India's federal budget on Sunday doubled the tax holiday for businesses establishing operations in a low-tax city located in Prime Minister Narendra Modi's home state to 20 years.
The tax boost for GIFT City comes as it is attracting increased interest from large global reinsurers. The Indian government is pitching the city as a gateway for global capital flows.
After the end of 20 years these businesses will be taxed at a flat rate of 15%, the federal budget proposed.
Foreign companies setting up units in Indian regions outside of Gujarat International Finance Tec‑City, or GIFT City, are taxed at a base rate of 35%.
"This will encourage both global and domestic institutions to structure international financial services business within India’s own financial hub," Dipesh Shah, executive director at the regulator for financial services at GIFT City told Reuters.
"Today’s announcement will provide long-term tax certainty and predictability to the IFSC (international financial services centre) ecosystem."
