Budget 2025: Government Extends GIFT City Tax Breaks In Bid To Lure New Investment

The Narendra Modi government announced a fresh set of measures to boost investments in the Gujarat International Finance Tec-City, or GIFT City, India’s experiment to liberalize its financial markets.

On Saturday, Finance Minister Nirmala Sitharaman extended some of GIFT City’s tax benefits to March 2030 that had previously been slated to expire between 2024 and 2026. The government will also permit mutual funds and exchange-traded funds to relocate to GIFT City without paying a capital gains tax, effective April 2026 onward, according to budget documents. 

K Rajaraman, chairman of International Financial Services Centres Authority, which regulates companies in the financial hub, said the new measures aid the government’s vision of recapturing offshore trading. He added that cutting taxes on securitization vehicles should spur more investment from foreign private credit funds.

GIFT City has been a years-long effort by Prime Minister Narendra Modi to entice capital into a market that’s historically been viewed by international investors as unwelcoming and overly complex. It’s essentially a city that is exempt from regulations that hold sway in other parts of the nation. However assets managed there have been growing slowly, and the measures announced Saturday represent an effort to expedite that growth. 

“The governments’ decision will gives global funds and Indian asset management companies a longer runway and more certainty for their relocation,” said Siddharth Shah, partner at Mumbai-based legal firm Khaitan & Co.

While bank assets have grown 34% to $70.9 billion in September 2024 from the previous year, funding commitments to alternative investment funds more than doubled to over $12 billion, according to data from the IFSCA.

The government also announced tax incentives for non-residents earning income through derivatives, life insurance units as well as aircraft and ship leasing companies operating out of GIFT City.