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Tata Capital > Blog > Wealth Services > Union Budget 2026: GIFT City investments just got better

Wealth Services

Union Budget 2026: GIFT City investments just got better

Union Budget 2026: GIFT City investments just got better

India’s Union Budget 2026 has allocated a record public capital expenditure of Rs. 12.2 lakh crore, which represents 4.4% of the nation’s GDP. The budget also proposed a landmark reform to strengthen GIFT City’s stature as a global financial hub. It has extended the tax holiday for businesses operating in Gujarat International Finance Tec-City (GIFT City) from 10 years to 20 years. It reflects the government’s long-term commitment towards making GIFT City a hub that attracts global capital, promotes financial services, and positions India as an attractive destination for international banking, insurance, and investment activities.

Budget boost for GIFT City investments

GIFT City is India’s first International Financial Services Center (IFSC), designed to be India’s premier global financial hub, to compete with Singapore, Dubai, and London. This year’s union budget has extended the tax holiday for GIFT City businesses to 20 years. This provides a strong incentive to domestic and international financial institutions to set up units in GIFT City and get a tax holiday for 20 consecutive years.

Before this year’s budget proposal, entities operating in GIFT City received a 10-year tax exemption, which could be spread over 15 years. The extension of this exemption period hands tax certainty to establishments and makes GIFT City a more attractive proposition for long-term investment.

The tax benefit doesn’t end with this 20-year holiday. Once the tax holiday ends, the tax concession comes into prominence. GIFT City businesses will be taxed at a concessional rate of 15%, which is significantly less than the standard corporate tax rate. Foreign companies operating outside GIFT City are subject to around 35% corporate tax. This competitive tax structure means that GIFT City remains one of the most attractive financial jurisdictions globally even after the initial 20 years.

Who could be interested?

The tax holiday extension is likely to be of interest to international banking units, fund managers, insurers, and reinsurers. For a financial institution making a large capital investment, GIFT City offers long-term stability and predictability in terms of tax and cash flow. Recent numbers also confirm this, as external commercial borrowings routed through GIFT City aggregated at around $55.7 billion as of December 2025.

These tax incentives are also important for global reinsurers, treasury centers, asset managers, and shipping finance companies. They, too, require long-term tax certainty and stable regulatory environments to operate in a country or location. A 20-year tax holiday and a lower subsequent tax rate send a strong signal that GIFT City is ready for the long race to become a popular global financial center. By positioning GIFT City attractively, India can increase Foreign Direct Investment (FDI), broaden capital markets, and reduce its dependency on overseas financial centers.

For multinational corporations, establishing treasury centers in GIFT City can be useful for managing global financial operations.

GIFT City reforms can lead to an increase in high-value financial activities such as foreign currency lending, global fund management, and cross-border financial services.

GIFT City as of now

Since the setting up of the International Financial Services Centers Authority in 2019, more than 1,000 entities have registered with the authority. GIFT City hosts entities from sectors like banking, asset management, aviation, ship leasing, reinsurance and more. It also hosts 35 banks that have cumulatively disbursed more than $100 billion in foreign currency loans. With IFSC units of banks like SBI, Yes Bank and Bank of Baroda nearing the end of their tax holiday period, the extension has come as a timely incentive.

Apart from the tax holiday extension, the budget also proposed changes to the tax treatment of inter-group loans and advances that are routed through IFSC-based treasury centers.

Summing up

The extension of the tax holiday for GIFT City will strengthen investor confidence, making the hub more attractive to global financial institutions, including banks, fund managers, and multinational corporations. It will improve GIFT City’s position as an international financial hub and encourage global firms to establish operations there. Lastly, increased financial activity in GIFT City will also generate employment in areas like banking, legal services, technology, compliance, and consulting.

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FAQs

What is the tax holiday announced in Budget 2026 for GIFT City?

The Union Budget 2026 has extended the existing tax holiday of 10 years within 15 years to 20 consecutive years. It is available to businesses registered in the GIFT City. After the end of the tax holiday, tax will be levied at a concessional rate of 15%. This is significantly lower than the corporate tax rates applicable to foreign companies in India.  

Why is the government promoting GIFT City?

The government wants to position GIFT City as a global financial hub that challenges existing hubs like Singapore, London and Dubai. By doing so, GIFT City can attract foreign investment and increase financial activity in India, while reducing dependency on overseas financial centers.

How will this reform impact India’s economy?

The reform will attract more business entities to GIFT City and convince them to stay in the hub for the long run. This, in turn, will boost financial services, increase foreign investment, generate employment opportunities and strengthen GIFT City’s position as a global financial center.
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