Introduction
The Indian government has introduced a new exemption from capital gains tax for units of investment trusts and exchange traded funds (ETFs) issued by entities based in Gujarat International Finance Tec-City (GIFT City) or traded in exchanges there. This move aims to promote GIFT City as a tax-neutral enclave for the financial sector.
Exemption Details
The Central Board of Direct Taxes (CBDT) has notified the exemption for the following:
- Units of investment trusts
- Units of schemes
- Units of ETFs launched under the International Financial Services Centres Authority (Fund Management) Regulations, 2022.
Expanding Incentives for Funds and Stock Market Trading
The law currently provides exemption from capital gains tax for securities traded on the stock exchanges in GIFT City or issued by entities in GIFT City. With the introduction of the new fund regime, which allows funds to be set up as investment trusts, units issued by such trusts are now included in the exemption from capital gains tax. Furthermore, ETFs listed and trading on stock exchanges in GIFT City also qualify for capital gains tax exemption. These changes enhance the scope of incentives available for funds and stock market trading in the International Financial Services Centre (IFSC) of GIFT City.
Promoting IFSC as a Global Financial Services Hub
The notification aligns with the objective of positioning the International Financial Services Centre as a significant hub for financial services worldwide. It aims to incentivize non-resident investors who trade on a recognized stock exchange. However, it is important to note that to benefit from this exemption, the consideration for the transaction must be paid or payable in foreign currency.
Conclusion
The Indian government’s move to exempt capital gains tax for units of investment trusts and ETFs in GIFT City aims to attract more non-resident investors and make IFSC a competitive global destination for financial services. These relaxations in the tax regime are a welcome development that will help boost investment and trading activities in GIFT City.
Disclaimer:
The information provided in this article is based on the latest Acts, Rules, Circulars, Notifications, Provisions, Press Releases, and other applicable material available at the time of compilation. We have diligently ensured the completeness and accuracy of the material. However, it is essential for users to consult the relevant legislation for specific guidance. Please note that the data provided may be subject to change without prior notice and should not be considered as professional advice. Estabizz Fintech holds no liability for any outcomes resulting from the use of this material.
