Units of REITs and ETFs issued by companies headquartered in GIFT City or traded on local exchanges are to be exempt from capital gains tax, according to the government. Any unit of an investment trust, a unit of a scheme, or a unit of an ETF launched under the International Financial Services Centres Authority (Fund Management) Regulations, 2022, are exempt from capital gains tax, according to a notification from the Central Board of Direct Taxes (CBDT).
A tax-neutral financial industry hub is being marketed as Gujarat International Finance Tec-City (GIFT)-IFSC. Financial Services Partner at Nangia Andersen LLP According to Sunil Gidwani, the law as it stands now exempts a variety of securities—whether they are traded on the stock exchanges in GIFT city or securities issued by organizations based there—from paying capital gains tax.
“The new fund regime provides for funds to be set up as investment trusts, and hence, the law required the inclusion of units issued by such trusts for the purpose of exemption from capital gains.
“Similarly ETF listed and trading on the stock exchanges in GIFT city would now qualify for capital gains tax exemption. These changes would further expand the scope of incentives available for funds and stock market trading in IFSC,” Gidwani added AKM Global Tax Partner Amit Maheshwari said the notification is in line with the objective of making the International Financial Services Centre (IFSC) a hub for financial services in the world and incentivising non-resident investors on a recognised stock exchange.
“It is important to note that to take advantage of this exemption, the consideration for such a transaction should be paid or payable in foreign currency. The securities, which are added through the new notification, include (i) a unit of Investment Trust, (ii) a unit of a Scheme, and (iii) a unit of an exchange-traded fund. “These relaxations are a welcome move by the government and will make it globally more competitive for the non-resident investors,” Maheshwari added.
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