can set up an IFSC unit

IFSC units are licensed for financial services such as banking, insurance, capital market intermediaries, fund management, aircraft and ship leasing, and finance or treasury company activities, each under its own IFSCA framework. IFSCA has also allowed ancillary services, such as legal, accounting, fund administration and compliance work, to be offered from GIFT City to IFSC units and overseas clients.

The common condition is that the business is carried on in foreign currency. A trading company or a domestic services business that simply wants the tax holiday will not fit. Start by matching your activity to an IFSCA framework; if there is no framework, there is no unit.

The approvals and their order

Two things are approved together: the unit as part of the SEZ, and the regulated activity under IFSCA. The steps usually run in the order set out below.

Practitioners quote anywhere from a few weeks to several months, driven by office space, the completeness of the file and the activity's own licensing process.

• Settle the activity, the entity form (company, LLP or branch) and the promoters.
• Get a letter of intent or allotment for office space from a GIFT City developer or co-developer.
• Incorporate with the Registrar of Companies and obtain PAN and TAN.
• Apply for IFSC unit approval and the activity licence through the IFSCA single-window portal; the approval committee may call the applicant for a meeting.
• On the letter of approval, execute the lease, register for GST and open the foreign currency accounts.
• Report commencement of operations and start the compliance calendar.

The tax holiday under section 80LA

The main relief is a deduction of 100 percent of the business income of an IFSC unit for any 10 consecutive assessment years out of the first 15, at the unit's choice. Union Budget 2026 was reported to widen this to 20 years out of 25, with a concessional rate, reported at 15 percent, after the holiday; check the Finance Act 2026 and the Income-tax Act, 2025 before relying on either figure.

The deduction covers income from the approved activity, needs an audit report in the prescribed form and does not reach income outside the licence. Choose the years with care: a deduction is only worth something against profit, so early loss years spent inside the window waste it.

Several related reliefs, such as those for relocating offshore funds and for some fund income, are tied to a sunset date that Budget 2025 was reported to extend to 31 March 2030.

Other tax and duty relief

The holiday sits inside a wider package, summarised below.

Section numbers follow the Income-tax Act, 1961; the Income-tax Act, 2025, in force from 1 April 2026, renumbers them.

• Minimum alternate tax: IFSC units in the old regime pay MAT at a lower rate, reported at 9 percent, and units in the new concessional regime are outside MAT.
• GST: supplies to IFSC units are relieved, and services supplied to overseas clients can be zero-rated.
• Transaction taxes: no securities or commodities transaction tax on specified trades on IFSC exchanges.
• Stamp duty: state relief on specified instruments and transactions in the IFSC.
• Capital gains: specified securities transferred by non-residents on IFSC exchanges can be exempt.

FEMA and company law status

For FEMA an IFSC unit is a person resident outside India. It works in foreign currency, holds foreign currency accounts and deals with Indian residents much as a foreign entity would. Indian residents who invest in it do so under the Liberalised Remittance Scheme or the overseas investment rules, with the reporting that follows.

For company law it is an ordinary Indian company or LLP, with some relaxations notified for IFSC companies. It files with the Registrar, holds board meetings, gets audited and files an Indian tax return like any other entity.

Substance: what protects the holiday

The benefits are for a real business in GIFT City: an office used for work, staff employed by the unit, decisions taken there, revenue earned in foreign currency and a clear line between the unit and any Indian group company.

Watch for shifted profits. If an Indian group company moves income into the unit without a genuine change in function, the tax department can challenge the deduction, apply transfer pricing and anti-avoidance rules and recover the tax with interest. Separate staff, separate systems and arm's length pricing are cheaper than a dispute.

If a unit exits the IFSC or loses its approval, benefits already claimed may be clawed back. Plan the life of the unit, not only its first year.

Is a GIFT City unit right for you?

It usually fits a fund manager, a finance or treasury company, a leasing business, an intermediary serving global clients, or a professional firm serving IFSC units and overseas clients. It does not fit a business whose customers and costs are in rupees in India.

Counsel handles the licence documents and the applicant files with IFSCA. The CA work is the activity-to-framework match, the tax model, the timing of the holiday and the accounts and audit reports that follow.

Frequently asked questions

What is the tax holiday for a GIFT City company?

An IFSC unit can deduct 100 percent of its business income for 10 consecutive years out of 15 under section 80LA, and Budget 2026 was reported to extend this to 20 years out of 25.

Can any company set up in GIFT City for the tax benefit?

No. The activity must fall under an IFSCA framework, such as financial services or permitted ancillary services, and be carried on in foreign currency.

Does a GIFT City company pay MAT?

Units in the old regime pay MAT at a lower rate, reported at 9 percent, and units under the new concessional regime are outside MAT.

How long does GIFT City company set-up take?

From a few weeks to several months, depending on office space, the completeness of the file and the activity licence. Office space is usually the first bottleneck.

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