Why GIFT City Is Emerging as India’s Maritime Leasing Hub
| Authored by R & D Law Chambers LLP | Practice led by Ravish Bhatt, Dual-qualified lawyer (India and England & Wales) | Bar Council of Gujarat, Enrolment G/504/2008 | SRA (non-practising) Registration No. 492 477 | ADIT, Chartered Institute of Taxation, LondonPublished: 3 August 2026 | Last reviewed: 3 August 2026 | Estimated reading time: 18 minutes |
| This article states the position as at 3 August 2026. Ship leasing in GIFT City is mid-reform: the Merchant Shipping Act 1958 was replaced by the Merchant Shipping Act 2025 (in force 15 March 2026); the IFSCA (Finance Company) Regulations 2021 were amended in May 2026 to add the SPV and TCSP route; and the Framework for Ship Leasing of 16 August 2022 has itself been amended several times. Where a cross-reference in the Framework now points to a repealed statute, the text says so. |
The Short Answer
| Ship leasing in GIFT City rests on a five-link legal chain. The IFSCA Act 2019 defines what a financial product is. The Central Government’s notification S.O. 5199(E) of 14 December 2021 enables product-by-product specification. IFSCA’s notification of 7 January 2022 specifies ship lease as a financial product. The IFSCA (Finance Company) Regulations 2021 supply the entity that carries it on. The Framework for Ship Leasing of 16 August 2022 supplies the operational rules. Remove any one link and the Framework loses its legal basis. |
Executive Summary
For decades, global ship leasing has been concentrated in Singapore, Hong Kong, Dubai, London and Dublin. India, despite being one of the world’s largest maritime economies, relied on overseas jurisdictions for much of its ship financing and leasing.
That is changing. Through GIFT City and the regulatory framework built by the International Financial Services Centres Authority, India now has a dedicated ecosystem for maritime finance and ship leasing. Ship-leasing activity at GIFT City quadrupled year on year to March 2025, with 17 vessels leased, according to IFSCA figures.
A practitioner opening the Framework for Ship Leasing sees its first page cite the IFSCA Act sections 12 and 13, a Central Government notification, a separate IFSCA notification, and the Finance Company Regulations, four or five instruments before a single operative rule appears. That is not drafting clutter. It is a chain of legal authority, and each link is a precondition for the next. This guide walks the chain from the root, then the operative provisions, eligibility, capital, the tax overlay and the reforms now reshaping the field.
Why Is Ship Leasing Important?
Modern shipping is highly capital intensive. An ocean-going vessel often requires investment in the tens of millions of dollars. Rather than buying outright, many businesses lease, which preserves capital and provides operational flexibility.
Common users include shipping companies, logistics operators, offshore service providers, port operators, energy companies and marine infrastructure businesses. Leasing gives them access to vessels without committing the full purchase price.
Why GIFT City?
GIFT City was established to develop India into a global financial services destination, and one objective is to bring international maritime financing closer to India’s shipping ecosystem. The IFSC offers a dedicated financial regulator, internationally oriented regulations, foreign currency operations, modern financial infrastructure and access to international investors.
There is a more candid framing worth stating, because it determines whether GIFT City is right for a given transaction. GIFT City’s sharpest and least replicable advantages tend to involve at least one Indian leg: inbound withholding relief, FEMA simplification and proximity to Indian counterparties. For a pure foreign-to-foreign ship lease with no India nexus, GIFT City achieves parity with Singapore, Dublin or the DIFC at best, not superiority. Its distinctive edge is as a bridge between international capital and the Indian economy. Two genuinely international-facing advantages survive that framing, and both are discussed under the tax overlay below.
Understanding the IFSCA Ship Leasing Framework: The Five-Link Chain
The logic of the Framework’s preamble is sequential. Parliament defined the universe of financial products and gave IFSCA its powers. The Central Government opened the door for new products to be added. IFSCA walked ship leasing through that door. The Finance Company Regulations created the vehicle. Only then did the Framework set out how the activity is conducted. Read in that order, the preamble stops being confusing and becomes a map.
Link 1. The IFSCA Act 2019
The International Financial Services Centres Authority Act 2019 created a single unified regulator for India’s IFSC. Two features matter for ship leasing. The definition of financial product in section 3(1)(d) is closed except for sub-clause (vi), which is an open-ended delegation to the Central Government to notify additional products; IFSCA cannot regulate an activity until it has become a financial product in this statutory sense. And section 13(1) provides that, notwithstanding anything in any other law, the powers of the appropriate regulators listed in the First Schedule are, within the IFSC, exercised by IFSCA. That is why the Framework cites sections 12 and 13 together: section 12 for the power to regulate a financial product, and section 13 because leasing and lending historically sat within the Reserve Bank’s domain for non-banking finance.
Link 2. S.O. 5199(E) and the delegated-specification model
The earlier aircraft-leasing route used a product-specific notification, S.O. 3652(E) of 16 October 2020, which named aircraft, helicopters and engines expressly. S.O. 5199(E), issued by the Ministry of Finance on 14 December 2021, abandoned that approach in favour of a general enabling power, so that each new asset class would not require a fresh Gazette notification. It notifies operating lease, including any hybrid of operating and financial lease, of such product or equipment as may be specified by IFSCA. It does not name ships. The same notification is therefore cited across the aircraft, ship and, more recently, oilfield-equipment leasing regimes. One enabling notification, many products.
Link 3. The 7 January 2022 notification
By notification IFSCA/2021-22/GN/021 dated 7 January 2022, published in the Gazette of India (Extraordinary), IFSCA exercised that delegated power and specified ship lease, defined to include operating lease and the hybrid of operating and financial lease of a ship, ocean vessel, engine or part, as a financial product under section 3(1)(d).
There is a precise reason only operating and hybrid leases needed specifying. A pure financial lease of a ship already fell within the general financial product definition, because its economic character is lending. A pure operating lease does not fit the lending definition, being closer to a rental, and so required express notification to be brought within IFSCA’s reach.
Link 4. The Finance Company Regulations 2021, the entity layer
Ship leasing is carried on through a Finance Company, a separately incorporated entity, or a Finance Unit, a branch of an existing entity. Neither may accept public deposits, and neither is a Banking Unit. Under Regulation 5(1)(ii), core activities include lending and financial lease, activities carrying balance-sheet risk. Under Regulation 5(1)(iii)(g), non-core activities include operating lease of any product, including ship lease. So a ship financial lease is a core activity and a ship operating lease is a non-core activity.
Why the classification sits here rather than in the Framework is the single most common source of confusion, and the answer is architectural. The Finance Company Regulations are a platform regulation; the Ship Leasing Framework is a product regulation sitting on top of it. Placing the core and non-core distinction at entity level gives one capital table for all activities, so an entity doing ship leasing and aircraft leasing and factoring meets the highest applicable floor rather than reconciling three schedules. It keeps prudential requirements coherent across a multi-activity entity. And it keeps each activity framework modular. Banking uses the same design: the licence is the entity regulation, and product guidelines sit on top.
Link 5. The Framework itself
The Framework for Ship Leasing, dated 16 August 2022 (Circular F.No. 496/IFSCA/FC/SLF/2022-23/001), is the operational layer. It defines ship, operating lease and financial lease; sets eligibility and registration; lists permissible activities; prescribes capital, fees, prudential requirements, reporting and enforcement; and expressly preserves compliance with maritime law. It is structured in two operative parts, Part I for ship operating lease, the non-core route, and Part II for ship financial lease, the core route, mirroring the classification set at entity level.
Types of Ship Leasing Structures
Everything below turns on the operating-versus-financial distinction, so it is worth pinning down precisely. A financial lease transfers substantially all the risks and rewards of ownership to the lessee; an operating lease does not.
1. Operating lease
The lessor retains ownership and its economic incidents. Consider a lessor chartering a container ship to a liner company for three years against a vessel life of perhaps twenty-five. The lessor bears residual-value risk, typically retains major maintenance, and gets the vessel back to re-charter or sell. The lessee simply pays for three years of use. This structure suits businesses seeking operational flexibility.
2. Financial lease
Substantially all risks and rewards pass to the lessee while legal ownership remains with the lessor during the term. A shipping company wants a USD 50 million bulk carrier but does not want to fund the purchase. The IFSC lessor buys the vessel, holds legal title, and leases it for 12 years, close to the vessel’s economic life, at rentals that repay the USD 50 million plus a financing return. The shipping company maintains, insures and operates the vessel, bears the risk if its value falls, and at the end pays a nominal sum to take title.
The apparent paradox, how a lease that hands the lessee substantially all ownership incidents is still a lease and not a sale, resolves through the distinction between legal title and economic ownership. Legal title stays with the lessor throughout, held as security for the payment stream. What passes to the lessee is the economic reality of ownership. The instrument remains a lease because its legal form is a lease; accounting standards look through that form to the substance, which is why the lessee capitalises the asset, but the instrument itself is not a sale.
3. Hybrid lease
Some transactions combine features of both, and the hybrid is expressly within the notified financial product. Duration relative to useful life, the presence or absence of a bargain purchase option, and who bears residual-value risk are the practical indicators of where a hybrid sits.
A distinction to avoid conflating
Dry lease versus wet lease is a different axis entirely. It concerns whether crew and services are bundled with the asset, not where ownership risk sits. The shipping analogues are the bareboat charter, where the charterer crews and operates the vessel, and the time charter, where the owner crews and operates. An operating lease can be either. Financial versus operating and dry versus wet are orthogonal, and treating them as one axis is an error.
The Ind AS 116 Gateway
The Explanation to the permissible-activity clauses provides that a transaction is classified as a lease if it is in accordance with the Indian Accounting Standard on leases, Ind AS 116. That word classified does gateway work. If an arrangement does not meet the Ind AS 116 definition of a lease, conveying the right to control the use of an identified asset for a period in exchange for consideration, it is not a lease for the Framework’s purposes, whatever the parties call it. Only once it clears that gateway does the operating-or-financial question arise.
This also answers a subtler question. The Ind AS 116 test qualifies only the lease-nature items on the permissible-activities menu. Some permitted activities, voyage charters and contracts of affreightment for instance, are not leases at all but carriage contracts, and they do not need to pass the lease test. So the relationship between the enumerated activities and Ind AS 116 is neither a blanket and nor a simple or: the activities are permitted, and those among them that purport to be leases must satisfy Ind AS 116 to be treated as leases.
Who Can Establish a Ship Leasing Business in GIFT City?
The applicant must be registered with IFSCA as a Finance Company or Finance Unit and satisfy the applicable registration requirements before undertaking any leasing activity. Applications are submitted through IFSCA’s Single Window IT System. Potential participants include international leasing companies, maritime finance institutions, banks, shipping groups, investment funds, financial sponsors and infrastructure investors.
Promoter
Section 2(69) of the Companies Act 2013 defines promoter through three independent limbs: a person named as promoter in a prospectus or the section 92 annual return; a person who controls the company’s affairs directly or indirectly, as shareholder, director or otherwise; or a person on whose advice or instructions the Board is accustomed to act, excluding a person acting in a merely professional capacity. Read with the control concept in section 2(27), this lets IFSCA look through to the real controllers of a corporate applicant and require that they sit in a clean jurisdiction.
FATF-compliant jurisdiction
The Financial Action Task Force is an intergovernmental body established in 1989 at the G7 Summit in Paris, headquartered in Paris, which sets the global standard for combating money laundering and terrorist financing. India has been a member since 2010. A FATF-compliant jurisdiction is, in practice, one not on the FATF’s increased-monitoring or high-risk lists. The Framework uses FATF status as regulator-neutral shorthand for a jurisdiction with a credible anti-money-laundering regime.
The maritime-law layer, and the major update
The Framework preserves, at clause 3.C(ii), compliance with all applicable maritime statutes, including what it names as the Merchant Shipping Act 1958, and with circulars and notifications of the Directorate General of Shipping and the Ministry of Ports, Shipping and Waterways. An IFSCA licence confers financial-regulatory permission; it does not displace the maritime-regulatory regime. Flag and registration, DG Shipping oversight and coastal-trade rules survive.
Here the position has moved materially. The Merchant Shipping Act 1958 has been repealed and replaced by the Merchant Shipping Act 2025 (Act 24 of 2025, assented 18 August 2025), which came into force on 15 March 2026 by Notification S.O. 1244(E) dated 10 March 2026, alongside a new Coastal Shipping Act 2025. The 2025 Act modernises registration, permits early registration of vessels under bareboat-charter arrangements, and broadens Indian-flag ownership to non-resident Indians, overseas citizens of India and Indian companies. Because clause 3.C(ii) still names the 1958 Act, that cross-reference should now be read as pointing to the 2025 Act, and the surviving obligations mapped onto it, unless and until IFSCA re-issues the Framework.
The reform is going further. By Gazette Notification S.O. 3690(E) dated 7 July 2026, issued by the Ministry of Ports, Shipping and Waterways under section 37 of the Coastal Shipping Act 2025, GIFT City IFSC units chartering foreign vessels for export-import and international trade are exempted from the section 11 licensing requirement, the Director General of Shipping licence. The exemption is confined to international export-import operations and does not touch India’s cabotage regime.
| Why this layer matters more for ships than aircraft. Aircraft leasing received a purpose-built domesticating statute, the Protection of Interests in Aircraft Objects Act 2025, implementing the Cape Town Convention. Ship leasing had no maritime equivalent, which is why the maritime-law layer was historically the sharper constraint on the ship side. The 2025 and 2026 reforms are the beginning of that gap closing. |
Registration Process
- Select an appropriate legal structure, a Finance Company or a Finance Unit, and now potentially a Special Purpose Vehicle under the May 2026 route.
- Secure office space within the GIFT SEZ and obtain the Provisional Letter of Allotment from the developer.
- Incorporate under the Companies Act 2013 with registered office in the IFSC, or register an existing entity for IFSC operations.
- Apply through IFSCA’s Single Window IT System, covering SEZ unit approval and IFSCA registration for ship leasing together.
- Demonstrate compliance with the Finance Company Regulations and the Ship Leasing Framework, including owned fund, promoter and fit-and-proper requirements.
- Obtain the Letter of Approval and the IFSCA registration, execute the lease deed, and complete ancillary registrations.
- Maintain ongoing compliance. Registration is required before any lessor activity begins.
Capital Requirements Decoded
| Route | Activity type | Minimum owned fund | Prudential regime |
|---|---|---|---|
| Ship operating lease | Non-core (Reg. 5(1)(iii)(g)) | USD 200,000 (Schedule item 1) | Exempt from Regs. 4 and 8, subject to board-approved prudential policy and fit-and-proper criteria |
| Ship financial lease | Core (Reg. 5(1)(ii)) | USD 3 million (Schedule item 2) | Capital ratio 8% of regulatory capital to risk-weighted assets; liquidity coverage ratio; 25% single-counterparty exposure ceiling |
| Both | Treated as core | USD 3 million | Core regime applies |
Three terms in the capital clauses repay explanation.
Freely convertible foreign currency
A currency freely exchangeable for others without exchange-control restriction, in practice the major currencies. The IFSC operates in these because it is designed as an offshore-currency jurisdiction; the Indian rupee is not freely convertible on the capital account, which is why the Framework confines rupee use to administrative and statutory expenses. Following the amendment of 7 April 2025, a lessor may raise invoices and receive payments in any foreign currency permitted under the IFSCA (Banking) Regulations 2020, and may open a Special Non-Resident Rupee account outside the IFSC for its business-related transactions.
Item 1 of the Schedule
The Schedule to the Finance Company Regulations holds a single minimum-owned-fund table for all Finance Company activities. Item 1, an entity doing one or more non-core activities only, sets USD 0.2 million. Item 2, an entity doing one or more core activities with or without non-core, sets USD 3 million. The Framework references this table rather than restating a number, which is the entity-versus-activity architecture doing its work.
Owned fund
Owned fund means paid-up capital plus free reserves plus the balance in the securities-premium account plus capital reserves representing surplus from the sale of assets, excluding revaluation reserves, and reduced by accumulated losses, the book value of intangible assets and deferred revenue expenditure. Paid-up capital is share capital actually received. Free reserves are distributable reserves under section 2(43) of the Companies Act, excluding notional and revaluation items. The securities-premium balance is genuine shareholder contribution above face value, its use restricted by section 52. Capital reserves here mean realised asset-sale surplus, not book revaluations. The tight definition serves a prudential purpose: it counts only real, loss-absorbing capital.
The fifteen-fold difference between the USD 0.2 million and USD 3 million floors reflects the risk differential between holding residual-value risk on a vessel and holding a financing exposure on a balance sheet.
Tax and Commercial Planning
The general IFSC benefits apply to any unit, a ship lessor included. The headline is section 80LA of the Income-tax Act: a 100% deduction on eligible business income for any 20 consecutive years out of 25, extended from the earlier 10-out-of-15 window by the Finance Act 2026 (assented 30 March 2026), with business income taxed at a concessional flat 15% once the holiday ends. Around it sit reduced MAT and AMT at 9%, GST zero-rating on services to overseas clients and on inbound supplies to the unit for authorised operations under section 16 of the IGST Act, customs-duty exemption on imports into the SEZ, Gujarat stamp-duty relief, and FEMA liberalisation flowing from the IFSC’s deemed-foreign status.
The three ship-specific benefits
- Section 10(4F) exempts a non-resident’s interest or royalty income on the lease of a ship paid by an IFSC unit. This benefits the funding side: a foreign lender to the lessor receives interest without Indian withholding leakage, regardless of who the lessee is.
- Section 80LA(2)(d) exempts income from the transfer of a ship that the unit had leased out.
- Section 10(4H) exempts capital gains on the transfer of shares of a ship-leasing IFSC unit.
The Finance Act 2025 extended the commencement-of-operations sunset for these from 31 March 2025 and 2026 to 31 March 2030.
A precision on withholding tax
It is sometimes said, loosely, that GIFT City removes withholding tax on lease rentals. The exemption bites in the inbound direction, where an Indian lessee pays a GIFT City lessor. Where a foreign lessee pays a GIFT City lessor from abroad, India imposes no withholding obligation in any event, and whether tax is withheld is a question for the lessee’s own jurisdiction and any applicable treaty. For a lessor whose lessees are predominantly foreign, the tax advantage therefore comes from the section 80LA holiday on its own rental income, not from inbound withholding mechanics.
That is also where the two genuinely international-facing advantages sit. The section 10(4F) funding-side exemption improves the lessor’s position as an international borrower regardless of lessee identity. And there is an onshoring arbitrage for Indian promoters, who can obtain comparable tax treatment while keeping the entity, the jobs and the intellectual property in India rather than offshoring them.
Substance, Reporting and the Offshore-Booking Question
The express obligations are clear. Registration is required before any lessor activity. The lessor must furnish audited annual financial statements and compliance confirmations to IFSCA within fifteen days of finalisation, and report in US dollars. All transactions are in freely convertible foreign currency, with the balance sheet maintained in dollars and rupee use confined to administrative expenses. The lessor must maintain its owned fund at all times and deploy resources commensurate with its business operations, with fit-and-proper promoters and full KYC and anti-money-laundering compliance.
What the Framework does not require is repatriation of income to India. The entire IFSC concept rests on the centre being treated as a deemed-foreign jurisdiction transacting in foreign currency with the world. Receipts sit in foreign-currency accounts, typically with an IFSC Banking Unit. Leasing a vessel abroad, and receiving and holding the income abroad, through and booked in the IFSC-registered entity and reported to IFSCA, is contemplated and does not by itself breach the Framework.
| Framework compliance and tax entitlement are two different gates. Clearing the first does not clear the second. Two express hooks cut against a nameplate that books offshore income to capture the tax holiday without real activity: the requirement to deploy resources commensurate with operations, and the section 80LA conditions, which require the unit actually to carry on the eligible business from the IFSC and to satisfy substance and commencement conditions. Whether a given offshore-heavy structure crosses from permitted foreign-currency IFSC business into impermissible want of substance is a fact-specific determination that the Framework does not resolve on its face. It turns on the degree of real activity and on the Income-tax Act’s substance and anti-avoidance provisions, including GAAR and any treaty principal-purpose test. This is stated as analysis, not as a settled rule. |
That distinction is the single most important practical point for anyone structuring a GIFT City lessor, and it is precisely where advice rather than a brochure earns its keep.
The 2025 and 2026 Reform Wave
The most structurally significant recent change is the SPV and TCSP route. The IFSCA (Finance Company) (Amendment) Regulations 2026 (Notification F.No. IFSCA/GN/2026/009, in force 7 May 2026, made under sections 12, 13 and 28 of the IFSCA Act) inserted definitions of Special Purpose Vehicle and Trust and Company Service Provider, added a new permitted activity at Regulation 5(1)(iii)(ma), leasing or financing undertaken by an SPV as permitted by the Authority, and inserted a Schedule entry for the SPV minimum owned fund. A companion amendment to the IFSCA (TechFin and Ancillary Services) Regulations 2025 created a formal TCSP regime. Together they enable a full-service structure in which a TCSP incorporates and administers an SPV that is recognised as a category of Finance Company permitted to conduct leasing and financing, a channel expected to support aircraft and ship leasing in particular.
| Date | Reform |
|---|---|
| 7 April 2025 | Currency rules liberalised: invoicing and receipts in any currency permitted under the Banking Regulations; SNRR account outside the IFSC |
| 15 March 2026 | Merchant Shipping Act 2025 in force, replacing the 1958 Act (S.O. 1244(E) of 10 March 2026) |
| 7 May 2026 | Finance Company Regulations amended to add the SPV route and a formal TCSP regime |
| 7 July 2026 | S.O. 3690(E) exempts IFSC units chartering foreign vessels for EXIM and international trade from the section 11 DG Shipping licence |
The direction of travel is unmistakable. India is deliberately dismantling the disadvantages that distinguished ship leasing from the more mature aircraft-leasing pillar. The Framework a client reads today should be read as a snapshot of a regime in motion.
Key Legal Considerations Before You Commence
Ship leasing combines several legal disciplines in one transaction: corporate law, maritime law, banking and finance, security documentation, regulatory compliance, cross-border contracts, international arbitration and tax coordination. Before commencing operations, evaluate corporate structuring, regulatory licensing, financing arrangements, vessel documentation and flag, insurance, security interests, cross-border contracts, tax implications, dispute-resolution mechanisms and ongoing compliance obligations. Each transaction should be assessed on its own commercial objectives and regulatory context.
How R & D Law Chambers Supports Maritime Businesses
R & D Law Chambers LLP advises on the full ship-leasing chain in GIFT City IFSC: Finance Company and Finance Unit registration and the SPV and TCSP route; the operating-versus-financial classification and its capital and prudential consequences; the section 80LA and section 10(4F) and 10(4H) tax position, structured to withstand GAAR and principal-purpose-test scrutiny; the maritime-law interface under the Merchant Shipping Act 2025; and the documentation and dispute-resolution architecture around cross-border lease and charter arrangements. The practice combines ADIT-level international tax depth with dual India and England-and-Wales qualification and cross-border arbitration experience.
Related advisory
- Regulatory & Compliance Advisory in GIFT IFSC, licensing, governance and ongoing compliance.
- Transaction & Contractual Advisory in GIFT IFSC, lease documentation and cross-border agreements.
- Fund Structuring in GIFT IFSC, where leasing sits within a fund or investment platform.
- International & Domestic Arbitration, charter and lease disputes.
- International Taxation & Cross-Border Tax Planning, treaty and withholding analysis.
Frequently Asked Questions
How is ship leasing regulated in GIFT City IFSC?
Ship leasing in GIFT City is regulated by IFSCA through a chain of instruments: the IFSCA Act 2019 empowers IFSCA; the Central Government’s S.O. 5199(E) of 14 December 2021 and IFSCA’s notification of 7 January 2022 make ship lease a financial product; the IFSCA (Finance Company) Regulations 2021 create the entity that carries it on; and the Framework for Ship Leasing of 16 August 2022 sets the operational rules. Maritime-law compliance under the Merchant Shipping Act 2025, which replaced the 1958 Act, survives in parallel.
What is the difference between an operating lease and a financial lease of a ship in GIFT City?
A financial lease transfers substantially all the risks and rewards of ownership to the lessee, while the lessor retains legal title as security. It is a core activity requiring a USD 3 million minimum owned fund. An operating lease leaves those risks and rewards with the lessor, who takes the vessel back. It is a non-core activity requiring USD 200,000. The distinction turns on economic risk allocation, not the label. A transaction must first qualify as a lease under Ind AS 116 before this classification applies.
What is the minimum capital to set up a ship leasing company in GIFT City?
The minimum owned fund is USD 200,000 for a ship operating-lease lessor and USD 3 million for a ship financial-lease lessor. These figures come from the Schedule to the IFSCA (Finance Company) Regulations 2021, item 1 for non-core and item 2 for core, which the Ship Leasing Framework references rather than restates. An entity undertaking both operating and financial leasing is treated as core and must meet the USD 3 million floor.
Does the Merchant Shipping Act apply to a GIFT City ship lessor?
Yes. An IFSCA licence confers financial-regulatory permission but does not displace the maritime-law regime. The Framework expressly preserves compliance with maritime statutes and DG Shipping requirements. The Merchant Shipping Act 1958 has been replaced by the Merchant Shipping Act 2025, in force 15 March 2026, and a notification of 7 July 2026, S.O. 3690(E) under the Coastal Shipping Act 2025, removed the licence requirement for GIFT City units chartering foreign vessels for export-import and international trade. The precise surviving obligations depend on the vessel’s flag and trade.
Can foreign companies establish ship leasing operations in GIFT City?
Yes. Eligible foreign and domestic businesses may establish ship leasing operations through a Finance Company or Finance Unit registered with IFSCA, and since May 2026 through a Special Purpose Vehicle administered by a Trust and Company Service Provider. The promoter, as defined in section 2(69) of the Companies Act 2013, must be situated in a FATF-compliant jurisdiction.
What are the tax benefits of ship leasing through GIFT City?
A GIFT City ship lessor can claim a 100% income deduction under section 80LA for any 20 consecutive years out of 25, extended from 10-out-of-15 by the Finance Act 2026, with post-holiday income taxed at a flat 15%, plus MAT and AMT at 9%, GST zero-rating, customs and stamp-duty relief, and FEMA liberalisation. Ship-specific exemptions cover non-resident interest on ship-lease funding under section 10(4F), income from transfer of a leased ship under section 80LA(2)(d), and capital gains on transfer of shares of a ship-leasing unit under section 10(4H). The Finance Act 2025 extended the commencement sunset for these to 31 March 2030.
Can a GIFT City ship lessor keep its lease income outside India?
There is no express requirement to repatriate lease income to India. The IFSC is treated as a deemed-foreign jurisdiction, and holding foreign-currency income offshore through the IFSC-registered entity is contemplated. However, the lessor must be genuinely registered, report to IFSCA, maintain a US-dollar balance sheet and deploy resources commensurate with its operations. Regulatory compliance does not by itself secure the tax benefit: the section 80LA substance conditions and India’s anti-avoidance rules apply, so a thin-substance booking entity is at risk on both.
Conclusion
India’s maritime economy continues to expand, and with it the need for modern financing structures. The GIFT City ship leasing framework is a significant step toward positioning India as a competitive destination for maritime finance, and the 2025 and 2026 reforms have closed much of the gap that once separated it from the aircraft-leasing regime.
For shipping companies, leasing firms, banks, investment funds and international maritime businesses, GIFT City offers a structured regulatory environment under IFSCA’s oversight. The participants who succeed, however, will not be those who focus only on registration. They will be the ones who invest in sound legal structuring, genuine substance, carefully drafted transaction documents and proactive risk management, and who understand that clearing the regulatory gate is not the same as clearing the fiscal one.
| This article is for general information as at 3 August 2026 and is not legal advice. Laws, regulations and regulator practice evolve. Seek jurisdiction-specific advice before acting. www.giftcitylawyers.com is an informational microsite owned and operated by R & D Law Chambers LLP. It is not affiliated with or endorsed by GIFT City, the International Financial Services Centres Authority, or any government or regulatory authority. |