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Creating a favourable environment for Indian and global financial services players to operate from India, the Union Finance Minister Nirmala Sitharaman in her budget, opened flood gates of incentives for the country's first International Financial Services Centre (IFSC) at GIFT City near Gandhinagar.
In order to facilitate on-shoring of international insurance transactions and to enable opening of branches by foreign re-insurers in the IFSC, the first budget of the second term of the Modi Government proposes to reduce Net Owned Fund requirement from ₹5,000 crore to ₹1,000 crore.
In her speech in the Parliament on Friday, Sitharaman stated, “With a view to further incentivising the IFSC, I propose to further provide several direct tax incentives to an IFSC including 100 per cent profit-linked deduction under section 80-LA in any ten-year block within a fifteen-year period, exemption from dividend distribution tax from current and accumulated income to companies and mutual funds, exemptions on capital gain to Category-III AIF and interest payment on loan taken from non-residents.”
Tapan Ray, MD & Group CEO of GIFT City, informed that the announcement will boost the investor confidence both in India and abroad as it re-emphasizes the importance of GIFT-IFSC as an emerging Global financial services hub.
“Key measures related to aircraft leasing business, reinsurance business & tax benefits, will enable significant offshore finance activities to take place from India and create jobs in the financial services industry. It will bring back billions of dollars of business which India has been losing to other competing global financial hubs,” said Ray adding that the setting up of Unified Regulator will further put GIFT-IFSC in a fast track mode.
In order to promote the development of world class financial infrastructure in India, some tax concessions have already been provided in respect of businesses carried on from an IFSC. The trading volumes at IFSC have registered a significant growth over the last few months with the daily trade crossing over USD 3 billion.
India ICC gets Bank of England recognition
In a seperate development, the first clearing corporation in GIFT City-IFSC, India International Clearing Corporation (IFSC) Limited, also known as India ICC has been granted recognition by Bank of England as a third-country CCP.
This will allow it to offer clearing services and activities in the United Kingdom (UK) under the Temporary Recognition Regime (TRR) of the Central Counterparties (Amendments, etc, and Transitional Provision) (EU Exit) Regulations 2018, if the UK leaves the European Union with no implementation period.
India ICC is a subsidiary of BSE Limited (BSE) and the TRR will enable it to provide clearing services and activities to the UK based entities for up to three years from the commencement of the TRR, extendable by HM Treasury in increments of twelve months, an official statement said.
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