India Inbound Structuring For Global Groups: Singapore, Netherlands & GIFT City Explained

Article Insights

Executive Summary

This article:-

• explains how global corporate groups, institutional investors, and international fund platforms structure India inbound investments using Singapore, the Netherlands, and GIFT City, with an emphasis on treaty outcomes, capital-gains treatment, withholding-tax optimisation, GAAR/PPT compliance, and parent-jurisdiction taxation (UK/US/Germany).
• Clarifies the post-2017 India–Singapore landscape, including how capital gains are now taxed, when indirect share transfers remain protected, how substance/beneficial ownership tests operate, and why Singapore continues to serve as a commercial and governance hub for Asia-Pacific groups.
• Analyses the India–Netherlands DTAA, focusing on the MFN clause, dividend WHT mechanics, capital-gains protection for offshore share sales, and the Dutch participation exemption—explaining why Dutch HoldCos remain preferred for India M&A and European parent structures.
• Explains the true role of GIFT City, distinguishing its strengths (fund-management platforms, treasury operations, derivatives, leasing, and offshore portfolios) from its limitations (no capital-gains relief on Indian equity, no treaty advantage, no replacement for SG/NL HoldCos).
• Provides a litigation-tested understanding of BO, substance, GAAR/PPT, supported by recent Indian tribunal decisions (e.g., eBay Singapore), and outlines how India evaluates conduit risk, shell-company accusations, and commercial purpose.
• Summarises repatriation outcomes at the parent level under UK participation exemption, Germany's 95% exemption regime, and U.S. §245A DRD (with GILTI/Subpart F considerations), illustrating how clean repatriation works in fully structured cross-border investment chains.
• Is designed for multinational groups, private equity/VC investors, sovereign funds, global asset managers, international banks, and cross-border counsel evaluating or executing India-focused acquisitions, holding structures, treasury setups, or fund platforms.

R & D Law Chambers is a research-driven dispute resolution and advisory practice serving clients across India and internationally. We operate at the intersection of taxation, cross-border structuring, arbitration, commercial litigation, and regulatory matters.

To explore our services, visit https://rdlawchambers.com/our-services/

Index of Topics that a Reader can Jump to:-

1.Why Global Groups Need Structured Entry into India

2. Singapore Holding Company Route

3. Netherland Holding Company Route

4. GIFT City Route (India's Onshore Offshore)

Overall positioning: Singapore / Netherlands vs GIFT City

1. Why Global Groups Need Structured Entry into India

1.1 Why Global Investors Are Increasingly Looking Toward India

India continues to be the fastest-growing major economy. FY 2024–25 GDP growth is estimated at 6.5%, with Q1 FY 2025–26 at 7.8%. FDI inflows remained strong at US$81 billion. These numbers are not anomalies—they reflect enduring fundamentals.

In practice, investors view India differently:

• Strategic corporates treat India as a primary growth market
• Funds and financial investors look for higher IRR
• SWFs/pensions see diversification

The underlying drivers include:

• Strong demographics (median age ~29)
• Rising consumption (US$1.8 trillion projected addition by 2030)
• Deep digital infrastructure (850M+ users, global payments leadership)
• “China-plus-one” manufacturing realignment
• Policy support via PLI schemes and infrastructure spending

India offers something rare: scale, stability, and sustained growth.

1.2. Consequences of Unstructured Investment

A frequent issue we observe is foreign investors entering India without a meaningful inbound structure. This typically results in unnecessary exposure, such as:

• Dividend WHT at 20%+ (instead of 5–10% under treaties)
• Capital gains taxed at 20–30% (vs potential 0–10%)
• Interest WHT locked at 20%
• PE risk, especially where offshore teams carry out India-facing functions
• Double taxation, both in India and the parent jurisdiction
• Repatriation friction, complicating distribution of returns
• GAAR/PPT risks where substance is not demonstrable

A few percentage of leakage can materially affect IRR and distort viability.

1.3. The Role of Structuring: Treaties, Substance and Certainty

India taxes various income streams e.g. dividend, interest, capital gains arising out of transfer of foreign company shares deriving substantial interest from assets located in India, as deemed to be arising or accruing within India under Section 9, but DTAA provisions override domestic rules where beneficial. Proper jurisdictional architecture ensures that the applicable treaty, not the default domestic rule, governs taxation.

Through recognised jurisdictions such as Singapore, the Netherlands, or India's GIFT City, investors can:

• Reduce dividend WHT to 5–10%
• Access 0–10% capital gains outcomes
• Avoid unintended PE creation
• Achieve clean and efficient repatriation
• Meet beneficial ownership, substance and PPT/GAAR expectations
• Align Indian tax with favourable parent-country rules (e.g., UK 0% participation exemption; Germany 95% exemption)

With appropriate substance and commercial rationale, such structuring is standard international practice, not avoidance.

2. Singapore Holding Company Route

2.1 Why Singapore Is a Preferred Gateway for India Inbound Investment

Singapore continues to function as a leading holding jurisdiction for India-focused investments. Even after the 2017 amendment to the India–Singapore DTAA, it remains commercially and tax-efficient for many global groups. The reasons are grounded in both treaty stability and practical corporate considerations.

• Strong India–Singapore DTAA

• Long-standing treaty relationship with clear interpretative history.
• Predictable withholding tax outcomes (10% on dividends and interest).
• Widely used and accepted by Indian tax authorities and multinational investors.

• No Capital Gains Tax in Singapore (Domestic Law)

• Singapore does not levy capital gains tax for non-trading gains.
• However, post-2017, India retains taxing rights on gains from shares of Indian companies acquired on or after 1 April 2017 under Article 13.
• Singapore's 0% CGT remains relevant for:-
• sales of Singapore HoldCo shares where India's indirect transfer rules do not apply,
• sales of non-share instruments,
• restructuring at the Singapore level,
• multi-jurisdictional exits not involving India.

• Regional Holding Hub for Asia

• Many multinational groups operate their Asia-Pacific management, treasury and governance functions from Singapore.
• India is often housed under the Singapore regional structure for business, not only tax, reasons.
• Deep professional ecosystem (legal, tax, compliance) and proximity to India.

• High Treaty Credibility

• Predictable administrative practice.
• Accepted substance standards and clear BO expectations.
• Stability and clarity under capital gains and LOB provisions after the 2017 Protocol.

• Supported by Consistent Judicial Interpretation

Indian tribunals and courts have examined key provisions of the India–Singapore DTAA including capital gains, LOB tests and beneficial ownership providing investors with a stable interpretative framework.

Recent example:

• In the recent decision in the case of eBay Singapore Services Pte Ltd v. DCIT, the Mumbai Tribunal held that short-term capital gains earned by a Singapore resident entity from the sale of shares in another Singapore company whose underlying assets included shares of an Indian company were not taxable in India under the India–Singapore DTAA. The Tribunal also rejected the revenue's contention that the Singapore entity was merely a shell or conduit established for tax avoidance, and affirmed the availability of treaty protection.

Various decisions help clarify how the treaty is applied in practice and reduce interpretative uncertainty.

2.2 Substance Requirements: Meeting PPT & GAAR Expectations

In the Indian-Singapore treaty context, substance is the difference between seeing the HoldCo as a genuine regional platform or as a “mail-box” conduit. These tests are real and actively applied by Indian tax authorities and tribunals.

• Resident Singapore Directors & Effective Management

• Key investment/financing decisions must be taken in Singapore, not just rubber-stamped there.
• Board meetings, minutes and oversight should reflect real activity.
• Aligns with Article 24A of the DTAA (shell/conduit company clause).

• Office, Local Expenditure & Governance

• A bona-fide office, administrative staff or service functions in Singapore strengthen substance.
• Singapore's domestic tax-residence rules also require “management and control” locally.
• Helps demonstrate the entity is not a shell.

• Multi-Jurisdiction Investment Activity Shows Commercial Purpose

• A HoldCo investing only in India may trigger higher scrutiny; one investing across Asia-Pacific is seen as a regional hub.
• Indian GAAR/PPT standards favour entities with genuine business rationale beyond tax.

• “Not a Shell or Conduit”: Objective Tests

• Under Article 24A of the India–Singapore DTAA a company is a shell/conduit if annual operations in Singapore are below S$ 200,000 (or equivalent) unless listed.
• Judicial decisions (e.g., Fullerton Financial Holdings v ACIT) affirm that treaty benefits can be granted only when such tests are satisfied.

• Alignment with India's GAAR / PPT Framework

• India's GAAR guidelines and PPT jurisprudence ask: Would this arrangement exist absent the tax benefit?
• If the answer is yes and substance/commercial purpose exist, treaty benefits are defensible.

2.3 Outcome for the Ultimate Parent (UK / US / Germany)

The Singapore HoldCo typically acts as a clean tax-neutral intermediate entity. Singapore does not tax foreign-sourced dividends or capital gains, allowing repatriation to the ultimate parent with minimal friction. The final tax outcome then depends on the parent jurisdiction.

• United Kingdom (UK) — Dividend Exemption + SSE

• The UK generally exempts foreign dividends received by UK corporate shareholders. In practice, the vast majority of dividends from Singapore HoldCos are not subject to UK corporation tax, subject to anti-avoidance rules.

Capital gains may be exempt under the Substantial Shareholding Exemption (SSE) if conditions are met:

• UK parent must hold ≥10% in Singapore HoldCo for ≥12 months; and
• Singapore HoldCo must be a trading company, or the holding company of a trading group.

A holding company qualifies if the group beneath it (e.g., Indian operating subsidiaries) carries on predominantly trading activities.

• Thus, if Indian OpCo engages in manufacturing/services, the group is treated as trading, SSE is typically available.

Effect:
India (10% WHT) → Singapore (0%) → UK (0% dividend tax / CG exempt under SSE).

Germany — Corporate Shareholders

For German-resident corporate shareholders, dividends from foreign subsidiaries generally benefit from a participation exemption regime. Typically, 100% of the dividend is treated as exempt, but German law requires 5% to be added back as a non-deductible business expense, resulting in an effective tax burden of about 1.5% of the gross dividend. Minimum shareholding thresholds and anti-avoidance rules apply while seeking to avail such benefits.

United States — Corporate Shareholders

For U.S. C-corporations, the key concepts are:

• §245A Dividends-Received Deduction (DRD): A U.S. C-corp holding at least 10% of a foreign corporation may qualify to deduct 100% of the foreign-source portion of dividends received, thereby avoiding U.S. tax on most foreign dividends.
• GILTI & Subpart F: U.S. anti-deferral regimes still apply to controlled foreign corporations (CFCs). However, the high-tax exception (where foreign tax rate ≥ ~18.9%) and foreign tax credits often significantly mitigate U.S. tax in India–Singapore structures.

Practical Outcome:

India taxes (WHT or capital gains) → Singapore imposes no additional tax → U.S. parent receives dividend free of additional U.S. tax under §245A DRD (subject to CFC/GILTI planning).

3. Netherland Holding Company Route

3.1 Why the Netherlands Works for India Inbound Investment

For many large European and global groups, the Netherlands has long served as a natural holding jurisdiction — not merely for tax reasons but also because of its legal predictability, participation exemption regime, and credible governance standards. When deployed correctly, Dutch structures can provide stable, treaty-aligned outcomes for India inbound investment, particularly for M&A and regional consolidation platforms.

• India–Netherlands DTAA: Stable, Predictable, and Widely Relied On

• The treaty has been tested repeatedly in Indian courts and tribunals, which lends substantial certainty to Dutch-based structures.
• Administrative and judicial practice around capital gains, interest, and royalty articles is well developed and relatively controversy-free compared to some other historic holding jurisdictions.

• MFN Clause — A Key Reason Dutch Entities Are Used in India M&A

• The Protocol to the India–Netherlands DTAA contains a Most Favoured Nation (MFN) clause, allowing Dutch taxpayers to claim more favourable WHT rates granted by India to later treaty partners that are OECD members.
• The Delhi High Court ruling in Concentrix Services NL BV recognised a possible reduction to 5% dividend WHT via MFN (derived from India–Slovenia treaty), though revenue authorities continue to challenge its automatic application.
• Because of this MFN dynamics, Dutch HoldCos are often chosen in large M&A transactions, where treaty certainty and WHT efficiency are critical.

• Dividend Withholding Tax: 10% Treaty Rate

• Under Article 10 of the base DTAA, India applies a 10% withholding tax on dividends to qualifying Dutch residents and 5% rate may be applicable in a given factual patern relying upon MFN clause.

• Participation Exemption: Dividends and Capital Gains Potentially Exempt in NL

• The Dutch participation exemption generally exempts dividends and capital gains from qualifying subsidiaries from Dutch corporate tax.

This usually requires:

• a minimum 5% shareholding,
• the participation not being held as a passive portfolio investment, and
• satisfaction of the motive test, asset test, or subject-to-tax test (e.g., subsidiary taxed at adequate levels).

In practice, this is the backbone of the Dutch holding regime and a key reason why the Netherlands remains a preferred structuring jurisdiction.

• Strong Legal Infrastructure for M&A and Treasury Functions

• Dutch corporate law, notarial practices, financing structures, and cross-border merger mechanisms are well understood by global counsel and investors.
• The jurisdiction is frequently used for group reorganisations, step-up transactions, cross-border mergers, and pre-IPO structuring.

• Clear Substance Expectations That Align with OECD Standards

• The Netherlands sets out defined substance parameters: board presence, decision-making in the Netherlands, local office or administrative capability, and proportionate annual expenditure.
• These align with modern BEPS-driven beneficial ownership expectations, making the jurisdiction relatively safe from GAAR/PPT challenges.

• Natural Choice for EU-Headquartered Groups

For European groups — especially those based in Germany, France, Scandinavia, the UK, or the EU region, the Netherlands is already the standard location for regional or global holding companies. This makes using a Dutch HoldCo for India inbound investment both commercially logical and administratively convenient.

3.2 Key Tax Benefits Under the India–Netherlands DTAA

The India–Netherlands treaty stands out because its capital gains article preserves a “resident-state only” rule in most scenarios, while still recognising India's right to tax certain domestic share transfers. For inbound India structuring, especially where global buyers are involved, this nuance becomes a significant advantage.

• Dividend Withholding Tax (Already Explained in 3.1)

• Interest Withholding Tax (10%)

• The treaty caps interest WHT at 10%, subject to beneficial ownership and substance—consistent with India's broader treaty practice.
• Worth noting for financing structures where Dutch HoldCos or Dutch treasury entities extend debt into India.

• Capital Gains – A More Flexible Regime Compared to Singapore

Unlike the post-2017 Singapore treaty (which gives India taxing rights on nearly all direct share sales), the Netherlands DTAA has a three-layered capital gains structure:

i. Default Rule — Resident State Exclusive Taxation

• Gains from alienation of property (including shares of foreign companies) are taxable only in the State of residence of the seller (i.e., Netherlands).
• This aligns with the OECD model and protects many offshore share transfers

ii. Exception — India Can Tax Only When ALL Conditions Are Met:

India may tax gains only if:

• Dutch resident seller holds ≥10% of an Indian company; and
• buyer is an Indian resident; and
• transaction is not part of reorganisation/amalgamation covered by carve-out.

If any condition fails (e.g., buyer is U.S., U.K., or Singapore entity), India's taxing right does not arise.

iii. Reorganisation Carve-Out — Protected from Source Taxation

Even if India otherwise has the taxing right:

• intra-group mergers, demergers, restructurings, or similar reorganisations
• remain exempt in India, provided the 10% ownership condition between buyer/seller is satisfied.

This is why Dutch HoldCos are frequently used in global restructurings before or after India M&A.

iv. Indirect Transfer Treatment — Often Outside India Tax

The treaty's default “resident-state taxation” rule means that if a Dutch HoldCo sells shares of a non-Indian company (e.g., selling a Singapore, UAE, or Mauritius HoldCo that owns Indian assets):

• India generally cannot tax the gain,
• subject to PPT/GAAR, beneficial ownership, and substance requirements.

This aligns with Indian jurisprudence in similar contexts under other treaties (e.g., eBay Singapore under the SG DTAA), but each case requires factual examination (acquisition dates, buyer residence, value-derivation tests, etc.).

• Efficient Exit Structure

When the treaty prevents India from taxing the gain (e.g., offshore sale to a non-Indian buyer):

• the Netherlands often does not tax the gain either (subject to participation exemption conditions such as 5% shareholding, non-portfolio motive, asset/subject-to-tax tests).

Thus, under certain structures, an offshore sale of an India-focused group can achieve:

• no India capital gains tax, and
• no Dutch corporate tax, subject to treaty eligibility, PPT, BO, substance and commercial rationale.

This combination is one of the key reasons Dutch HoldCos are widely used in cross-border India M&A.

3.3 Substance Requirements for a Dutch HoldCo

For Dutch holding companies, substance is ultimately about demonstrating genuine management and commercial purpose. There is no single statutory checklist for all HoldCos, but both Dutch authorities and treaty partners generally expect certain indicators to be present, especially when accessing treaty benefits or defending beneficial-ownership status.

• Board Presence & Decision-Making

A Dutch HoldCo will typically strengthen its position if key management functions are carried out in the Netherlands. This may include having Dutch-resident directors, holding board meetings in NL, and documenting that strategic decisions are taken there.

• Real Office / Administrative Footprint

While the form can vary, many Dutch HoldCos maintain some level of local administrative capacity whether through a modest office, service provider support, or bookkeeping performed in the Netherlands.

• Proportionate Operating Expenditure

Dutch commentary often refers to maintaining expenditure that is proportionate to the scale of the entity's activities. This is not a fixed monetary requirement, but meaningful annual spending on governance, accounting, and compliance generally supports substance.

• Beneficial Ownership Indicators

Independent banking arrangements, retention of profits instead of full pass-through, and the ability to articulate a commercial rationale (e.g., regional holding platform) may help establish that the Dutch entity is the genuine recipient of income.

• Alignment With PPT / GAAR Expectations

Modern anti-abuse standards focus on purpose and economic reality. Multi-country investment activity, functional decision-making in NL, and non-tax justifications for the platform often help demonstrate that the Dutch HoldCo is not merely inserted for treaty access.

3.4 Ultimate Parent Outcome (UK / Germany / USA)

The tax treatment at the level of the ultimate parent company—whether located in the UK, Germany, or the USA is broadly the same as discussed under the Singapore route. Parent-jurisdiction rules such as the UK's participation exemption, Germany's 95% exemption regime (with a 5% add-back), and the U.S. §245A DRD framework (subject to GILTI/Subpart F considerations) generally apply in similar fashion regardless of whether the intermediate holding company is in Singapore or the Netherlands. Thus, the choice between Singapore and Netherlands primarily affects India-level and intermediate-jurisdiction outcomes, while parent-level tax consequences usually remain consistent, subject of course to substance, anti-deferral regimes, and local participation exemption conditions.

4. GIFT City Route (India's Onshore Offshore)

4.1 What GIFT City Is and Why It Exists

GIFT City (Gujarat International Finance Tec-City) is India's attempt to build an onshore–offshore financial centre a jurisdiction that sits physically in India but functions with its own regulatory, tax, and foreign-exchange ecosystem. Think of it as India's answer to Singapore or Dubai, but with the advantage of being onshore for Indian purposes and offshore for foreign-investment and financial-services purposes.

At its core, the International Financial Services Centre (IFSC) within GIFT City was created to:

• stop financial business from migrating to Singapore, Mauritius, and Dubai,
• offer globally competitive tax and regulatory incentives,
• attract foreign capital into India through India-based managers,
• host banks, insurers, funds, exchanges, aircraft leasing, fintech, and
• bring India-based structuring into India—rather than around India.

Today, IFSC hosts international banks, global asset managers, India-focused GPs, insurance entities, aircraft lessors, and capital-market platforms. It is still early in its evolution, but its direction is clear — India wants to be the jurisdiction where India-focused deals are structured and executed.

IFSC units are treated as “persons resident outside India” for FEMA when carrying out approved financial services. This allows them to operate in foreign currency, engage in unrestricted cross-border transactions, invest/manage offshore portfolios, and service global clients — making GIFT City a functional equivalent of a Singapore/Dubai financial hub.

However, this does not create any Indian tax exemption for Indian equity or convert the unit into a non-resident for tax purposes.

4.2 Tax Benefits for Foreign Investors

GIFT IFSC's tax regime is designed to attract foreign funds, fund managers, treasury operations, and global financial activity into India not to provide capital-gains exemptions on Indian equity. The benefits are highly section-driven and apply only in specific scenarios.

• Income Tax Holiday for IFSC Units — Section 80LA(1A)

Units registered in the IFSC (including fund managers, finance companies, insurers, leasing companies, and similar entities) may claim:

• 100% deduction of eligible business income
• For any 10 consecutive years
• Out of the first 15 years of operation

This is a platform-level incentive — it reduces the operational cost of running the fund or manager in IFSC, but it does not exempt investors from tax on Indian-source income.

• Category I & II IFSC AIFs — Pass-Through + Limited IFSC-Specific Relief

Category I and II AIFs located in IFSC remain governed by Section 115UB, meaning:

• Indian-source income (Indian shares, Indian interest, Indian dividends)
  → taxed to the non-resident investor exactly as per normal Indian law
  → no capital gains exemption on Indian equity
• Non-resident investors receive relief only for non-India income, such as:
• • offshore securities
  • IFSC-exchange traded products
  • certain derivative/NDF instruments executed via IFSC banking units

These are supported by exemptions in Sections 10(4E), 10(4G), etc., and by IFSCA compliance relaxations (e.g., no PAN and no Indian tax return for qualifying NR investors investing only in specified offshore/IFSC assets).

Category I/II IFSC AIFs can give non-resident investors zero India tax on many offshore and IFSC-traded instruments, but Indian-equity income is taxed normally under Section 115UB.

They are not a tax-saving route for India outbound or inbound equity investing.

• Category III “Specified Funds” — Targeted Exemptions Under Section 10(4D)

A Category III AIF in IFSC becomes a “Specified Fund” only if:

• all unitholders (other than sponsor/manager) are non-residents, and
• prescribed conditions are satisfied.

If so, then:

• Section 10(4D) exempts income from transfer of “specified securities”
  (This category excludes shares of Indian companies.)
• Section 10(23FBC) can exempt corresponding income in the hands of non-resident unit holders.

IN summary, A Category III “Specified Fund” can provide zero India tax on offshore portfolios, but it still cannot eliminate Indian-source tax on Indian equity and it is not a route for tax-efficient India equity investment.

• Debt & Treasury — Where IFSC Actually Helps

IFSC provides real efficiency for debt flows and treasury operations, not equity:

• Section 10(4E) — exempts NR income from certain NDF/derivative transactions with IFSC banking units
• Section 10(4F) — exempts royalty/interest income to non resident on aircraft or ship leasing paid by a unit of an International Financial Services Centre, which has commenced operations on or before 31.03.2030.
• Section 10(4G) — exempts income of non resident arising from portfolio of securities or financial products or funds, managed by portfolio manager on behalf of non resident in an account maintained with an offshore banking unit in IFSC.
• Section 10(4H) — exempts capital gains income of non resident -engaged in business of leasing of aircraft or a ship arising from transfer of equity shares of a domestic company, being a Unit of an International Financial Services Centre engaged primarily in business of leasing of aircraft or a ship

In addition:

Section 194LC gives concessional withholding tax (typically 5%) for interest paid by Indian companies on certain foreign loans/bonds, including IFSC-listed bonds.
This is not a GIFT-specific incentive, but an India-wide WHT provision that becomes relevant when bonds are listed on IFSC exchanges.

Thus, IFSC's strongest tax benefits apply to debt, derivatives, NDFs, aircraft/ship leasing, and offshore treasury operations, not to Indian equity.

• GIFT City vs Singapore / Netherlands (Accurate Comparison)

Versus Singapore

• Singapore cannot provide capital-gains exemption on Indian shares acquired on/after 1 April 2017 → India taxes the gain.
• IFSC also cannot exempt Indian equity.
• Where IFSC wins:
• • lower-manager costs
  • 80LA tax holiday
  • exemptions on offshore/IFSC securities
  • compliance relief for NRs

No advantage over Singapore for Indian-equity taxation.

Versus Netherlands

• Dutch treaty planning can, in many structures, shift taxing rights outside India for offshore share sales (Article 13 nuances).
• GIFT City cannot replicate this.
• GIFT is for onshore fund platforms, not for treaty-based exit planning.

4.3 Limitations of the GIFT City Route

Despite offering strong incentives for fund managers and offshore-style products, GIFT City is not a comprehensive tax-planning tool for inbound India investment. Its limitations reflect both the legislative design and the practical realities of an emerging jurisdiction.

i. No Capital Gains Relief on Indian Shares (As Covered Above)

GIFT City does not change India's domestic taxation of Indian-source gains.
Whether the investor is a Category I/II AIF unitholder, a non-resident, or part of a “specified fund”, exits from Indian companies remain taxable in India under Section 115UB or general provisions. This alone makes IFSC unsuitable as a replacement for Netherlands-style treaty exit planning.

ii. No Treaty Benefits

GIFT AIFs or IFSC entities do not access treaty networks the way Singapore or Netherlands entities do. India does not treat IFSC units as separate tax residents for DTAA purposes. Therefore:

• no reduced WHT via treaty,
• no treaty-based capital gains protection,
• no BO/LOB treaty planning.

This sharply contrasts with NL or Mauritius holding structures.

iii. Money Is Effectively “Onshore” — Harder for Global Redeployment

Funds based in IFSC operate under the Indian FEMA/IFSC environment. While certain offshore investments are permitted, profit repatriation, currency movement, and redeployment still operate within India's broader regulatory perimeter.
Singapore, Luxembourg, and Cayman are structurally more flexible hubs for global redeployment.

iv. Regulatory Ecosystem Still Maturing

IFSC is improving rapidly but still faces practical constraints:

• Limited depth of global custodians
• Fewer international brokers and banks compared to SG/HK/Dubai
• Early-stage fund-administration and compliance ecosystem
• Lower global LP familiarity and comfort
• Need for foreign talent approvals for specialist fund-management roles

For global GPs and LPs, this is an operational limitation, not a tax limitation.

v. Narrow Exemptions — Specific Assets Only (As Covered Above)

Sections 10(4D), 10(4E), 10(4F), 10(4G) provide narrow, asset-specific exemptions.

vi. Not Suitable for India Operating Companies (“Strategic Corporates”)

A foreign operating company entering India for business (manufacturing, services, distribution, etc.) does not benefit materially from GIFT City on count of following limitations:-

• No relief from PE exposure
• No relief from India tax on profits
• No business-level treaty advantage
• No special repatriation outcomes

GIFT City is primarily for financial-sector activity, not business expansion into India.

In summary, Singapore and the Netherlands remain the key holding-company jurisdictions for India inbound structuring, driven by treaty outcomes and parent-jurisdiction tax efficiency. GIFT City, in contrast, is not a capital-gains planning tool but an operational and regulatory hub for fund management, treasury, and global portfolios. Choosing the appropriate route depends on the nature of investment — direct operating investment, private equity/VC, M&A holding structure, or fund platform — rather than on a single “lowest-tax” objective.

About the Author

Ravish is a dual-qualified lawyer and solicitor licensed to practice in India and on the roll of the Solicitors Regulation Authority (England and Wales). He specialises in international arbitration and international taxation, and holds the Advanced Diploma in International Taxation (ADIT) from the Chartered Institute of Taxation (CIOT).

Services We Provide

• International & Domestic Arbitration – Strategic representation in high-value commercial disputes, EPC/infrastructure claims, shareholder conflicts, emergency relief, and enforcement or challenge of awards in India.
• Commercial Disputes & Litigation – End-to-end support in contract disputes, injunctions, recovery actions, business torts, and tribunal-ready documentation before courts and arbitral tribunals.
• Insolvency & Bankruptcy (IBC/NCLT) – Creditor and debtor representation, Section 7/9 filings, CIRP strategy, resolution plan negotiations, and complex NCLT litigation.
• Taxation (Direct, Indirect & International) – Advisory and litigation covering income tax, GST, customs, transfer pricing, as well as treaty-driven international tax and cross-border structuring.
• Contract Drafting, Negotiation & Risk Management – Cross-border commercial agreements, EPC contracts, MSAs/SLAs, technology and licensing documents, shareholder agreements, and long-term project contracts.
• GIFT City / IFSC Advisory – Regulatory, tax and transactional support for entities operating in or entering IFSC, including fund formation, fintech, global service centres and cross-border structuring.
• Real Estate, Development & Property Law – Due diligence, transactional documentation, RERA compliance, leasing/licensing and dispute management for residential, commercial and industrial projects.
• Employment & Labour Advisory – Employment contracts, HR policies, compliance frameworks, workforce exits, investigations, POSH matters and employment disputes.
• IP, IT & Technology Law – SaaS and software agreements, technology licensing, digital-business documentation, data protection, IP monetisation and innovation-centric contracting.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.