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Budget offers incentives for International Finances Services Centre units

Published: Feb 03, 2025

By TIOLCorplaws News Services

NEW DELHI, FEB 03, 2025: IN a move to further promote the growth of International Financial Services Centres (IFSCs) in India, the government has proposed several tax incentives and amendments aimed at enhancing the sector's attractiveness for both domestic and international businesses. The proposed changes are part of efforts to foster a world-class financial infrastructure in the country.

Extension of Sunset Dates for Tax Concessions

The government plans to extend the sunset dates for the commencement of operations in IFSC units. Tax concessions related to the relocation of funds and the start of operations in IFSC will now be extended until March 31, 2030. These amendments will take effect from April 1, 2025, ensuring long-term support for businesses operating in the IFSC.

Exemption on Life Insurance Policies from IFSC Insurance Offices

A significant change has been proposed for life insurance policies issued by IFSC Insurance offices. Currently, the exemption on life insurance proceeds is subject to premium limits-?2.5 lakh for unit-linked policies and ?5 lakh for others. The new proposal aims to exempt life insurance proceeds from IFSC Insurance offices for non-residents, without the existing premium limits, providing parity with other foreign jurisdictions. This amendment is also set to take effect from April 1, 2025.

Capital Gains and Dividend Exemption for Ship Leasing Units in IFSC

In a bid to expand the tax benefits to the ship leasing sector, the government has proposed extending the existing tax exemptions for aircraft leasing units to those engaged in ship leasing within IFSCs. Non-resident investors and IFSC units involved in ship leasing will be exempt from capital gains tax on the transfer of equity shares, as well as from dividend tax on payments made within the IFSC ship leasing business. This change will also take effect from April 1, 2025.

Rationalisation of Dividend Definition for Treasury Centres in IFSC

The government has also proposed rationalising the definition of "dividend" for corporate treasury centres in IFSCs. The revision addresses concerns about potential tax implications for loans and advances made between group entities, especially in cases where one entity operates as a global or regional corporate treasury centre. Under the proposed amendments, loans or advances between group entities-where one is a finance company or finance unit in an IFSC-will not be treated as "dividend." These changes aim to ensure smoother operations for treasury centres in India's IFSCs and are set to be effective from April 1, 2025.

These proposed changes reflect the government's continued efforts to make India's IFSCs more competitive and attractive to global financial services businesses, with the goal of positioning India as a hub for international finance.

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