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GIFT IFSC Boosted by Union Budget with New VCC Structure

-Introduction

-Overview of GIFT IFSC and the Union Budget 2024-25

-What is a Variable Capital Company (VCC)?

-Benefits of the VCC Structure for GIFT IFSC

-Exemptions and Incentives for GIFT IFSC

-Financial Leasing and Pooled Funds

– Impact on Non-Resident Indians (NRIs) and Foreign Investors

-Anticipated Reforms and Pending Issues

-Why Choose PropRaise Realtors for Investment in GIFT City

-Conclusion

Introduction

The Union Budget 2024-25 has introduced several incentives aimed at bolstering the International Finance Services Centre (IFSC) at GIFT City in Gujarat. One of the most significant introductions is the Variable Capital Company (VCC) structure, a globally recognized vehicle for investment funds. This new structure is set to enhance GIFT IFSC’s attractiveness, particularly for Non-Resident Indians (NRIs) and foreign investors, by providing greater clarity and ease of doing business.

Overview of GIFT IFSC and the Union Budget 2024-25

The GIFT (Gujarat International Finance Tec-City) IFSC is India’s first operational smart city and international financial services center, designed to offer world-class infrastructure and a conducive business environment. The Union Budget 2024-25 has introduced several measures to make GIFT IFSC more attractive to investors and financial institutions.

Key highlights from the Budget include:

  • Exemptions for retail and exchange-traded funds (ETFs), aligning them with Alternate Investment Funds (AIFs) and other existing funds.
  • Introduction of the Variable Capital Company (VCC) structure to enhance investment opportunities.
  • Legislative approval for more efficient financial leasing of aircraft and ships.
  • Exemptions for Venture Capital Funds (VCFs) located in IFSC.

What is a Variable Capital Company (VCC)?

A Variable Capital Company (VCC) is an innovative structure for investment funds that is recognized globally. It allows for greater flexibility in fund management and is commonly used in financial hubs like Singapore, Luxembourg, and Mauritius. The VCC structure simplifies the creation of new funds by allowing multiple funds to be created within the same structure while being firewalled from each other. This reduces costs and complexity, making it an attractive option for fund managers.

Benefits of the VCC Structure for GIFT IFSC

The introduction of the VCC structure in GIFT IFSC brings several benefits:

  • Flexibility: VCCs allow for different types of funds to be established under a single entity, which can cater to various investment strategies and requirements.
  • Cost Efficiency: By consolidating multiple funds within one structure, administrative and compliance costs are reduced.
  • Attractiveness to Global Investors: The globally recognized VCC structure makes GIFT IFSC more appealing to international fund managers and investors.
  • Enhanced Fund Management: VCCs provide a robust framework for fund management, enabling efficient capital raising and deployment.

Exemptions and Incentives for GIFT IFSC

The Union Budget has introduced several exemptions and incentives to stimulate growth in GIFT IFSC, particularly focusing on Non-Resident Indians (NRIs) and foreign investors:

  • Exemptions for Retail and ETFs: These funds now enjoy the same exemptions as AIFs, making them more attractive to investors.
  • Tax Exemptions: The Budget exempts Venture Capital Funds (VCFs) in IFSC from explaining the source of funds when extending loans or other amounts to assessees, aligning them with other similar entities.
  • Section 68 Exemption: The exemption under Section 68, which seeks to tax unexplained cash credits, now applies to GIFT IFSC AIFs, ensuring parity with SEBI AIFs.

Financial Leasing and Pooled Funds

The Budget has outlined plans for more efficient and flexible financial leasing of aircraft and ships, as well as for pooled funds of private equity through the VCC structure. These measures will:

  • Simplify Fund Creation: The VCC structure allows multiple funds to be created within the same entity, reducing costs and complexity.
  • Boost Leasing Activities: More efficient financial leasing will attract more businesses to GIFT IFSC, enhancing its position as a global financial hub.
  • Encourage Private Equity: Pooled funds through the VCC structure will stimulate private equity investments in GIFT IFSC.

Impact on Non-Resident Indians (NRIs) and Foreign Investors

The incentives and exemptions introduced in the Union Budget are expected to attract more NRIs and foreign investors to GIFT IFSC. Key benefits for these investors include:

  • Greater Clarity and Ease of Doing Business: The new measures provide a clear regulatory framework, making it easier for NRIs and foreign investors to invest in GIFT IFSC.
  • Attractive Investment Opportunities: With the introduction of the VCC structure and other exemptions, GIFT IFSC offers a more attractive investment landscape.
  • Tax Benefits: The alignment of tax treatment for Retail Schemes and ETFs with Category III IFSC AIFs provides significant tax advantages for investors.

Anticipated Reforms and Pending Issues

While the Union Budget has introduced several positive measures, some anticipated reforms remain pending:

  • Overseas Direct Investments (ODIs): Clarity on the tax framework for ODIs by non-banking units is still awaited.
  • Insurance Proceeds: There is a need for clarity on the taxation of insurance proceeds in IFSC.
  • Further Reforms: Continued reforms are necessary to fully realize the potential of GIFT IFSC as a global financial hub.

Why Choose PropRaise Realtors for Investment in GIFT City

PropRaise Realtors is your trusted partner for investing in GIFT City. Here’s why you should choose us:

  • Expertise in GIFT City Real Estate: With extensive knowledge and experience in the GIFT City property market, we provide valuable insights and guidance to investors.
  • Comprehensive Services: From identifying lucrative investment opportunities to managing your real estate portfolio, we offer end-to-end services to meet your needs.
  • Client-Centric Approach: We prioritize our clients’ needs and work diligently to ensure their investment goals are achieved.
  • Strong Network: Our strong network within the real estate and financial sectors allows us to offer exclusive deals and opportunities to our clients.
  • Commitment to Excellence: At PropRaise Realtors, we are committed to delivering the highest standards of service and ensuring the success of your investments.

Invest In GIFT City's Best Properties with PropRaise Realtors.

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GIFT IFSC Boosted by Union Budget with New VCC Structure