The Union Budget 2026 has delivered a decisive policy impetus to India’s International Financial Services Centre (IFSC) at GIFT City, Gandhinagar. By proposing a significant extension of tax incentives and introducing greater long-term tax clarity, the Government has reinforced its strategic intent to position GIFT City as a globally competitive offshore financial hub operating within India’s jurisdiction.
The measures aim to attract global financial institutions, treasury centres and offshore businesses seeking regulatory certainty, operational efficiency and proximity to the Indian market.
Extension of Tax Holiday and Post-Deduction Certainty
To increase the competitiveness of IFSC, it is proposed to increase the period of deduction under section 147 to 20 consecutive years out of 25 years for units in IFSC and 20 consecutive years for OBUs. It is also proposed that the business income of these units from IFSC after the expiry of period of deduction will be taxed at rate of 15%.
This policy shift moves beyond short-term incentives and provides long-term predictability for businesses planning multi-decade operations. The extended tax holiday, combined with clarity on post-deduction taxation, enhances confidence for global entities making long-term capital allocation and location decisions.
Strengthening India’s Offshore Financial Competitiveness
The enhanced IFSC framework is designed to attract offshore financial activity that has traditionally been routed through international financial centres such as Mauritius, Singapore and Dubai. GIFT City offers a unique value proposition—access to global markets and Indian opportunities while operating under a specialised regulatory and tax regime.
Over the past decade, GIFT City has evolved into a robust financial ecosystem with strong policy backing from both the Central and State Governments. Today, it hosts over 1,000 entities, has generated more than 20,000 jobs, and accounts for banking assets exceeding USD 100 billion.
Policy Stability and Investor Confidence
The Budget measures provide long-term tax certainty, which is a critical factor for global financial institutions, banks, fund managers, exchanges and insurance players. The extension of the tax deduction window and the introduction of a predictable tax rate thereafter reduce policy risk and support stable business planning.
Such predictability strengthens investor confidence and positions GIFT City as a credible alternative to established offshore financial centres, particularly at a time when global tax and regulatory norms are becoming increasingly stringent.
Facilitation of Treasury and Funding Operations
It is proposed to rationalize the provisions of deemed dividend applicable to treasury centre in IFSC by providing that provisions of deemed dividend shall not be applicable if
(i) the parent entity or the principal of the group shall be listed in a country or territory outside India; and
(ii) such parent or principal entity and other group entity to the transaction is located in a country or territory outside India as may specified by the Central Government, by notification in the Official Gazette.
By easing these provisions, the policy enables multinational groups to centralise treasury, liquidity management and funding operations in GIFT City more efficiently. This is expected to attract large-scale treasury centres and enhance India’s role in global capital and liquidity management.
Advance or loans between two group entities should not be dividend if one entity is the Finance Company in IFSC and the other group entity to the transaction shall also be located in a country or territory outside India which shall be a notified jurisdiction, Also, the parent entity or the principal entity of such group is listed on stock exchange in a country or territory outside India; and for such purposes the country or territory outside India shall be specified by the Central Government, by notification in the Official Gazette.
Gateway for Global Capital and Financial Services
The Government continues to project GIFT City as a gateway for global capital flows into India, with a focus on sectors such as aircraft leasing, reinsurance, global banking, fund management and capital markets infrastructure.
The Budget 2026 measures are expected to accelerate the onshoring of offshore financial activities, reduce reliance on overseas IFSCs and retain economic value within India, while maintaining global standards of regulation and supervision.
Conclusion
The Union Budget 2026 marks a structural step forward in India’s offshore financial strategy. By extending tax incentives, providing post-deduction tax clarity and rationalising treasury-related provisions, the Government has strengthened the long-term foundations of GIFT City IFSC.
With enhanced certainty, scale and policy support, GIFT City is well positioned to emerge as a globally competitive financial hub, supporting India’s broader objective of integrating more deeply with international financial markets while retaining value within the country.
Disclaimer: This article provides general information existing at the time of preparation and we take no responsibility to update it with the subsequent changes in the law. The article is intended as a news update and Affluence Advisory neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this article. It is recommended that professional advice be taken based on specific facts and circumstances. This article does not substitute the need to refer to the original pronouncement.
