The Union Budget presented by Finance Minister Arun Jaitley on Monday announced a string of tax sops for India’s first International Financial Services Centre (IFSC) being built at GIFT City at Gandhinagar.
Tax benefits announced by the minister “to facilitate setting up of the IFSC in India” include complete exemption from dividend distribution tax, securities transaction tax, long term capital gain tax and commodity transaction tax.
“The companies located in IFSC shall not be liable to dividend distribution tax. Minimum Alternate Tax shall be charged at the rate of nine percent from units located in IFSC,” states the minister in the annexure to part-B of the budget speech.
This reduction in MAT that currently stands at 18.5 percent provides a competitive tax regime to IFSC at GIFT City.
The transaction in foreign currently of solar of equity share or units of equity oriented funds or units of a business trust taking place on a recognised stock exchange established in IFSC shall not be liable to securities transaction tax. The budget also proposes that the gains arising from transfer of such long term capital asset shall be exempt from tax.
Similarly, the transaction in foreign currency of sale of commodity derivatives taking place on a recognised association established in IFSC shall not be liable to commodity transaction tax.
These tax sops are in addition to those announced by the Gujarat government on February 23, where the state finance minister Saurabh Patel announced a Stamp Duty exemption for share-broking transactions of share brokers who establish their registered share broking office in GIFT City and also operate and trade from the same place.
Reacting to these tax sops provided in the Union budget, Ajay Pandey MD & Group CEO of GIFT City said, “We welcome the Union Budget’s important regulations for development of IFSC in India. These incentives could not have come at a more opportune time than this as India stands out as the only bright spot in the world with a GDP growth rate of over seven percent even as the rest of the world is facing varying levels of slowdown.”
“The recent announcement of IT/ITeS policy and waiver of stamp duty on share broking transactions in GIFT City by the Government of Gujarat, along with today’s announcement for IFSC in the Union Budget will further boost the development of India’s first IFSC at GIFT City,” he added