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Family Investment Fund in IFSC GIFT City

by InCorp Advisory

Reading Time: 2 minutes

Family investment fund (FIF) in the International Financial Service Centre (IFSC) would refer to self-managed fund established by single family that operate within the regulatory framework and infrastructure provided by an IFSC.

GIFT IFSC is set-up in Gandhinagar, Gujarat to undertake financial services transactions that are currently carried on outside India by overseas financial institutions and overseas branches/ subsidiaries of Indian financial institutions.

GIFT City IFSC opens a great opportunity to High-net-worth individuals (HNIs) who are currently investing in overseas funds to benefit from the favourable financial environment, access to global markets, and potential tax advantages offered by the IFSC.

What does Single Family Means?

What does Single Family Means

Related Read: Benefits Of Setting Up A Business Entity At GIFT City

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Legal form of FIF

Important Considerations:

  • FIF shall seek registration as an ‘Authorised FME’.
  • FIF should maintain a minimum corpus of USD 10 million within 3 years from the date of obtaining certificate of registration.
  • FIF can undertake all activities related to managing FIF as specified by Authority.
  • FIF can borrow funds or engage in leveraging activities as per their risk management policy.
  • FIF could be open ended or close ended depending upon the requirement of family
  • Resident Individuals may invest in FIF upto USD 2,50,000 per year and Resident Entity may invest upto 50% of their net worth.
  • FIF set up in IFSC will be considered as an Indian resident for tax purposes and an overseas resident/ offshore unit from an exchange control perspective.

Related Read: Benefits of a Private Family Trust in India

CLICK HERE

Permissible Investment by FIF

Legal form of FIF

Tax Benefits

  • FIF would be entitled to 100% income tax exemption for ten consecutive years out of fifteen years.
  • FIF would be entitled to GST exemptions on services received by unit in IFSC or provided to IFSC / SEZ units, Offshore clients.
  • FIF may be subject to MAT/AMT, as applicable, and the amount thus paid should be available as credit in subsequent years. Also, TCS at 20% would be applicable from October 1, 2023, using LRS (subject to regulation) for investing in FIF.

Related Read: GIFT City: An Overview and Tax Benefits

CLICK HERE

Brief Roadmap

  • Application for name reservation for a setup (Company/LLP) of proposed unit under Gift City-IFSC
  • Identification of suitable office space at GIFT City
  • Application for incorporation of Company/Limited Liability Partnership entity with MCA
  • Application to the SEZ Authority
  • Application to the IFSCA Authority
  • ODI/LRS Compliance for transferring funds to GIFT City in case of resident individuals

Why Choose InCorp?

Incorp will assist you in the following services:

  • Assistance in structuring the FIF as per the requirement
  • Providing advisory services on regulation & taxation to ensure compliance and optimal structuring
  • Assistance in preparing necessary documentation required for incorporation of FIF in GIFT City
  • Assistance in setting up FIF and post setup requirements and compliance if any required by FIF

FAQs

Need help with navigating the rules and regulations in Gift City?

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GIFT City IFSC vs Singapore: Why GIFT City Is The Better Destination For Stockbrokers

by InCorp Advisory

Reading Time: 3 minutes

In recent years, Singapore and GIFT City IFSC have emerged as two of the most prominent financial hubs in Asia. Both locations offer world-class infrastructure, skilled talent pools, and access to global markets, making them attractive destinations for stockbrokers looking to expand their regional operations. However, there are significant differences between the two locations that stockbrokers must consider when deciding where to set up their business.

In this blog, we will compare the advantages and disadvantages of setting up a brokerage firm in Singapore versus GIFT City IFSC.

Market Access

One of the most critical factors that stockbrokers must consider when selecting a location is market access. Singapore and GIFT City IFSC have different markets with different regulatory frameworks and market structures. Singapore has a well-established financial market with a sophisticated regulatory framework and access to global markets. Stockbrokers in Singapore can trade in equities, fixed income, derivatives, and other financial products, making it a well-diversified market. However, Singapore’s financial market is relatively small compared to other global financial centers, such as New York and London.

In contrast, GIFT City IFSC offers access to India’s financial market, one of the fastest-growing economies globally. India has a large and rapidly growing middle class, driving demand for financial products such as insurance, mutual funds, and equities. Stockbrokers in GIFT City IFSC can access the Indian market through the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Moreover, India has a vast unbanked population, which provides opportunities for innovative financial products and services. Therefore, stockbrokers looking to tap into the growth potential of the Indian market may prefer GIFT City IFSC over Singapore.

Related Read: Budget 2023: Major Boost & Benefits For GIFT City IFSC

CLICK HERE

Regulatory Framework

Another crucial factor that stockbrokers must consider when selecting a location is the regulatory framework. Singapore is known for its strict regulatory environment, which offers a high level of investor protection. The Monetary Authority of Singapore (MAS) regulates all financial institutions in Singapore and ensures that they comply with strict standards for risk management, customer protection, and market integrity. The MAS has also implemented regulations to combat money laundering and terrorist financing, which reduces the risk of fraud in the financial system.

In contrast, GIFT City IFSC has a less stringent regulatory environment than Singapore. The International Financial Services Centre Authority (IFSCA) regulates financial institutions in GIFT City IFSC and has implemented a more flexible regulatory framework to attract foreign investors. The IFSCA has also implemented tax incentives, such as tax exemptions on income from international transactions, which reduces the tax burden on stockbrokers.

Tax Incentives

One of the most significant advantages of GIFT City IFSC over Singapore is the tax incentives. The Indian government has implemented several tax incentives to attract foreign investors to GIFT City IFSC. For example, companies operating in GIFT City IFSC are exempt from taxes on income generated from international transactions. Moreover, the Indian government has also implemented a low tax rate of 9% for companies operating in GIFT City IFSC, which is significantly lower than the tax rates in Singapore.

In contrast, Singapore has a higher tax rate than GIFT City IFSC. The corporate tax rate in Singapore is 17%, which is higher than the tax rate in GIFT City IFSC. Moreover, Singapore has implemented a Goods and Services Tax (GST), which imposes a tax of 8% on goods and services sold in Singapore.

Related Read: A Complete Overview Of IFSC Gift City And Tax Benefits

CLICK HERE

Conclusion

Singapore and GIFT City IFSC are attractive destinations for stockbrokers looking to expand their operations in Asia. Singapore offers access to a well-established financial market with a sophisticated regulatory environment and access to global markets. On the other hand, GIFT City IFSC provides access to the fast-growing Indian market, which offers vast opportunities for growth and innovative financial products.

Additionally, GIFT City IFSC offers more relaxed regulations and tax incentives, making it a more cost-effective option for stockbrokers. Ultimately, the decision between Singapore and GIFT City IFSC will depend on each stockbroker’s unique business needs, risk tolerance, and growth strategy.

Related Read: Benefits For Stock Brokers Registered In IFSC GIFT City

CLICK HERE

Why Choose InCorp?

InCorp can offer comprehensive guidance to existing and new setups like stockbrokers looking to establish a business in the IFSC jurisdiction.

Our expert team provides valuable insights on regulatory compliance, tax planning, and business strategy to ensure that you can navigate the complexities of setting up your business efficiently and effectively. With our assistance, you can be confident in your ability to establish a successful business plan from the IFSC jurisdiction.

FAQs

Need help with navigating the rules and regulations in Gift city?

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Gift City: The New Hub For Indian Aircraft Leasing And Financing

by InCorp Advisory

Reading Time: 4 minutes

India is one of the fastest-growing aviation markets in the world, with the potential to become the third-largest aviation market by 2025. However, the country’s aviation industry has been facing challenges in terms of financing and leasing, hindering its growth. In response to this, the Ministry of Civil Aviation, Government of India constituted a Working Group on Development of Avenues for Aircraft Financing and Leasing Activities, known as ‘Project Rupee Raftar.’

The project aims to develop a robust and indigenous leasing and financing structure in the country, with the involvement of various stakeholders, regulatory bodies, and financial institutions. Through the efforts of Project Rupee Raftar, the International Financial Services Centre Authority Act (IFSCA) notified aircraft leasing as a financial product, creating a significant opportunity for the establishment of a viable aircraft leasing market in India. The scope of aircraft leasing includes operating lease, finance lease, and a hybrid of both. Finance lease is considered a permitted core activity, while operating lease is regarded as a permitted non-core activity.

In this blog, we will explore how the IFSCA’s move to include aircraft leasing as a financial product has opened up new avenues for financing and leasing activities, unlocking the unbridled potential of the Indian aviation market. The blog comprises of the eligibility criteria, process for registering in GIFT IFSC, tax benefits for lessors and certain general conditions to follow:

Eligibility for Aircraft Leasing in GIFT City

Lessor can undertake permissible activities depending upon nature of lease:
Eligibility for Aircraft Leasing in GIFT City

Related Read: Budget 2023: Major Boost & Benefits For GIFT City IFSC

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Eligibility of Applicant to act as lessor for Aircraft leasing in IFSC are as follows:
Eligibility of Applicant to act as lessor for Aircraft leasing in IFSC GIFT CityPromoters/partmers/Trustees shall be in Financial Action Task Force compliant jurisdiction

Minimum capital requirement of USD 30,00,000 for financial lease and USD 2,00,000 for operating lease.
Application fees of USD 1,000 (one time) and registration fees of USD 12,500 (one time) for finance lease, and application fees of USD 1000 (one time) and registration fees of USD 5000 (one time) for operating lease. Annual fees are USD 12,500 (2nd year onwards) for finance lease and USD 3,000 (2nd year onwards) for operating lease.

Related Read: A Complete Overview Of IFSC Gift City And Tax Benefits

CLICK HERE

Process flow for registration of Aircraft Leasing in GIFT City

Process flow for registration of Aircraft Leasing in GIFT City

Benefits for Aircraft lessor registered in GIFT City- IFSC

Particulars  Benefits 
Income Tax Act  
  • 100% tax exemption for 10 consecutive years out of 15 years 
  • Capital gain tax deduction from transfer of an aircraft or aircraft engine previously leased by it to any person then the previously mentioned tax holiday period is also applicable to it, provided it has commenced its operations by March 31, 2024, under section 80 LA of Income Tax Act,1961. 
  • MAT / AMT @ 9% of book profits applies to Company / others setup as a unit in IFSC (MAT not applicable to companies in IFSC opting for new tax regime). 
  • Dividend paid to shareholders of company in IFSC (Taxable in the hands of recipient, Exemption not relevant due to withdrawal of DDT regime). 
  • No withholding of taxes is required on interest paid to Non-residents by units in IFSC. 
  • Withholding of taxes is not required on aircraft lease payment to non-residents by units in IFSC provided it has commenced its operations on or before March 31, 2024. 
Goods and Service Tax 
  • No GST on services – 
    • received by unit in IFSC 
    • provided by IFSC / SEZ units to offshore clients 
  • GST applicable on services provided to DTA 
Customs Duty 
  • Exemption from customs duty for all goods imported in the SEZ used for authorized operations. However, any removal of goods from SEZ into Domestic Tariff Area (“DTA”) would attract customs duty. 
Central Excise 

Duty 
  • Exemption from duty of excise on domestic procurement to carry out authorized operations. However, the removal of goods into DTA shall be liable to excise duty. 
Other Benefits 
  • 100% reimbursement of stamp duty and registration paid 
  • 100 % reimbursement of electricity duty and Re. 1 subsidy on power tariff for a period of 5 years. 
  • 100% of EPF amount paid in case of female employees and 75% of EPF amount paid in case of male employees 
  • Lease rental subsidy for every 50 sq. ft per employee 
  • Up-to 20 employees – Rs 8 per sq. ft 
  • 20-100 employees – Rs 5 per sq. ft 
  • 21 Above 100 employees – Rs 3 per sq. ft 

Related Read: How To Incorporate AIF In GIFT City-IFSC?

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Benefits given by Gujarat Government for setting unit in GIFT City IFSC in Gujarat IT/ITeS policy (2022-27) :

Benefits given by Gujarat Government for setting unit in GIFT City IFSC in Gujarat IT/ITeS policy

General Conditions:

  • Lessor should undertake all transactions in freely convertible foreign currency only. Administrative expenses may be undertaken by the lessor in INR by maintaining a separate INR account. 
  • Books of Accounts, records, document to maintained as required by applicable law in any freely convertible currency. 
  • Lessor shall submit annual final statement within 15 days of finalization all financial information in USD unless otherwise specified. 
  • Lessor shall comply with Cape Town Convention and Protocol and other required statutory requirement, obligation, standards, policies direction and guidelines. 
  • In case the lessor fails to comply with the condition subject to which registration is granted, IFSCA may act after giving an opportunity of submission.

Conclusion

In conclusion, the Indian government’s initiative to develop a robust and indigenous leasing and financing structure, and the IFSCA’s decision to notify aircraft leasing as a financial product, has created a viable aircraft leasing market in India. The registration of aircraft lessors in GIFT City-IFSC offers various benefits, including tax exemptions, GST and customs duty exemptions, and other subsidies, which make it an attractive destination for aircraft leasing companies.

Related Read: Benefits For Stock Brokers Registered In IFSC GIFT City

CLICK HERE

Why Choose InCorp?

At Incorp, we understand the importance of a robust and indigenous leasing and financing structure for the aviation industry. We recognize that setting up an aircraft leasing company can be a complex process, requiring expertise in various fields, including finance, law, and regulation. That’s why we offer specialized advisory services to assist companies in setting up aircraft leasing companies and availing the benefits of the recently created aircraft leasing market in India. Our team of experts can guide companies through the entire process, from initial planning and formation to ongoing compliance and management. With our help, companies can take advantage of the significant benefits offered by the new market, including access to affordable capital and increased flexibility in fleet management. Contact us today to learn more about how we can help your company succeed in the aircraft leasing industry in GIFT City.

FAQs

Need help with navigating the rules and regulations in Gift city?

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Budget 2023-24: Major Boost And Benefits For GIFT City IFSC

by InCorp Advisory

Reading Time: 5 minutes
Union Budget 2023-24, presented by the Honourable Finance Minister, Ms Nirmala Sitharaman, hopes to build on the foundation laid in the previous Budgets. GIFT City – IFSC (Gujarat International Finance Tec-City – International Financial Services Centre) continues to be a focus area for the Government with key policy announcements being made in this Budget 2023-24 as well.

Introduction

Union Budget 2023-24 aims to provide the necessary support and infrastructure to help GIFT City – IFSC attract more international financial services and companies, thereby contributing to the country’s economic growth and development. Budget 2023-24 amendments and policies emphasise the government’s commitment to creating a favourable business environment for companies operating in the IFSC, with a focus on simplicity, transparency, and stability.

Announcements will play a critical role in furthering the government’s goal of making India a hub for international finance and a global financial market leader. We have covered the announcements in the following 3 parts:

Policy Announcements For GIFT City IFSC

1. Acquisition financing proposed to be permitted by banking units of foreign banks in IFSC

Background

  • Acquisition financing is a type of financing used by businesses to purchase other businesses or assets
  • As per present regulations, foreign banks having its unit/ operations in IFSCs are permitted to finance the acquisition of assets/businesses outside India by Indian Corporates
  • Currently, overseas branches of Foreign Bank were funding such acquisitions and not those units are in IFSC

Proposal

  • IFSC regulations to be amended to allow foreign banks through their IFSC banking units for finance merger & acquisition

Impact

  • This is an appropriate measure to facilitate Corporates for achieving a reduction in the cost of financing outbound mergers & acquisitions

2. Setting up data embassies in IFSC (Countries looking for digital continuity solutions)

Background

  • A ‘data embassy’ is a concept for ensuring digital continuity for a country, where a nation’s critical data and digital infrastructure are stored in a secure location outside of its physical borders
  • ‘Digital continuity solutions’ means solutions for ensuring the continuous and secure operation of digital systems, even in the event of a disaster or other disruption
  • Any country would prefer to establish these data embassies in areas with a supportive legal and regulatory climate, as well as robust physical security measures

Proposal

  • IFSC regulations to be amended to allow foreign banks through their IFSC banking units for finance merger & acquisition

Impact

  • IFSC regulations to be amended to allow the setting up of Data Embassies
  • Participating countries will be able to take advantage of IFSC in form of favourable legal & tax regulations, lower operating costs, and supportive infrastructure facilities resulting in cost-effectiveness

3. Proposed to set up a subsidiary of EXIM bank for trade refinancing in IFSC

Background

  • Export-Import (EXIM) bank’s subsidiary may provide trade financing solutions, such as working capital loans, export credit insurance, and supply chain financing, to businesses operating in the IFSC and beyond
  • The subsidiary would aim to support businesses in accessing the financing they need to grow their international trade activities and to promote economic growth and competitiveness

Proposal

  • A subsidiary of the EXIM Bank of a country is proposed to be set up in IFSC for trade refinancing, would offer trade financing services to support international trade and commerce

Impact

  • By setting up in the IFSC, the subsidiary of the EXIM Bank can take advantage of the favourable legal and regulatory environment, as well as enjoy secured and efficient trade financing solutions
  • It will encourage participation in emerging sectors such as Aircraft leasing, ship leasing etc

Rationalization Of Policies For GIFT City IFSC

1. IFSCA is set to be empowered with the powers of a Special Economic Zone (SEZ) authority to avoid dual regulation

Background

  • According to the current GIFT city regulations, the applicant must submit the Gift City-IFSC registration application to both the IFSC and the SEZ authority
  • Applicant is required to represent its business activity and project viability report to both the authority parallelly
  • The process would take a relatively long time due to duplication of work and resources as both regulators were involved

Proposal

  • IFSCA has empowered SEZ authority to enhance its scope as a single-point regulator

Impact

  • Single point regulator will be streamlining the registration process and avoid duplication of time, efforts & resources
  • The amendment also includes assigning powers to IFSC about a specific power of SEZ such as arbitration, ancillary services etc

2. Single window registration and approval system for IFSCA, SEZ authorities, IRDAI, GSTN, RBI, and SEBI

Background

  • A ‘data embassy’ is a concept for ensuring digital continuity for a country, where a nation’s critical data and digital infrastructure are stored in a secure location outside of its physical borders
  • ‘Digital continuity solutions’ means solutions for ensuring the continuous and secure operation of digital systems, even in the event of a disaster or other disruption
  • Any country would prefer to establish these data embassies in areas with a supportive legal and regulatory climate, as well as robust physical security measures

Proposal

  • Setting up an ecosystem wherein single window registration and approval system for all approvals under IFSCA, SEZ authorities, IRDAI, GSTN, RBI, and SEBI

Impact

  • This system will streamline and reduce the time involved in the process of obtaining approvals and registrations by bringing together multiple regulatory agencies

3. Offshore derivative instrument (ODI) proposed to be considered as a valid contract

Background

  • Currently, International Banking Unit (IBU) and other entities were unable to issue the ODI as they were not recognised under the law due to which branches of foreign banks were unable to issue ODI from IFSC and were therefore unable to move their trading desks to IFSC.
  • These instruments are covered under Securities Contract (Regulation) Act (SCRA)

Proposal

  • It is proposed that an Offshore derivative instrument would be considered a valid contract to clarify the position of ODI in IFSC banking units

Impact

  • Overall, clarifying offshore derivative instruments as valid contracts would avoid ambiguity
  • Amendments in IFSC regulations have pave way for participatory notes instruments

Related Read: How To Incorporate AIF In GIFT City- IFSC?

CLICK HERE

Tax Announcements For GIFT City IFSC

1. Extension of tax benefit period for relocation of AIFs to new find location in GIFT City – IFSC to 31st March 2025

Background

  • AIFs, which are financial vehicles that pool funds from multiple investors to invest in alternative assets such as private equity, real estate, hedge funds etc
  • IFSC has already notified the framework for setting up and its permitted activities for Alternative Investment Funds (AIF)

Proposal

  • The extension of the tax benefit period for relocation of AIFs to a new location in the GIFT City- IFSC which has now been extended until 31st March 2025 (earlier 31st March 2023)

Impact

  • AIFs can enjoy an extended period to continue receiving all tax benefits while they are in the process of relocating within IFSC

2. Any income of non-resident Offshore Derivative Instruments (ODI) holder distributed by an offshore banking unit located in IFSC shall be exempt

Background

  • Currently, as per existing regulations, there was no clarity on ODI transaction was a valid contract or not
  • Taxation on ODI held in IFSC was unclear

Proposal

  • Income of non-resident ODI holders distributed by offshore banking units located in IFSC shall be exempt if the income is chargeable to tax in the hands of the IFSC Banking Unit

Impact

  • Since, ODI is treated as a valid contract, in line with the Budget 2023-24 amendment, there was a consequential amendment required regarding clarity on the taxation of ODI

Related Read: A Complete Overview of IFSC Gift City and Tax Benefits in Gift City

CLICK HERE

Conclusion

GIFT City – IFSC is quickly becoming a preferred jurisdiction for international financial services. Recognizing the growing importance of IFSC, the Global Financial Centres Index, London Report (March 2022) ranked GIFT City’s IFSC first among 15 global centres. Government has set its sights on transforming GIFT City into a thriving financial hub with an international character and innovative solutions for financial issues. Ongoing changes, amendments, clarifications, and regulations are expected to be introduced in pursuit of this long-term objective. 

Why Choose InCorp?

At Incorp, we have the expertise and skills to guide you through the entire nuance of processes and Gift city. We are here to ensure peace of mind, from setting up your company in Gift City to staying compliant and efficiently managing your taxes on time.

Need help with navigating the rules and regulations in Gift city?

Talk to our expert today!
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