Chennai, India

Financial Service Sector in India – Changing Landscape 2022

By Chirag V and Aditya Sriram R, VCAJ & Associates LLP

In 2015, the Government of India announced establishment of Gujarat International Financial Tec-city (“GIFT City”), in Gujarat as India’s First International Financial Services Centre(“IFSC”). The IFSC in GIFT City seeks to bring to the Indian shores, those financial services transactions currently undertaken outside India by overseas financial institutions.

Features of the GIFT City

  • gift cityGlobal Benchmarking – Alternative to Globally established financial centre.
  • World-class infrastructure – Nextgeneration urban planning, ICT infra with plug & play offces.
  • State subsidies – Stamp duty exemption, infrastructure subsidy, employment generation subsidy, Capital subsidy, etc.
  • Ease of doing business – Unified regulator to develop & regulate international financial services which are usually vested in different regulators.
  • Tax incentives.

Commercial Advantages

  • Tax favourable regime – Reduced corporate income tax. (Hongkong – 16.5% & Singapore – 17%).
  • Stable Political Regime.
  • Low Operating Cost compared to other prominent jurisdictions.
  • No Forex exposure.
  • Well defined tax & regulatory regime.

Tax Features & Benefits

  • Tax holiday on business income for the first 5 financial years & 50% exemption for the subsequent five financial years.
  • Minimum alternate tax at just 9%.
  • Capital gains tax exemption for Non-residents on sale of eligible securities in IFSC.
  • No tax on dividends distributed to shareholders.
  • No withholding taxes on Interest payable to non-residents.
  • Exemption from Securities/ commodities transaction tax.
  • Exemption to file return of Income in India by the non-resident investors for income earned through IFSC.
  • Tax exemption on Income earned by Aircraft leasing and ship leasing.
  • Tax exemptions for relocation to IFSC.
  • Exemptions from Goods & Service Tax, Customs etc.
  • Exemption from Stamp duty.

Our comments

Hong Kong is the world’s largest equity-raising hub, the third-largest dollar trading centre and a primary gateway to the second-largest economy. Today, Hong Kong is trapped in an escalating conflict that threatens its position as Asia’s premier international business centre.

To promote and develop the IFSC, the Government has been proactive in granting specific tax exemptions to the Investment funds investing in IFSC. Further, Government has also been actively addressing the grievances and public comments from the concerned businesses.

The time is now ripe for all the financial institutions to set up a base and enhance the capital flows through GIFT city. IFSC ticks all boxes for offshoring of the Globally established financial institutions’ onshore business activities such as International Stock Exchanges, International Banking units, international stockbroking & intermediaries, international insurers & intermediaries, Asset Management Companies and Aircraft & ship leasing companies.


Chirag V

Chirag V

GGI member firm
VCAJ & Associates LLP
Advisory, Auditing & Accounting, Corporate Finance, Fiduciary & Estate Planning, Tax
Chennai, India
T: +91 44 2828 2930
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VCAJ & Associates is a Limited Liability Partnership, founded by young and energetic group of professionals. The Firm has dedicated partners specializing in Assurance, Tax & Regulatory Advisory and Litigation services.

Chirag is partner in VCAJ & Associates LLP, Chartered Accountants. He advises many Indian as well as Multinational Companies in the areas of Corporate Tax, Expatriate Tax, Inbound Structuring, Outbound structuring & FEMA. He has also represented before various Tax / appellate authorities in India in respect of revenue audit proceedings. Specifically, Chirag is an expert in handling high end and complicated tax remediation and regularization projects.
Aditya Sriram R

Aditya Sriram R

GGI member firm
VCAJ & Associates LLP
Advisory, Auditing & Accounting, Corporate Finance, Fiduciary & Estate Planning, Tax
Chennai, India
T: +91 44 2828 2930
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: vcaj.in

Aditya is young, energetic & focused on advising and assisting clients in the areas of International Tax, Corporate Tax, Employee share-based Incentive schemes, Transaction & Group Structuring, and Tax Litigations.
 


Published: International Taxation Newsletter, No. 16, Spring 2022 l Photo: Xandra - stock.adobe.com

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