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Aircraft Leasing and Financing Through GIFT City: The IFSCA Framework for Lessors and Financiers

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: 6 August 2026  |  Last reviewed: 6 August 2026  |  Estimated reading time: 12 minutes
Scope. This article addresses aircraft leasing and financing conducted through GIFT IFSC. It states the position under the IFSCA (Finance Company) Regulations, 2021 as amended in 2026, the IFSCA (TechFin and Ancillary Services) Regulations, 2025 as amended in 2026, the Protection of Interests in Aircraft Objects Act, 2025, and the Income-tax Act, 2025 as amended by the Finance Act, 2026. It is not a general guide to aviation regulation in India and does not address airline licensing, airworthiness or operational requirements.
Short answer. Two separate problems kept aircraft leasing out of GIFT IFSC, and both were solved only recently. The enforceability problem, that an international interest in an aircraft could not reliably be enforced against an Indian airline in insolvency, was addressed by the Protection of Interests in Aircraft Objects Act, 2025. The structural problem, that GIFT IFSC could host a leasing entity but not the ownership vehicle, the primary financing or the administration around it, was addressed by IFSCA amendments notified in May 2026. Advice written before either date describes a jurisdiction that no longer exists.

Index of Topics

  1. Why aircraft leasing did not work in India, and what changed
  2. The enforceability gate: the Protection of Interests in Aircraft Objects Act, 2025
  3. The structural gate: the TCSP and SPV framework of May 2026
  4. How the structure now assembles
  5. Regulatory routes into GIFT IFSC for a lessor
  6. Tax treatment of the IFSC leasing unit
  7. Documentation and the questions that decide outcomes
  8. What still has to be planned around
  9. Frequently asked questions
  10. How R & D Law Chambers works on these matters

1. Why Aircraft Leasing Did Not Work in India, and What Changed

Short answer. India acceded to the Cape Town Convention in 2008 but did not enact implementing legislation for seventeen years. The result was that internationally recognised repossession rights could be defeated by domestic insolvency law. Lessors priced that risk into lease rentals, and India was expensive to lease into for reasons that had nothing to do with demand.

The commercial logic of leasing into India was never in doubt. Indian carriers have hundreds of aircraft on order and the great majority of the operating fleet is leased. What was in doubt was whether a lessor could recover its asset when an airline failed.

That doubt was resolved, unfavourably, in 2023. When Go First entered insolvency, the moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 prevented lessors from repossessing more than fifty aircraft, notwithstanding that those lessors held rights recognised under the Cape Town Convention and had filed deregistration requests. Aircraft sat grounded and deteriorating while the question was litigated. The Aviation Working Group, which monitors compliance with the Convention, downgraded India’s score, and lease rate factors across the Indian market rose accordingly.

The episode made the underlying problem visible: India had acceded to a treaty designed to give creditors time-bound, largely self-executing remedies, but had not given that treaty force in domestic law, and where it collided with the Code, the Code prevailed. A lessor could hold a perfect international interest and still be unable to move its aircraft.

Two changes have since addressed different halves of the problem. They are examined in sections 2 and 3, and the practical significance is that they are recent enough that most published guidance, and a good deal of transaction precedent, predates one or both.

2. The Enforceability Gate: The Protection of Interests in Aircraft Objects Act, 2025

Short answer. The Act gives the Cape Town Convention and the Aircraft Protocol direct force of law in India, and has overriding effect over inconsistent domestic legislation including the Insolvency and Bankruptcy Code, 2016 and the Companies Act, 2013. India adopted Alternative A, under which a creditor may take possession on expiry of a two-month waiting period unless defaults are cured. The Directorate General of Civil Aviation is the registry authority, and the High Courts have jurisdiction.

The overriding effect provision is what makes the Act work. Without it, the Convention remedies would sit alongside the Code and the collision seen in the Go First proceedings would recur. With it, the specific insolvency remedy in the Act prevails over the general moratorium.

Alternative A matters for a reason that is easy to miss. It is not merely a shorter timetable. Under Alternative A, on expiry of the waiting period without the defaults being cured, the creditor’s entitlement to possession does not depend on obtaining a fresh judicial determination on the merits. That converts repossession from an outcome contingent on litigation into something much closer to a mechanical consequence of default and time. For a financier pricing Indian risk, the difference between a remedy that requires a favourable judgment and one that follows from the calendar is the difference that shows up in the lease rate.

Two qualifications belong in any honest account. First, the remedy is conditioned on the international interest having been properly constituted and registered on the International Registry. An interest that was never validly registered does not acquire priority because the Act exists. Registration discipline at the transaction stage is what makes the remedy available years later. Second, the Act is recent, and the volume of Indian judicial consideration of its provisions is correspondingly limited. Confidence in its operation currently rests on the statutory language and on the overriding effect clause rather than on a settled body of authority.

3. The Structural Gate: The TCSP and SPV Framework of May 2026

Short answer. Until May 2026, an aircraft leasing entity could be established in GIFT IFSC, but the ownership vehicle, the primary financing, the transaction structuring and the professional administration around it typically remained outside. IFSCA closed that gap by notifying amendments to the Finance Company Regulations and the TechFin and Ancillary Services Regulations on 12 May 2026, recognising special purpose vehicles as a category of finance company and trust and company service providers as a registered class of administrator.

The gap was structural rather than legal. Aircraft leasing works through single-purpose vehicles: each aircraft, or a small group, is held in its own entity, which holds title, enters the lease with the airline and services the financing. That structure requires two things the IFSC did not previously supply in regulated form. It requires a recognised vehicle that can be established transaction by transaction, and it requires professional administrators who incorporate and run those vehicles to a regulated standard, because financiers will not lend against an SPV nobody is accountable for.

The reform followed a defined process rather than arriving unannounced. A committee on the aircraft leasing and financing ecosystem at GIFT IFSC reported on 9 January 2026, a consultation paper was issued on 17 March 2026, and the amendment regulations were notified on 12 May 2026 following public consultation.

What the amendments do

Read together, these permit a full leasing structure to sit inside the IFSC: a registered administrator establishing and running transaction-specific vehicles, each of which is itself a recognised regulated entity permitted to lease and finance. That is the ecosystem the jurisdiction previously lacked.

One point of form is worth noting for structuring. The Finance Company Regulations contemplate a finance company being established as a subsidiary, a joint venture, a newly incorporated company under the Companies Act, 2013, or in such other form as IFSCA may specify, and an applicant intending to undertake only non-core activities may be considered for registration in the form of a limited liability partnership. The available forms should be confirmed against the current text for the specific activity proposed, because the position differs between core and non-core activities.

4. How the Structure Now Assembles

Short answer. A TCSP registered under the TechFin and Ancillary Services Regulations incorporates and administers an SPV registered as a finance company. The SPV takes title to the aircraft, enters the lease with the operator, and carries the financing. The international interest is constituted and registered on the International Registry, which is what makes the remedies under the 2025 Act available on default.

The sequence matters, because each element depends on the one before it. Registration decisions taken for administrative convenience at closing determine what remedies exist years later, and cannot be retrofitted.

  1. Establish the administrator relationship: identify a TCSP registered with IFSCA, since the SPV route depends on TCSP incorporation or administration.
  2. Establish the SPV as a finance company in the appropriate form for the activity proposed, and confirm the permissible activity covers the leasing or financing structure intended.
  3. Structure title, the financing and the security so that the interest to be registered is a validly constituted international interest under the Convention.
  4. Register on the International Registry, and confirm the registration reflects the structure as executed rather than as first drafted.
  5. Complete Indian registration and deregistration documentation with the DGCA as registry authority, including an irrevocable deregistration and export request authorisation where the structure provides for one.
  6. Build the dispute resolution architecture into the lease and financing documents, addressing governing law, forum, and interim relief over assets located in India.

5. Regulatory Routes Into GIFT IFSC for a Lessor

Short answer. Aircraft leasing in the IFSC is conducted through the finance company regime rather than through a standalone aviation licence. A lessor may establish a finance company undertaking leasing as its activity, or use the SPV route with a TCSP administrator. Which is appropriate depends on the number of aircraft, the financing structure, and whether the lessor intends a continuing IFSC platform or a transaction-specific vehicle.

The distinction is between building a presence and executing a transaction. A lessor establishing a regional platform, with a pipeline of aircraft and its own personnel, is establishing a finance company and should design for the continuing obligations that follow: capital, governance, personnel and reporting. A lessor with one aircraft or one portfolio, or a financier structuring a single transaction, is better served by the SPV route, where the administration burden sits with the TCSP and the vehicle is scoped to the deal.

Both routes engage the exchange control position that makes the IFSC useful. An IFSC unit carrying on permitted financial services is treated as a person resident outside India for exchange control purposes, which permits foreign currency operation and cross-border transactions from an Indian location. For a cross-border leasing structure, where rentals are typically dollar-denominated and the counterparty is Indian, that treatment is central rather than incidental.

6. Tax Treatment of the IFSC Leasing Unit

Short answer. An IFSC unit may claim a full deduction of eligible business income for twenty consecutive years out of twenty-five under section 147 of the Income-tax Act, 2025, with income thereafter taxed at fifteen per cent. Separate exemptions apply to non-resident income from aircraft leasing paid by IFSC units, subject to the unit having commenced operations before a statutory sunset date.

Two points of precision. The provision is section 147 of the Income-tax Act, 2025. The Income-tax Act, 1961 was repealed with effect from 1 April 2026, so section 80LA, under which this deduction was historically claimed, is no longer operative law. Guidance still citing section 80LA as the current provision has not been updated since April.

The Finance Act, 2026 extended the deduction from ten consecutive years out of fifteen to twenty out of twenty-five and fixed the post-deduction rate at fifteen per cent. It also introduced a condition for units commencing operations on or after 1 April 2026, that the unit must not be formed by splitting up, reconstruction, reorganisation or transfer of a business already existing in India. A group moving an existing Indian leasing operation into the IFSC should treat that as a design constraint at the outset.

Alongside the unit-level deduction, the aircraft leasing exemptions historically found in sections 10(4F) and 10(4H) of the Income-tax Act, 1961, covering royalty and interest income of non-residents on aircraft leasing paid by an IFSC unit, and capital gains of non-residents engaged in aircraft leasing on transfer of shares in an IFSC leasing unit, are carried forward under the Income-tax Act, 2025 with renumbered provisions. The commencement sunset attaching to the leasing exemptions was extended to 31 March 2030. Because the renumbering is recent, the current section references and the applicable sunset should be confirmed against the text of the 2025 Act for the specific structure before they are relied on in a transaction.

A caution that applies to every IFSC structure. The regime delivers unit-level relief and targeted exemptions on defined flows. It does not confer treaty access, because an IFSC unit is not treated as a separate tax resident for treaty purposes, and it does not exempt Indian-source income generally. Structures marketed on a treaty premise are marketed on something the IFSC does not provide.

7. Documentation and the Questions That Decide Outcomes

Short answer. The documents that matter most in a distressed scenario are the ones drafted with least attention at closing: the registration entries on the International Registry, the deregistration authorisation, and the dispute resolution clause. Each is a low-friction item at signing and a decisive one on default.

Registry entries

The remedies under the 2025 Act depend on a validly constituted and registered international interest. Where the structure as executed differs from the structure as first documented, and registrations reflect the earlier version, the discrepancy surfaces at enforcement. Registration should be reconciled against the executed documents as a closing item.

Deregistration and export authorisation

An irrevocable deregistration and export request authorisation is the mechanism through which a creditor procures deregistration and export without depending on the operator’s cooperation. Its form and the process for its use engage the DGCA as registry authority, and it should be prepared on the footing that it will be used when relations with the operator have broken down entirely.

Dispute resolution

GIFT IFSC has no independent court system of its own. Disputes involving an IFSC entity go to the Indian courts under Indian procedural law unless the parties have agreed to arbitration, so the dispute resolution architecture must be built into the contract. Where arbitration is chosen, the seat determines whether the resulting award can be enforced against assets in India: enforcement of a foreign award under Part II of the Arbitration and Conciliation Act, 1996 depends on the award having been made in a territory notified by the Central Government. The governing law of the arbitration agreement should be stated separately from that of the contract.

Interim relief deserves specific attention in a leasing context, where the asset is mobile and the value at risk is concentrated. Under the proviso to section 2(2) of the Arbitration and Conciliation Act, 1996, sections 9, 27 and 37(1)(a) and 37(3) apply to a foreign-seated international commercial arbitration unless the parties have agreed otherwise, which preserves access to Indian courts for interim measures over assets in India. Excluding those provisions by boilerplate, without considering where the aircraft will be, removes a remedy the creditor may need.

8. What Still Has to Be Planned Around

Short answer. Three things. The 2025 Act is recent and its provisions have limited judicial consideration. The TCSP and SPV framework is more recent still, and market practice around it is forming. And the IFSC ecosystem, while developing quickly, remains earlier in its curve than established leasing jurisdictions.

None of these is a reason to avoid the jurisdiction. They are reasons to document conservatively, because the arguments that will be run on a first-generation statute are not yet known and the drafting should not depend on a contested reading.

On ecosystem depth, the honest position is that GIFT IFSC does not yet match established centres for the range of specialist service providers, financing counterparties and institutional familiarity that a large leasing platform draws on. That is an operational consideration rather than a legal one, and it weighs differently for a lessor building an India-focused book, for whom proximity and the tax and exchange control treatment are directly valuable, than for one seeking a global hub in which India is incidental.

The direction of travel is clear enough. The committee process, the consultation and the May 2026 amendments indicate a regulator actively removing structural obstacles as they are identified. A transaction being structured now should be documented against the framework as it stands, with the expectation that it will continue to develop.

9. Frequently Asked Questions

Can a foreign lessor lease aircraft into India through GIFT City?

Yes. A lessor may establish a finance company in GIFT IFSC undertaking leasing, or use a special purpose vehicle incorporated or administered by a registered trust and company service provider, following the IFSCA amendments notified on 12 May 2026. An IFSC unit carrying on permitted financial services is treated as a person resident outside India for exchange control purposes, which permits foreign currency operation from an Indian location.

Can a lessor repossess an aircraft from an Indian airline in insolvency?

Under the Protection of Interests in Aircraft Objects Act, 2025, yes, subject to conditions. The Act gives the Cape Town Convention and Aircraft Protocol force of law in India and has overriding effect over inconsistent legislation including the Insolvency and Bankruptcy Code, 2016. India adopted Alternative A, under which the creditor may take possession on expiry of a two-month waiting period unless defaults are cured. The remedy depends on the international interest having been validly constituted and registered.

What is the TCSP and SPV framework?

A regulatory structure notified by IFSCA on 12 May 2026. Trust and company service providers are recognised as a registered category under the TechFin and Ancillary Services Regulations, 2025, and special purpose vehicles are recognised as a category of finance company under the Finance Company Regulations, 2021, permitted to undertake leasing or financing. Together they allow a complete leasing structure to sit within GIFT IFSC.

What tax benefits apply to an aircraft leasing unit in GIFT City?

An IFSC unit may claim a full deduction of eligible business income for twenty consecutive years out of twenty-five under section 147 of the Income-tax Act, 2025, with income thereafter taxed at fifteen per cent. Separate exemptions apply to non-resident royalty, interest and capital gains connected with aircraft leasing through IFSC units, subject to a commencement sunset extended to 31 March 2030. Current section references under the 2025 Act should be confirmed for the specific structure.

Does an IFSC leasing structure give access to Indian tax treaties?

No. An IFSC unit is not treated as a separate tax resident for treaty purposes. The regime provides unit-level relief and targeted exemptions on defined flows, not treaty-based withholding reduction or capital gains protection.

How are disputes with an Indian operator resolved?

GIFT IFSC has no independent court system. Disputes go to the Indian courts under Indian procedural law unless the parties have agreed to arbitration. Where arbitration is chosen, the seat determines enforceability against Indian assets, because enforcement of a foreign award under Part II of the Arbitration and Conciliation Act, 1996 requires the award to have been made in a territory notified by the Central Government.

10. How R & D Law Chambers Works on These Matters

We advise on Indian law for businesses in India and internationally, wherever a matter has an India connection. Our GIFT IFSC practice covers entity establishment and IFSCA authorisation, regulatory and compliance design, structuring, and the contractual layer, together with insolvency proceedings before the National Company Law Tribunal and international arbitration and enforcement before the Indian courts.

Those are the disciplines a leasing structure into India draws on. The regulatory route into the IFSC determines what the vehicle may do; the insolvency and enforcement analysis determines what the creditor can recover when the operator fails; and the contractual architecture determines which forum decides and whether its decision reaches the assets. We work across those questions rather than treating them as separate exercises.

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This article is for informational purposes only and does not constitute legal or tax advice. The views expressed are those of the author. Specific legal or tax matters should be referred to qualified advisers. 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 (CIOT, London).

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