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What is a Tax Holiday in GIFT City?

Key Takeaways

The GIFT City tax holiday offers eligible businesses an income tax exemption for 20 consecutive years within a block of 25 years.
Both existing and new businesses in GIFT City can avail of the tax holiday, subject to applicable eligibility and requirements.
After the tax holiday period ends, businesses face a flat 15% tax rate on business income.

20 Aug 2026 by Team FinFIRST

Through Gujarat International Finance-Tec (GIFT) City, the government seeks to drive business expansion, accelerate economic development, and position India’s International Financial Services Centre (IFSC) as a globally reputable hub.

Aligned with this vision, GIFT IFSC offers a tax holiday. This temporary suspension of taxes on businesses, institutions, or individuals encourages industrial expansion, attracts investment, and benefits consumers during the defined period.

This blog offers a quick overview of the GIFT City tax holiday benefit.

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How does the GIFT City tax holiday work?

The following are key benefits of the GIFT City tax holiday:

Updated tax holiday: Now, as per the Union Budget 2026, the tax holiday duration has been extended. This means businesses are exempted from income tax for 20 consecutive years within a block of 25 years.

Post-tax-holiday taxation: Once the 20-year tax holiday ends, businesses face a flat 15% tax rate on business income, ensuring continued tax efficiency.

How beneficial is the GIFT City tax holiday?

Here are the key benefits you can leverage as a stakeholder from the GIFT City tax holiday:

Tax relief

Business revenues often fluctuate, making it challenging to maintain significant income, especially when starting or facing adversity. During these times, leveraging GIFT City’s 20-year tax holiday can be an effective strategy. It reduces your tax liability and enables you to allocate resources to essential business needs.

Redirect tax savings

You need capital to start your business, to grow it, and to sustain it at every stage. A practical way to arrange the necessary capital is to take advantage of the GIFT City 20-year tax holiday. Taxes that you would normally pay over 20 years can be redirected into your business for its growth and development.

Attract capital

Ambitious business plans often require substantial capital. You can attract investment both domestically and globally. Apart from your business’s prospects and financials, the GIFT City 20-year tax holiday appeals to investors by enhancing potential returns.

Who is eligible for the GIFT City tax holiday, and how can it be availed?

Knowing the eligibility rules and steps to claim the benefit can help businesses get the most from tax holiday benefits in GIFT City.

GIFT City tax holiday eligibility:

All existing and new businesses in GIFT City are eligible to avail of the tax holiday benefit.

For all existing businesses, the current GIFT City tax holiday period will also be considered.

For example, if a business has already utilised 5 years of its initial tax holiday, it will be eligible for an additional 15 years of tax benefits as announced in the Union Budget 2026.

GIFT City tax holiday procedure:

To avail of the GIFT City tax holiday, businesses must meet the following requirements:

Establish your business in GIFT City: A business entity must be set up and registered within GIFT City.
Obtain regulatory approval: To set up your business in the GIFT City, you need to obtain approval from the International Financial Services Centre Authority (IFSCA). Upon successful approval, you will receive your business license.
Apply for tax benefits under applicable provisions: You can claim the 100% income tax exemption while filing Income Tax Return for GIFT city unit.
Maintain compliance with documentation requirements: Once business operations begin, they must continue for 20 years. Ensure you submit all required documents when applying for exemption under this section. Provide any additional details or documentation promptly if requested by the Income Tax Department.

In addition to tax benefits, GIFT City offers banking infrastructure that facilitates cross-border financial activities. For example, IDFC FIRST Bank offers the GIFT City Savings Account through its international banking unit in GIFT City. It allows eligible Non-Resident Indians to hold foreign currency deposits and access banking services under the IFSC regime.

Summing it up

A tax holiday is a temporary reduction or exemption of government-imposed taxes. This can include income tax, property tax, sales tax, or other applicable taxes. In the case of the Gujarat International Finance-Tec (GIFT) City, it is the income tax exemption. Both existing and new businesses in the GIFT City can avail of this tax holiday for a consecutive period of 20 years within a 25-year block. This may facilitate industrial growth and, in turn, drive the economy forward.

Frequently Asked Questions

What is the duration of the GIFT City tax holiday?

As per the Union Budget 2026, the GIFT City tax holiday is for 20 years, in a block of 25 years. Earlier, the duration was 10 years in a block of 15 years.

Can the GIFT City tax holiday be utilised in an arbitrary manner, or consecutively?

The GIFT City tax holiday benefit must be utilised consecutively. Hence, carefully consider when you want to opt for it.

Who can avail the GIFT City tax holiday?

All existing and new businesses can avail themselves of the GIFT City tax holiday benefit.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirst.bank.in for latest updates.