Core Insights - The International Financial Services Centre (IFSC) at GIFT City is positioned as a key element in India's economic strategy for banking, capital markets, and insurance, with a focus on creating a globally competitive financial hub [4][6] - Deloitte recommends tax and regulatory reforms in the upcoming Budget 2026 to enhance the attractiveness of IFSC GIFT City for global financial institutions [6][7] Tax Treatment Recommendations - Broker-dealers and finance companies in IFSC GIFT City should receive the same tax treatment as International Banking Units (IBUs) established by foreign banks to level the playing field [5][6] - Current income-tax laws provide broader exemptions to IBUs compared to non-bank entities, which limits the growth potential of broker-dealers and finance companies [5][6] GAAR and Tax Certainty - Deloitte advocates for an exemption from India's General Anti-Avoidance Rules (GAAR) for IFSC units to enhance tax certainty and attract more businesses [5][6] - The requirement for IFSC units to demonstrate significant economic substance under IFSCA oversight is already in place, supporting the case for GAAR exemption [6] Transfer Pricing Concerns - Section 92C(4) of the Income-tax Act currently denies IFSC units the benefit of a 100% income-tax holiday on income enhanced through transfer pricing adjustments, which could lead to litigation and undermine confidence [6][7] - Exempting IFSC units from this provision would strengthen India's position as a credible financial hub [6] TDS Recommendations - Deloitte suggests removing tax deduction at source (TDS) on all payments to IFSC units eligible for the 10-year, 100% tax deduction under section 80LA to reduce compliance burdens [6][7] - This recommendation is relevant for foreign banks operating IBUs in GIFT City, regardless of their tax status [7]
Budget expectations 2026: Deloitte pitches parity rules, compliance clarity to scale IFSC GIFT City as global BFSI hub