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Central Board of Direct Taxes (CBDT) has clarified that non-resident investors will not be taxed on income from foreign investments that go through Alternate Investment Funds (AIFs) set up in the GIFT City IFSC (International Financial Services Centre).
Circular comes as a clarification on an earlier notification CBDT issued, in which it notified that an investor’s income from investments made outside India will not be taxed. The CBDT reasoned that such an investment will not be taxed in India because it would be deemed as a direct investment outside of India.
The clarification on tax exemption for non resident investors in GIFT City AIFs is a welcome move for our Indian financial services industry. It will help to attract more foreign investment into country and boost the growth of GIFT City IFSC.
CBDT’s circular states that the tax exemption will apply to income from all types of foreign investments including equity, debt and derivatives. The exemption will also apply to income from investments made through AIFs that are set up in GIFT City or outside of GIFT City.
Impact of the Circular
Clarification on tax exemption for non resident investors in GIFT City AIFs is likely to have a positive impact on the Indian financial services industry. The exemption will make it more attractive for foreign investors to invest in India and it will boost economic progress of GIFT City IFSC.
Exemption will also help to attract more foreign capital into the country. This will help to support economic growth and create jobs.