No short-term tax on GIFT derivatives for foreigners

Mumbai: The Budget has sought to prevent more of the derivatives trade from moving offshore by exempting foreign investors from short-term capital gains tax on trades in such instruments at Gujarat International Finance Tech (GIFT) City’s International Financial Services Centre (IFSC), bringing it on a par with Singapore and Dubai.

“There is an apprehension that futures trading on Indian stocks may move to offshore exchanges such as SGX,” said Sameer Gupta, EY financial services tax leader. To counter this, “the Finance Bill proposes that transactions in derivatives, bonds, GDRs (global depository receipts) by a nonresident on a stock exchange located in an IFSC shall be exempt from capital gains tax in India.” They are also not liable for the 9 per cent minimum alternate tax that applies to IFSC units.

Foreign portfolio investors were paying 30 per cent short-term capital gains on derivative trades at GIFT City’s IFSC platforms against zero tax in Singapore and Dubai.


The government halved alternate minimum tax to 9 per cent from 18.5 per cent to encourage private equity funds to set up offices in GIFT City. The government has also proposed to set up a unified authority for the regulation of all financial services offered by IFSCs in India.