Deloitte’s Budget 2026 pitch: parity rules and tax clarity to scale IFSC GIFT City
Ahead of Budget 2026, Deloitte has urged the government to address tax and compliance frictions at IFSC GIFT City, arguing that parity in treatment and clearer rules could attract more global financial players and deepen India’s offshore financial hub ambitions.
Why GIFT City is being framed as a global BFSI bet
With global banks, broker-dealers and capital market participants exploring India as a base for offshore-style financial activity, Deloitte has recommended a set of Budget 2026 changes aimed at accelerating the scale-up of the International Financial Services Centre (IFSC) at GIFT City. The firm’s core argument is that India can convert growing interest into sustained presence only if regulatory and tax design removes asymmetries that currently make some structures more attractive than others.
Parity between IBUs and non-bank market entities
One of the key proposals is parity in tax outcomes for broker-dealers and finance companies relative to International Banking Units (IBUs). While current frameworks allow multiple types of IFSC entities to carry out sophisticated cross-border products and exposures, Deloitte flagged that tax exemptions and capital gains treatment can differ by entity type, creating friction and potentially discouraging non-bank players from scaling operations.
GAAR certainty and fewer disputes
Deloitte also argued for higher tax certainty by seeking an exemption from India’s General Anti-Avoidance Rules (GAAR) for IFSC units and transactions involving them, noting that IFSC entities already have economic substance requirements and oversight by the regulator. In parallel, it highlighted risks of transfer pricing adjustments leading to litigation or reducing the practical value of existing tax holidays, urging a framework that avoids unintended tax costs for eligible IFSC operations.
Lower compliance load through TDS changes
Another recommendation is a broader removal of tax deduction at source (TDS) on payments made to eligible IFSC units that receive tax benefits, on the logic that withholding on income that is ultimately not taxable adds operational overhead without improving revenue outcomes. Deloitte suggested that reporting safeguards can continue, but routine withholding and related paperwork could be reduced to make the IFSC environment more globally competitive.
What to watch as Budget 2026 approaches
If the government adopts even part of these proposals, the immediate signal would be a push for stability and predictability—two factors global financial institutions weigh heavily when deciding where to book trades, structure vehicles, and deploy talent. The longer-term question is whether such changes can help India shift more offshore-linked financial activity onshore into a regulated domestic international hub at meaningful scale.