In a significant move to strengthen India’s push as a global financial hub, the Union Budget 2026–27 announced that businesses operating within the Gujarat International Finance Tec-City (GIFT City) will now enjoy a 20-year tax holiday — doubling the previous 10-year exemption period. This change aims to make GIFT City far more attractive to international and domestic financial players considering long-term operations in India.
What the Tax Holiday Extension Means
Under the new budget provisions, companies that set up operations in GIFT City’s International Financial Services Centre (IFSC) can now receive tax exemptions on business income for 20 consecutive years out of a 25-year window. After the expiration of this tax-free period, these entities will be subject to a concessional 15% corporate tax, which is highly competitive compared to the regular Indian corporate tax rates that can range between 25% to 35% elsewhere in the country.
This extended tax holiday is designed to provide long-term fiscal certainty for financial firms and related businesses that may require extended planning horizons. Financial institutions typically make capital, infrastructure and staffing decisions years in advance, and knowing they can operate tax-free for two decades reduces long-term risk and encourages deeper investments.
Level Playing Field for Early Entrants
The extension also addresses concerns about earlier entrants to GIFT City. Some established financial units, including public sector bank branches and other IFSC participants that set up operations years ago, were approaching the end of the original 10-year exemption window. The budget’s new provision restructures the incentive framework to ensure that both legacy players and new entrants can plan for extended periods with similar benefits, potentially leveling the competitive landscape within the hub.
Boost to Global Financial Services Ecosystem
GIFT City, India’s first operational international financial services hub, is part of the government’s broader strategy to attract offshore banking units, fund managers, exchanges, reinsurers and fintech firms to India. With the extended tax holiday, the IFSC becomes more competitive with other global finance centers, potentially attracting capital that might otherwise have flowed to established hubs in Singapore, Dubai or London.
Long-Term Investment and Economic Impact
Analysts believe the extended tax incentives could lead to greater foreign direct investment (FDI) into India’s financial sector and nearby infrastructure, job creation in high-value services, and improved overseas market participation. Clearer tax certainty and a predictable post-holiday tax rate of 15% also help foreign firms evaluate GIFT City as a long-term operational base for global transactions, treasury services and financial product innovation.
Looking Ahead
The tax holiday extension for GIFT City units will take effect from the beginning of the 2026–27 financial year, creating a stronger foundation for the centre’s growth in the coming decade. As India continues to refine its financial policy frameworks, such measures could play a key role in positioning the country as a major international financial services destination.
