Context
Non-resident Indians (NRIs) and foreign investors enjoy low tax rates on investments made in the International Financial Services Centre (IFSC) in the Gujarat International Finance Tec-City (GIFT) located at Gandhinagar, Gujarat.
A large number of Alternative Investment Funds (AIFs) have also sprung up in the GIFT city, catering to NRIs.
About
Investing in alternative investment funds (AIFs):
Investing in derivatives:
IFSC and resident Indians:
- Resident Indians have not been given any tax breaks for investing through the IFSC.
- They can remit money to the IFSC through the Liberalised Remittance Scheme (LRS) of the RBI. However, they can only invest in securities issued by entities outside India.
- Indian residents must also report these holdings in the foreign assets schedule of the income tax return.
- Derivative trading is not permitted under LRS.
What is International Financial Services Centre?
- An international financial services centre caters to customers outside the jurisdiction of the domestic economy, dealing with flows of finance, financial products and services across borders.
- Gujarat International Finance Tec-City Co. Ltd is being developed as the country’s first international financial services centre (IFSC)
What are the services an IFSC can provide?
- Fund-raising services for individuals, corporations and governments
- Asset management and global portfolio diversification is undertaken by pension funds, insurance companies and mutual funds
- Wealth management
- Global tax management and cross-border tax liability optimization, which provides a business opportunity for financial intermediaries, accountants and law firms.
- Global and regional corporate treasury management operations that involve fund-raising, liquidity investment and management and asset-liability matching
- Risk management operations such as insurance and reinsurance
- Merger and acquisition activities among trans-national corporations