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Outbound investments from Gujarat International Finance Tec-City (GIFT) International Financial Services Centre (IFSC) continue to face challenges due to tax-related issues, limiting the growth of overseas investment structures. The International Financial Services Centres Authority (IFSCA) has confirmed that it is working with the central government to address these concerns. Industry participants believe reforms in taxation and the tax collected at source (TCS) framework could improve the competitiveness of GIFT IFSC. Despite current hurdles, experts expect outbound investments by Indian investors to increase gradually as portfolio diversification gains importance.
Outbound investments from Gujarat International Finance Tec-City (GIFT) International Financial Services Centre (IFSC) continue to remain limited because of tax-related challenges, and the International Financial Services Centres Authority (IFSCA) is working with the central government to address the issue.
Speaking during a panel discussion at an Artha Bharat Investment Managers IFSC LLP event held in the past week, Pradeep Ramakrishnan, Executive Director at IFSCA, said the authority is already working with the government on issues related to the taxation of outbound investments. He indicated that resolving outbound tax concerns remains one of the key requests raised by investment funds operating from GIFT IFSC.
His remarks come at a time when the industry has been seeking a more competitive tax framework to strengthen GIFT City as a preferred base for outbound investment structures. Market participants have maintained that tax clarity and policy support are important to attract more global investment activity through the financial centre.
During an interview with PTI, Sachin Sawrikar, Managing Partner at Artha Bharat Investment Managers IFSC LLP, said outbound investments from GIFT IFSC remain relatively small and continue to face several constraints. According to him, taxation issues and the existing tax collected at source (TCS) framework are among the major factors affecting the growth of overseas investment activity.
Sawrikar said the IFSC regulator has already made representations to the government regarding these concerns, but the final decision on any policy changes rests with the central government. He added that the present policy framework does not actively encourage outbound investments.
At the same time, he noted that the Liberalised Remittance Scheme (LRS) has already established a framework that allows resident Indians to invest overseas. He believes outbound investments are likely to increase over time despite the existing regulatory and tax-related challenges.
Sawrikar also said overseas investments should not be viewed as capital permanently leaving India, as such investments continue to remain owned by Indian investors and the returns generated eventually benefit them. He explained that overseas investing can serve as a productive deployment of capital while helping investors build diversified portfolios.
He further observed that investors are increasingly recognising the importance of diversifying beyond a single market. According to him, international investments can complement domestic portfolios over the long term by providing broader market exposure and helping manage investment risk.
GIFT IFSC has been positioned by the government as India's international financial services hub and has introduced several regulatory and tax incentives over the past few years to attract global financial institutions, fund managers and investment vehicles. However, industry stakeholders have consistently highlighted the need for further tax reforms, particularly relating to outbound investments, to improve the centre's competitiveness against established international financial hubs.
Source PTI
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