Regulator Engages with Government as Industry Seeks More Competitive Tax Framework for Overseas Investments
The International Financial Services Centres Authority (IFSCA) is working with the Government of India to address tax-related challenges affecting outbound investment funds operating from GIFT City, according to a senior IFSCA official.
Speaking during a panel discussion at an event organised by Artha Bharat Investment Managers IFSC LLP, Pradeep Ramakrishnan, Executive Director at IFSCA, said the regulator is actively engaging with the government on issues relating to outbound taxation, a key concern raised by investment funds operating through Gujarat International Finance Tec-City (GIFT IFSC).
The development comes as industry participants continue to advocate for a more competitive tax framework to strengthen GIFT City's position as an international financial centre and encourage overseas investment structures from India.
IFSCA Confirms Discussions on Outbound Tax Issues
During the panel discussion, Pradeep Ramakrishnan stated that IFSCA is already working with the government on tax matters affecting outbound investments.
According to him, taxation remains one of the principal concerns highlighted by fund managers operating from GIFT IFSC.
The regulator indicated that discussions are underway, although any policy changes would ultimately depend on decisions taken by the Government of India.
Industry Says Tax Challenges Continue
Speaking separately, Sachin Sawrikar, Managing Partner at Artha Bharat Investment Managers IFSC LLP, said outbound investments through GIFT IFSC remain relatively limited due to multiple constraints.
According to Sawrikar, key challenges include:
- Tax treatment of outbound investment structures
- Tax Collected at Source (TCS) provisions
- Existing policy limitations affecting overseas investment
He noted that IFSCA has already made representations to the government regarding these concerns, while emphasising that the final decision rests with policymakers.
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Liberalised Remittance Scheme Already Provides a Framework
Sawrikar observed that India's Liberalised Remittance Scheme (LRS) already provides resident individuals with a framework for investing overseas.
While acknowledging current challenges, he expressed the view that outbound investments are likely to increase over time as global diversification becomes an increasingly important component of investment portfolios.
Industry participants believe improvements to the tax framework could further support this trend.
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Overseas Investments Seen as Portfolio Diversification
According to Sawrikar, overseas investments should not be viewed as permanent capital outflows from India.
He noted that such investments remain owned by Indian investors and that any returns generated ultimately accrue to them.
He further stated that international investments can serve as a productive use of capital while complementing domestic investment portfolios through geographical diversification.
Investment professionals increasingly recognise that diversified portfolios across multiple jurisdictions may help manage concentration risk over the long term.
GIFT City Continues to Evolve as a Global Financial Hub
Over recent years, GIFT IFSC has emerged as India's flagship international financial centre, offering a dedicated regulatory environment for banking, fund management, insurance, capital markets and financial services.
Industry stakeholders have consistently sought greater tax parity with competing international financial centres to improve the competitiveness of funds established in GIFT City.
The ongoing discussions between IFSCA and the Government are expected to be closely watched by domestic and international fund managers considering outbound investment structures through the IFSC.
Cross-border investment vehicles also require comprehensive Cross Border Payment planning and regulatory compliance to facilitate efficient international capital deployment.
Policy Discussions Continue
At present, IFSCA has confirmed that discussions with the Government are ongoing regarding outbound taxation.
No specific timeline or details regarding potential policy changes have been announced.
Any modifications to the tax framework would be subject to government approval and future policy notifications.