Union Budget 2026 Drives Long-Term Growth for GIFT City and Global Financial Services

By CA Gaurav Kanudawala, Founder of GIFT CFO

India’s Union Budget 2026 marks a defining moment for the evolution of GIFT City IFSC as a global financial and business hub. While the budget covers infrastructure, manufacturing, MSME growth, and tax reforms across the country, one of the most powerful and strategic impacts is clearly directed toward strengthening the International Financial Services Centre at GIFT City.

From a CFO’s perspective, this budget is not just an annual financial statement. It is a long-term policy signal to global investors, financial institutions, fintech firms, and multinational corporations that India is serious about building a globally competitive financial ecosystem within GIFT City.

As someone deeply involved in advising businesses on IFSC structuring and cross-border financial planning, I see this budget as a turning point that brings stability, clarity, and long-term confidence to GIFT City participants.

Strong Policy Intent for GIFT City

GIFT City has been steadily growing as India’s answer to global financial hubs like Dubai, Singapore, and London. However, the long-term success of any financial center depends on predictable tax policies, regulatory certainty, and international competitiveness.

Budget 2026 delivers exactly that.

The government has clearly shifted from offering short-term incentives to creating sustainable long-term attractiveness for global businesses operating from GIFT IFSC. This change in direction is visible through three major tax announcements that directly influence IFSC units.

1. Extension of IFSC Tax Holiday to 20 Years

One of the most significant reforms announced is the extension of the tax holiday for IFSC units from 10 years to 20 years out of a block of 25 years. For offshore banking units, a continuous 20-year benefit is also aligned with this approach.

This is a major shift from the earlier structure and addresses a long-standing concern of global investors, insufficient visibility for long-term planning.

Why This Matters

Financial institutions, fund managers, aircraft leasing companies, fintech firms, and global treasury operations make investment decisions with a 15- to 25-year horizon. A 10-year tax window was often considered too short to justify relocating major operations.

By extending the benefit to 20 years, the government has:

• Created long-term tax certainty

• Improved global competitiveness of GIFT IFSC

• Encouraged real substance and job creation, not just temporary setups

• Strengthened India’s position as a serious alternative to offshore financial centres

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From a CFO standpoint, this reform changes the investment return model for IFSC units in a very positive way.

“Extending the GIFT IFSC tax holiday from 10 to 20 years is a game-changing move by the Government of India for its long-term growth. Beyond the tax holiday, a concessional 15 percent tax on IFSC business income brings global competitiveness and long-pending clarity. This gives continuity for existing businesses and confidence to new corporates exploring India via GIFT IFSC. This will create significant employment opportunities in GIFT IFSC.”

2. Concessional 15% Tax After Tax Holiday

Another critical step is the proposal that, after the tax holiday period, IFSC units will be taxed at a concessional corporate tax rate of 15%.

This ensures that businesses do not face a sudden jump to standard domestic tax rates after the incentive period ends.

Strategic Impact

This is extremely important because global financial centers compete on effective long-term tax cost, not just initial tax holidays.

With this reform:

• Businesses can now model stable long-term tax outflows

• GIFT IFSC becomes more aligned with international financial jurisdictions

• It encourages companies to build permanent operational presence, not temporary tax-driven structures

For CFOs managing global structures, this provides predictability in cash flow planning and internal rate of return calculations.

3. Relief for Global Treasury Centres

The budget also provides an exemption to Global Treasury Centers in IFSC from the deemed dividend provisions.

This is a highly technical but very impactful reform.

Why This Is Important

Global treasury centers handle intra-group financing, cash pooling, and capital structuring. Deemed dividend provisions often created tax uncertainty in cross-border group transactions.

This exemption:

• Reduces tax friction in group financing structures

• Makes GIFT City more attractive for multinational treasury operations

• Positions IFSC as a regional or global treasury hub location

For large multinational groups, treasury centralization is a multi-billion-dollar decision. This reform directly supports that shift toward India.

What Was Expected but Missed

While the budget made strong progress, there are areas where the industry expected further clarity.

1. MAT Carry Forward Period

The carry forward of the Alternate Minimum Tax under section 115JD currently allows credit for 15 years. Industry expected this to be aligned with the extended 20-year tax holiday for IFSC units, but this was not included.

2. Clarity on MAT Phase-Out

With MAT proposed to be phased out and treated as a tax, the specific position for IFSC units needs clarification.

From a CFO perspective, these are technical but important aspects that impact long-term tax modeling. The expectation is that further notifications or amendments will address these concerns.

Broader Budget Measures Supporting GIFT City Growth

Although the above reforms directly target IFSC, several other budget provisions indirectly strengthen GIFT City.

Financial Sector Strengthening

The focus on deepening capital markets, improving banking competitiveness, and encouraging global financial participation complements the growth trajectory of IFSC exchanges, fund management platforms, and fintech entities.

Infrastructure and Digital Push

Increased capital expenditure and digital infrastructure expansion support the ecosystem around GIFT City, making it more viable as a long-term business location for global firms.

Ease of Doing Business

Simplification of tax laws and regulatory processes aligns with the needs of international players who compare jurisdictions on compliance efficiency.

Employment and Economic Multiplier

The long-term nature of these IFSC reforms means companies will invest in:

• Skilled finance professionals

• Risk management teams

• Compliance and regulatory staff

• Technology and fintech talent

This will drive high-value employment in GIFT City and contribute to India’s ambition of becoming a global financial services powerhouse.

CFO View on the Direction of Policy

From a strategic finance perspective, the government is sending a clear message:

GIFT City is not just an experiment. It is a long-term pillar of India’s global economic strategy.

The shift from short incentives to structural tax competitiveness shows policy maturity. For global investors, stability matters more than temporary benefits, and this budget moves strongly in that direction.

Conclusion

Union Budget 2026 will be remembered as the budget that strengthened the long-term foundation of GIFT City IFSC. By extending the tax holiday, introducing a concessional post-holiday tax regime, and providing relief to global treasury centers, the government has enhanced India’s standing in the global financial landscape.

There are still technical refinements expected, particularly around MAT, but the overall direction is clear and positive.

As founder of GIFT CFO, I see this as a strong opportunity for businesses across banking, fund management, fintech, leasing, insurance, and treasury operations to seriously evaluate GIFT City as their global or regional base.

GIFT City is entering its next phase of growth driven by stability, clarity, and long-term vision.

For strategic IFSC structuring, tax planning, and CFO advisory in GIFT City.

Call: +919726372715 Email: info@giftcfo.com

Consult with the GIFT CFO to build your global financial presence from India.