A Practical Guide for International Businesses, Investors and Financial Institutions
| 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: 17 minutes |
| This article states the position as at 3 August 2026. It reflects the IFSCA Act 2019 and regulations made under it, the SEZ Act 2005 as modified for the IFSC by notification S.O. 940(E) of 28 February 2024, the Companies Act 2013 with the IFSC exemptions in the Ministry of Corporate Affairs notifications of 4 January 2017, and the Income-tax Act 1961 as amended by the Finance Act 2026. |
The Short Answer
| Entering GIFT City is not an incorporation exercise. It is a legal, regulatory, tax and commercial structuring exercise, and the order in which the steps are taken determines what is possible later. A business must clear three separate gates, each with its own authority and conditions: an IFSCA licence for the activity, incorporation under the Companies Act with the IFSC exemptions, and entitlement to the section 80LA tax holiday. Clearing one does not clear the others. This checklist sets out what to resolve before you commit. |
Why Legal Planning Matters Before You Enter
Consider two fintech companies entering GIFT City. Both obtain approvals. Both commence operations. Three years later one is expanding internationally with minimal regulatory friction, and the other is delayed by contractual drafting that does not match its licence, a licensing gap discovered on a new product line, a tax structure that cannot be defended on audit, governance deficiencies surfaced by an inspection, and investors who will not close until all of it is remediated.
The difference is rarely luck. A legal structure should support the business across its whole lifecycle: fundraising, regulatory inspection, tax review, shareholder exit and dispute resolution. Most regulatory friction, tax leakage and disputes in the IFSC arise after setup, when structures are misaligned with FEMA, when tax positions are not defensible under scrutiny, when contracts do not reflect regulatory reality, or when dispute resolution was treated as boilerplate.
| The three gates, and why they are the organising idea. The permission to carry on financial services in the IFSC comes from the IFSCA licence under the relevant sectoral regulations. The corporate-law relief comes from two Ministry of Corporate Affairs notifications made under section 462 of the Companies Act. The tax benefits come from the Income-tax Act, principally section 80LA, and the SEZ and GST frameworks. These are three distinct authorities applying three distinct sets of conditions. The most common structuring errors are assuming that an IFSCA licence automatically carries the Companies Act relief, or that incorporation in the IFSC automatically secures the tax holiday. Neither follows. |
1. Is GIFT City the Right Jurisdiction for Your Business?
Before considering incentives, ask the prior question: should this business operate from GIFT City at all?
The answer depends on your industry, target customers, revenue model, cross-border activity, regulatory obligations and expansion plans. GIFT City is designed for eligible international financial services and closely related activities. It is not a general-purpose corporate jurisdiction, and an activity that falls outside the permitted list cannot be accommodated by structuring.
Businesses that commonly benefit include international banks, fund management entities, fintech companies, insurance and reinsurance businesses, aircraft and ship leasing companies, wealth managers, payment service providers, global capability centres, family offices and treasury centres.
There is a further test worth applying honestly. GIFT City’s sharpest advantages tend to involve at least one Indian leg: inbound withholding relief, FEMA simplification, proximity to Indian counterparties and access to the Indian market. Where a business has no India nexus at all, GIFT City achieves parity with Singapore, Dublin or the DIFC rather than superiority, and the substance obligations still apply. Choosing the jurisdiction for the incentive alone, without the nexus, is the structural mistake that produces problems at audit.
2. Select the Appropriate Business Structure
Possible vehicles include a private limited company, a limited liability partnership, a branch office, a subsidiary, a joint venture, a fund management entity or a special purpose vehicle. Each carries different implications for ownership, taxation, regulatory approvals, governance, fundraising and exit.
Two IFSC-specific constraints bear on this choice. An IFSC company must be formed as a company limited by shares; the guarantee and unlimited forms are excluded. And the registered office must remain within the IFSC at all times and cannot be shifted outside it. Your structure should reflect commercial objectives rather than merely satisfying incorporation requirements.
Since May 2026 there is a further option for leasing and financing. An amendment to the IFSCA (Finance Company) Regulations 2021, in force 7 May 2026, introduced a Special Purpose Vehicle route administered by newly recognised Trust and Company Service Providers, adding a permitted activity for leasing or financing undertaken by an SPV.
3. Understand the Applicable Regulatory Framework
Businesses in GIFT City are subject to a specialised regulatory ecosystem led by IFSCA, which under section 13 of the IFSCA Act 2019 exercises within the IFSC the powers otherwise held by the Reserve Bank of India, SEBI, IRDAI and PFRDA.
Before commencing operations, establish whether your business requires an IFSCA licence and under which set of regulations; whether approvals are required before launch or can run in parallel; whether the regulatory sandbox is available and appropriate; and which continuing reporting obligations will attach once you are licensed.
| A point the single window does not solve. Because an IFSC may be established only within a Special Economic Zone, every entity licensed by IFSCA is simultaneously an SEZ unit and carries both sets of obligations for as long as it exists. The Single Window IT System unifies the approval stage. It does not unify ongoing reporting: regulatory returns go to IFSCA, SEZ returns go to the SEZ Online portal, and Companies Act filings go to the Ministry of Corporate Affairs. Businesses that plan for one reporting stream and discover three are the ones that accumulate defaults quietly. |
Note also that the SEZ Act 2005 does not apply to IFSC units as enacted. By notification S.O. 940(E) dated 28 February 2024, issued under section 31(1) of the IFSCA Act, specified provisions of the SEZ Act and Rules apply to the IFSC with modifications, including the transfer of Development Commissioner functions to IFSCA as Administrator. Analysis proceeding from the bare text of the SEZ Act, or from generic SEZ commentary written for manufacturing zones, is proceeding from a text that does not govern the entity.
4. Evaluate Tax Implications Before Incorporation
Many businesses are drawn by the incentives, but incentives alone should not drive structuring. Before incorporating, work through corporate tax treatment, applicable tax treaties, transfer pricing, withholding obligations, GST, permanent establishment risk, the General Anti-Avoidance Rules, and profit repatriation.
The headline benefit 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, with income taxed at a flat 15% once the holiday ends. Around it sit MAT and AMT at 9%, GST zero-rating under section 16 of the IGST Act on services to overseas clients and inbound supplies for authorised operations, customs-duty exemption on imports into the SEZ, and Gujarat stamp-duty relief.
A structure that appears efficient today must also remain defensible during a future audit. Entitlement under section 80LA depends on the unit actually carrying on the eligible business from the IFSC and satisfying the statutory substance and commencement conditions. Regulatory compliance and fiscal entitlement are separate gates, tested by different authorities at different times, and a thin-substance booking entity is exposed on the second even if it is clean on the first.
5. Review FEMA and Cross-Border Regulations
An IFSC unit is treated as a non-resident under the foreign exchange regime, which removes much of the friction that applies on the mainland but does not remove the framework. Establish how foreign capital will be introduced, whether the intended cross-border payments are permitted, how dividends will be repatriated, what documentation each step requires, and which transactions carry reporting obligations.
Businesses operating internationally should also confirm that the GIFT City structure aligns with home-country obligations, including controlled foreign company rules, home-regulator notification requirements and any group reporting.
6. Build Strong Commercial Contracts From Day One
Contract drafting is among the most overlooked areas during setup, and among the most consequential. Every material commercial relationship should be documented: customer agreements, vendor contracts, shareholders’ agreements, employment contracts, technology licensing, SaaS agreements, service agreements, confidentiality agreements and data processing agreements.
For an IFSC entity there is an additional alignment requirement that mainland businesses do not face. Contract documentation must be consistent with the authorised operations recorded in the Letter of Approval and with the activity for which the IFSCA licence was granted. A contract that commits the entity to an activity outside its authorised operations is a compliance exposure, not merely a commercial one, and the mismatch is usually discovered at inspection or renewal rather than at signature.
7. Protect Intellectual Property and Document Ownership
Before launching, confirm that trade marks are protected, software ownership is documented, copyright assignments are executed, licensing arrangements are clearly drafted, proprietary technology is safeguarded and confidential information is protected by agreement.
Ask specifically: who owns employee-created intellectual property; who owns consultant-developed software; are licensing rights clearly defined; have trade mark registrations been completed; and is confidential information adequately protected? For technology and financial services businesses in the IFSC, intellectual property is frequently the most valuable asset on the balance sheet, and disputes about it almost always trace back to ownership that was never documented at the outset.
8. Establish Governance and Standing Frameworks Before Day One
Many businesses treat compliance as something to address once operations begin. In the IFSC that sequencing is wrong, because several obligations are continuous rather than periodic and are breached in the present tense rather than on a filing date.
Put in place before commencement: an anti-money-laundering, counter-terrorist-financing and know-your-customer programme; a cyber security and resilience framework; a board-approved prudential policy where the prudential regulations are disapplied; internal policies and a compliance calendar covering all authorities, not only IFSCA; risk management policies; and record retention protocols.
| Standing obligation | What must exist before commencement |
|---|---|
| AML governance | A Designated Director and a Principal Officer, who must be separate individuals, appointed by board resolution and intimated to the Authority |
| AML programme | An enterprise-wide risk assessment and board-approved policies, distinct from those of any onshore Indian affiliate rather than inherited unchanged |
| Customer due diligence | A documented CDD and beneficial ownership process, including video-based identification if used |
| FIU-IND | Registration on the FINGate portal and a reporting process |
| Sanctions screening | A documented screening process and an escalation route for what happens on a hit |
| Cyber security | A framework meeting the IFSCA cyber guidelines, which is a precondition for compliant digital onboarding |
| Fit and proper | Assessment of key persons at appointment, and a process for continuing assessment |
| Substance | Registered office within the IFSC, manpower commensurate with the scale of operations, minimum owned fund maintained at all times |
The requirement to maintain the minimum owned fund, and to deploy manpower commensurate with operations, are continuing conditions. They are not demonstrated once at registration and then forgotten. Strong governance established at the outset also demonstrates credibility to regulators, investors, lenders and counterparties at the moments when it matters.
9. Understand Employment and Immigration Requirements
Before hiring your first employee in the IFSC, review employment contracts, confidentiality obligations, non-solicitation clauses, intellectual property ownership clauses, remote work policies, employee handbooks, background verification, compensation structures and employee stock option documentation where applicable.
If you intend to hire expatriates or foreign nationals, verify visa, immigration and work authorisation requirements well in advance. A clear employment framework reduces disputes and supports the manpower-commensurate-with-operations requirement that the regulator will test.
10. Protect Data, Cybersecurity and Confidential Information
Financial institutions, fintech companies, fund managers and technology businesses in the IFSC process sensitive commercial and customer information. Establish where customer data will be stored, whether the business involves cross-border data transfers, whether confidentiality agreements have been executed, whether vendor contracts include data protection clauses, and how cybersecurity responsibilities are allocated.
There is a regulatory point that elevates this above an IT concern. Because the customer onboarding process must satisfy the applicable cyber standards, a deficiency in the cyber framework becomes a deficiency in onboarding, and therefore a customer due diligence failure rather than merely a technology failure. Data governance in the IFSC is a board-level legal and regulatory responsibility.
11. Establish Banking and Foreign Currency Processes
An IFSC unit transacts in freely convertible foreign currency and maintains its balance sheet in United States dollars, with rupee use confined to administrative and statutory expenses. Establish procedures for foreign currency accounts, cross-border remittances, international settlements, treasury management, banking mandates, authorised signatories and internal financial controls.
These look operational but carry legal and regulatory consequences, and the currency requirement is easy to breach in practice through routine rupee transactions that nobody flags. The Foreign Currency Settlement System, launched in October 2025, allows IFSC Banking Units to settle foreign currency transactions locally, which changes the practical banking options available.
12. Plan Your Dispute Resolution Strategy Before You Need It
Many companies spend months negotiating pricing, commercial terms and delivery schedules, then insert a dispute resolution clause copied from another agreement. It is among the most expensive mistakes available.
A dispute resolution clause should address the governing law of the contract, the governing law of the arbitration agreement, which is a separate question, the seat, the venue, the language, the number of arbitrators, the institutional rules, interim relief and the enforcement strategy.
Two points matter particularly for IFSC entities with cross-border counterparties. Under section 44(b) of the Arbitration and Conciliation Act 1996, an award is enforceable in India as a foreign award only if made in a territory the Central Government has notified. And under the proviso to section 2(2), sections 9, 27 and 37(1)(a) and 37(3) apply to a foreign-seated international commercial arbitration unless the parties agree otherwise, which is what makes interim relief over Indian assets available in support of an arbitration abroad. Silence in the clause is not neutral; the statute fills it.
Our comparison of the three institutions most often named in these clauses is available here.
13. Prepare for Investors Before Raising Capital
Investors conduct legal due diligence before investing, and the easiest time to prepare for it is before they arrive. A pre-emptive review should cover corporate records, shareholding structure, regulatory approvals and their scope, material contracts, litigation history, tax compliance and the basis of any section 80LA position, employment documentation, intellectual property, data protection and board resolutions.
For an IFSC entity, diligence will also examine whether authorised operations match actual activity, whether prior approval was obtained for any change in control of twenty per cent or more, and whether the compliance record with both IFSCA and the SEZ authority is clean. A well-organised legal framework shortens diligence and removes the discount that disorder invites.
14. Think Beyond Today
Founders focus on incorporation. Experienced advisers think about the next five to ten years. Will you raise venture capital? Will foreign investors join? Could you merge with another business? Will you expand internationally or add activities to the licence? Could you list? What happens if shareholders disagree, or if you exit?
One IFSC-specific sequencing point belongs here. Adding an activity is possible through broadbanding, but the order matters: the authorised operations in the Letter of Approval must be amended before the IFSCA regulatory approval for the new service is obtained. Getting that sequence wrong means operating beyond authorised operations, which is a different and more serious problem than a delayed approval.
A GIFT City Legal Readiness Checklist
Corporate structure
- Appropriate legal entity selected, limited by shares, registered office within the IFSC
- Shareholding finalised and beneficial ownership documented
- Governance framework established and board approvals completed
Regulatory
- IFSCA licensing category identified and application scope confirmed
- SEZ Letter of Approval and authorised operations aligned to intended activity
- Compliance calendar prepared covering IFSCA, the SEZ authority, the Registrar of Companies and allied registrations
- Internal policies documented and board-approved
Tax
- Tax structure reviewed and the section 80LA position articulated and evidenced
- Treaty, transfer pricing and withholding implications assessed
- FEMA position confirmed and GST registration and letter of undertaking obtained
Commercial
- Customer and vendor agreements drafted and aligned to authorised operations
- Shareholders’ agreement finalised, with exit and deadlock provisions
- Confidentiality and data processing agreements executed
Employment and intellectual property
- Employment contracts prepared with IP ownership and confidentiality clauses
- Immigration requirements assessed for any expatriate hires
- Trade mark protection, copyright ownership and software licensing documented
Risk management
- AML, CFT and KYC programme in place with both appointments made and FIU-IND registration completed
- Cyber security framework implemented and tested
- Insurance reviewed; dispute resolution and arbitration strategy settled
- Record retention process implemented and retrievable, not merely retained
Frequently Asked Questions
Is GIFT City suitable for every business?
No. GIFT City is designed for eligible international financial services and closely related activities. Whether it suits a particular business depends on the business model, the regulatory category available, and whether the transactions have an India nexus. Where there is no India nexus, the jurisdiction offers parity with established offshore centres rather than advantage, and the substance obligations still apply.
Do foreign companies need Indian legal advisers before entering GIFT City?
Yes. International advisers understand the home-jurisdiction position, but the IFSC regime is Indian law: the IFSCA Act and regulations, the SEZ Act as modified for the IFSC, the Companies Act with its IFSC exemptions, the Income-tax Act and FEMA. Licensing, documentation, substance and continuing compliance all require Indian counsel.
Can foreign investors establish companies in GIFT City?
Yes, subject to the applicable regulations and to the entity qualifying for the relevant IFSCA registration. Foreign entities may establish a subsidiary or a branch. Where the applicant is a company, the promoter as defined in section 2(69) of the Companies Act 2013 will be examined, and for several activity frameworks the promoter must be situated in a FATF-compliant jurisdiction.
Should contracts be reviewed before entering GIFT City?
Yes, and for a reason specific to the IFSC. Beyond the ordinary commercial reasons, contract documentation must be consistent with the authorised operations in the Letter of Approval and with the activity for which the IFSCA licence was granted. A contract committing the entity to an activity outside its authorised operations is a regulatory exposure, and the mismatch usually surfaces at inspection or renewal.
Is arbitration recommended for GIFT City businesses?
For most cross-border commercial relationships, yes. Arbitration offers confidentiality, procedural flexibility and international enforceability under the New York Convention. The clause should specify the institution and rules, the seat, the governing law of the contract and of the arbitration agreement, and the number of arbitrators. Where enforcement in India is possible, the seat should be a territory notified under section 44(b) of the Arbitration and Conciliation Act 1996.
Does an IFSCA licence give me the tax holiday?
No. These are separate gates. The IFSCA licence permits the financial activity. The section 80LA deduction depends on the unit actually carrying on the eligible business from the IFSC and satisfying the statutory substance and commencement conditions, tested by the tax authorities rather than by IFSCA. A structure can be fully compliant with IFSCA requirements and still fail the fiscal test.
How We Help
Entering GIFT City is about creating a legal foundation that supports growth, investment, compliance and, if it comes to it, litigation. R & D Law Chambers LLP advises businesses, financial institutions, investors and international organisations on establishing and operating within GIFT City, through its GIFT City IFSC practice at giftcitylawyers.com.
The advisory approach is integrated rather than piecemeal: GIFT City legal advisory, corporate structuring, commercial contract drafting, regulatory compliance, cross-border transactions, international arbitration, dispute resolution, intellectual property advisory, transaction support and risk management. Structures are designed around a specific question: will this survive a tax audit, a GAAR review, a FEMA inquiry or an investor dispute, rather than merely secure initial approval?
Related advisory
- GIFT City Opportunities for Global Businesses, where the opportunities lie and for whom.
- Fund Structuring in GIFT IFSC, legal, tax and regulatory design.
- Regulatory & Compliance Advisory in GIFT IFSC, licensing and continuing obligations.
- Fund Documentation & Legal Structuring for FMEs, fund documents and manager agreements.
- Transaction & Contractual Advisory in GIFT IFSC, commercial agreements and transaction documentation.
- International & Domestic Arbitration, dispute resolution and enforcement.
| 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. |