![International Financial Service Centre (IFSC) International Financial Service Centre (IFSC)](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgbys-gi2wa1XrcdzpN-sXC1ocX00y5KzbWkzQuzvC3Ga2mQpbYMIgPFANpnOmXBMbr1Lbv99ERaAUgN_RveI-wc15m1cf58QyBenNAt_StRdQz5YLzF7Fe2bASIr1Wh1Vwsfslb85vg3N8/w640-h386/International-Financial-Services-Centre-IFSC.webp)
International Financial Service Centre (IFSC)
What is the International Financial Services
Centre?
![International Financial Service Centre (IFSC) International Financial Service Centre (IFSC)](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgbys-gi2wa1XrcdzpN-sXC1ocX00y5KzbWkzQuzvC3Ga2mQpbYMIgPFANpnOmXBMbr1Lbv99ERaAUgN_RveI-wc15m1cf58QyBenNAt_StRdQz5YLzF7Fe2bASIr1Wh1Vwsfslb85vg3N8/w640-h386/International-Financial-Services-Centre-IFSC.webp)
- The International Financial Services Centre (IFSC) is a Hub of Financial Services within a country, which has laws and regulations different from the rest of the country.
- These International Financial Services Centre have low tax rates and flexible regulations for securities and currency trading, banking and insurance, which makes them attractive for foreign investment. It can be said that these centres deal mainly with the flow of money, financial product and services across borders.
- These International Financial Services Centre are “International” they deal with the flow of finance and financial products/services across borders which includes banking, insurance, asset management, and most importantly, a well-structured and fully developed capital market for debt, equities, commodities as well as derivatives.
- London, New York and Singapore can be counted as Global Financial Centres. Many emerging International Financial Services Centres (IFSCs) around the world, such as Shanghai and Dubai, are aspiring to play a global role in the years to come.
What are the Services an IFSC can provide?
The following types of finance and financial products/services across borders provided by the IFSCs:
1. Fund-Raising
Services for individuals, corporations and governments.
2. Asset
Management and Global Portfolio Diversification are undertaken
by pension funds, insurance companies and mutual funds.
3. Wealth
Management.
4. Global
Tax Management and Cross-Border Tax Liability Optimization, which
provides a business opportunity for financial intermediaries, accountants and
law firms.
5. Global
and regional Corporate Treasury Management operations that
involve fund-raising, liquidity investment and management and asset-liability
matching.
6. Risk
Management operations such as insurance and reinsurance.
7. Merger
and Acquisition activities among trans-national corporations.
Types of International Financial Services Centre
The International Financial Service Centre (IFSCs)
are generally classified into four categories:
1. Global Financial Centres: These
are centres that genuinely serve clients from all over the world in the
provision of the widest possible array of international financial services
(IFS); e.g. London, New York, Singapore.
2. Regional Financial Centres: These
are centres serve their regional economies rather than their national
economies; Examples of such Regional Financial Centres would be Dubai or Hong
Kong.
3. Non-Global, Non-Regional and Ordinary
International Financial Centres: These are
centres provide a wide range of the International
Financial Services but cater mainly to the needs of their
national economies rather than their regions or the world. In a way they
connect their financial systems to the world; e.g. Paris, Frankfurt, Tokyo and
Sydney.
4. Offshore Financial Centres: These are centres that are primarily tax havens for wealth management and global tax management rather than providing a full array of international financial centres.
What does an IFSC Require?
The International Financial Services Centre such
as Dubai International Financial Centre and Shanghai International Financial
Centre, which is located within Special Economic Zone (SEZ),
have six key building blocks:
1. Rational
Legal Regulatory Framework
2. Sustainable
Local Economy
3. Stable
Political Environment
4. Developed
Infrastructure
5. Strategic
Location
6. Good
Quality of Life
India’s First International Financial Services Centre
- India’s first International Financial Services Centre (IFSC) has been set up at the Gujarat International Financial Tec-City (GIFT City) Gandhinagar, Gujarat.
![]() |
International Financial Services Centre (IFSC) |
- The International Financial Services Centre (IFSC) in GIFT City is being developed as a global financial and information technology services hub designed to be at or above par with Globally Benchmarked Financial Centres such as London, Hong Kong, Singapore, and Dubai attract foreign investors who are willing to trade in foreign currencies. Earlier, there was no such option in India.
- GIFT - IFSC is operational with approximately 10 Leading Banks, 8 Insurance Companies and Participating Brokers, and 2 International Exchanges (India INX and NSE IFSC) along with around 100 capital market players have established their base at GIFT- IFSC.
- GIFT City-IFSC has bagged the 10th spot in the latest edition of Global Financial Centres Index (GFCI), London. GIFT - IFSC is ranked tenth, ahead of Luxembourg, Seoul, Abu Dhabi, Toronto and Beijing are on the list of the GFCI report, which has 15 centres that are likely to become more significant in the next few years. Including GIFT City’s IFSC, six of the top ten emerging centres are in Asia.
Should an IFSC be located within an SEZ?
- As per Section 2 (q) of India's Special Economic Zone (SEZ) Act, 2005, "International Financial Services Centres" means an International Financial Services Centre which has been approved by the Central Government under sub-section (1) of Section 18 of SEZ Act, 2005.
- Section 18 and Section 55 of India's Special Economic Zone Act, 2005 provides for the establishment of an International Financial Services Centre in India within an SEZ in India and enables the Central Government to regulate IFSC activities.
- As per sub-section (1) of Section 18 of SEZ Act, 2005, The Central Government may approve the setting up of an International Financial Service Centre in a Special Economic Zone and may prescribe the requirements for setting up and operation of such centre. Provided that the Central Government shall approve only one International Financial Services Centre in a Special Economic Zone.
![]() |
International Financial Service Centre (IFSC) |
Tax Regime for IFSC in India
The Income-tax Act, 1961 contains the following provisions wherein special benefits, exemptions and deductions are allowed to the units located in an IFSC:
1. The Budget 2016-17 announced the competitive tax regime for IFSC with Tax Exemptions for a Period of 10 Years.
2. A Reduction in Minimum Alternate Tax (MAT)
to 9% from 18.5% (As per
Union Budget 2016) - Surcharge, cess extra.
3. Exemptions from
Dividend Distribution Tax
(DDT), Securities Transaction Tax, Commodities
Transaction Tax and Long
Terms Capital Gains Tax (LTCG).
4.
Short Term Capital Gain
Tax taxable at the rate of 15%.
5. Exemptions from
Customs Duty and Excise Duty, Central Sales Tax, Service Tax or CGST.
6. Exemptions from
VAT, Stamp duty etc. as per State Govt. Policy (Now SGST).
7. Relaxation
from obtaining or Quoting PAN
8. Lower
rate @4% of TDS under Section 194LC
9. Relaxation
from the filing of return of income
10. Deduction
under Section 80LA
11. Concessional
tax rate on transfer of specified
securities Under Section 112A and Section 111A
12. Concessional
tax rate in case of Global Depository
Receipts (GDRs) issued by certain companies under section 115ACA
Participants of IFSC in India
- A wide range of participants including the Banks, Insurance companies, Stock Exchanges, Clearing Corporations & Depositories, Brokers, Investment Advisors, Portfolio Managers, Alternate Investment Funds and Mutual Funds have been permitted to participate in GIFT-IFSC.
- Hon'ble Prime Minister of India inaugurated BSE’s India International Exchange (IFSC) Limited (India INX) and India International Clearing Corporation (IFSC) Limited (India ICC) on January 09, 2017. Subsequently, India InternationalExchange (INX) commenced trading from January 16, 2017. NSE’s International Exchange & Clearing Corporation has also commenced operations in June 2017.
![]() |
International Financial Service Centre (IFSC) |
Regulations/Guidelines for IFSC in India
- The Finance Minister of India, Late Arun Jaitley, while delivering the budget speech for the assessment year 2015–16 announced that the first phase of GIFT will soon become a reality and that appropriate regulations/guidelines governing IFSC would be issued by March 2015.
- Following the Budget 2015-16, the financial regulators viz. the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI) and the Department of Financial Services issued the following regulations and guidelines to operationalize IFSC-GIFT in India under the provisions of the SEZ Act.
1. Foreign Exchange Management (International Financial
Services Centre) Regulations, 2015
2. Scheme for setting up of IFSC Banking Units (IBU) by
Indian Banks.
3. The Securities and Exchange Board of India (International
Financial Services Centres) Guidelines, 2015
4. Insurance Regulatory and Development Authority of India
(Regulation of Insurance Business in Special Economic Zone) Rules 2015
5. Insurance Regulatory and Development Authority of India
(International Financial Services Centre) Guidelines, 2015
- As per SEBI (International Financial Services Centres) Guidelines, 2015, only the following persons can deal in securities listed in IFSC:
1. A
person not resident in India;
2. A
non-resident Indian;
3. A
financial institution resident in India who is eligible under FEMA to invest
funds offshore, to the extent of permitted outward investment;
4. A
person resident in India who is eligible under FEMA, to invest funds offshore,
to the extent allowed under the Liberalized Remittance Scheme of Reserve Bank
of India, subject to a minimum investment as specified by the Board from time
to time.
- The Stock Exchanges operating in IFSC may permit dealing in the following types of securities, and products in such securities, in currency other than Indian Rupee, on their trading platform with a specified trading lot size subject to prior approval of the SEBI:
1.
Equity
shares of a company incorporated outside India;
2.
Depository
Receipt(s);
3.
Debt
securities issued by eligible issuers;
4.
Currency
and interest rate derivatives;
5.
Index-based
derivatives; and
6.
Such
other securities may be specified by SEBI.
- An IFSC Task Force set up in the Department of Economic Affairs in 2016 under the Chairmanship of MoS (Finance & Corporate Affairs) currently oversees all policy and regulatory matters related to developments of IFSC’s in India.
**********
No comments:
Post a Comment
Please do not enter any spam link in the comment box.