The tax holiday for IFSC units
| Before 2026 | From tax year 2026-27 | |
|---|---|---|
| Deduction | 100% of eligible business income | 100% of eligible business income |
| Period | Any 10 consecutive years out of 15 | Any 20 consecutive years out of 25 |
| After the holiday | Normal rates | Concessional 15% on business income |
The deduction was section 80LA of the old Act; India’s Income-tax Act, 2025 took effect on 1 April 2026 and carries it forward with the new, longer period. You choose when the 20-year window starts, which matters for businesses that expect losses in the early years.
Exemptions for non-residents
- Units of specified IFSC funds — income of non-resident unit-holders from eligible funds.
- Securities on IFSC exchanges — capital gains of non-residents on specified securities traded on IFSC exchanges, with no securities transaction tax, commodities transaction tax or stamp duty on those trades.
- Offshore derivatives — income from specified derivative contracts with IFSC banking units, extended by Budget 2025 to IFSC-based FPIs.
- Leasing — specified lease rentals and interest paid by IFSC aircraft and ship lessors to non-residents.
Funds and relocation
- Fund managers: the safe-harbour rules that stop an offshore fund being taxed in India merely because its manager is in India have been adapted for IFSC managers.
- Relocation: eligible offshore funds can move to GIFT City tax-neutrally — transfers of assets and investors’ swaps of units aren’t taxed — for relocations up to 31 March 2030. From 1 April 2026, retail schemes and ETFs can also be the resulting fund.
GST and other levies
- Services received by IFSC units — from abroad, within the IFSC or from the rest of India — are broadly outside GST, and supplies to units from the domestic tariff area are zero-rated.
- Trades on IFSC exchanges carry no STT, CTT or stamp duty.
Conditions and traps
- No splitting up: units that start on or after 1 April 2026 must not be formed by splitting up or reconstructing an existing Indian business.
- Substance: IFSCA expects real operations — key managerial persons based in the IFSC and decisions made there.
- Minimum tax: check how minimum alternate tax applies to your unit and whether the new corporate tax regime is better for you.
- Transfer pricing: transactions with group entities in India or abroad must be at arm’s length — see transfer pricing.
Setting up? See GIFT City setup or fund setup in GIFT City.
Frequently asked questions
How long is the GIFT City tax holiday?
After the Finance Act 2026, eligible IFSC units get a 100% deduction of business income for any 20 consecutive years out of 25, up from 10 out of 15, followed by a concessional 15% rate.
Do GIFT City units pay GST?
Services received by IFSC units are broadly outside GST, and supplies to IFSC units from the rest of India are zero-rated. Supplies made by IFSC units into the rest of India attract IGST.
Is there tax on moving an offshore fund to GIFT City?
Eligible relocations of offshore funds to GIFT City are tax-neutral for the fund and its investors if completed by 31 March 2030, subject to the conditions in the Income-tax Act.
Can an existing Indian business move to GIFT City for the tax holiday?
Units starting on or after 1 April 2026 must not be formed by splitting up or reconstructing an existing Indian business. A genuinely new IFSC operation can qualify.
Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.