After FM’s Tax Sops, True Beacon, Kedaara Capital & Basiz To Set Up Investment Funds In GIFT City

Zerodha founders’ hedge fund True Beacon, private equity firm Kedaara Capital and fund accounting service provider Basiz have applied to set up alternative investment funds (AIFs) at the International Financial Services Centre (IFSC) at Gujarat’s GIFT (Gujarat International Finance Tec) City. 

According to ET, which first reported the development, True Beacon is awaiting regulatory approval for setting up shop in GIFT City with a new launch of funds that is expected to invest money in Nifty 50 stocks. The approval from IFSC is expected in early April. 

True Beacon has been founded by Zerodha founders Nikhil Kamath and Nithin Kamath. According to its website, the hedge fund is looking to boost the participation of ultra high net-worth individuals in the next phase of India’s economic growth. All three firms are reportedly looking to raise around $100-$200 Mn each initially under an AIF structure, according to the report. 

The development comes after Finance Minister Nirmala Sitharaman, during this year’s Union Budget, announced tax incentives for certain units under the IFSC in the Ahmedabad-based GIFT City. The FM had said that these tax exemptions would help transform the area into a fintech hub. 

“In addition to the tax incentives already provided, I propose to include, among others, tax holiday for capital gains for aircraft leasing companies, tax exemption for aircraft lease rentals paid to foreign lessors, a tax incentive for relocating foreign funds in the IFSC, and to allow tax exemption to the investment division of foreign banks located in IFSC,” the FM had said during her speech.

What Is GIFT City’s IFSC?

The IFSC is a non-resident zone under the Foreign Exchange Management Act (FEMA) but treated as a resident entity under the Income Tax Act. An IFSC caters to customers outside the jurisdiction of the domestic economy. Such centres deal with flows of finance, financial products and services across borders. London, New York, Singapore, Shanghai and Dubai can be counted as global financial centres. 

In 2015, then finance minister, the late Arun Jaitley had announced that India would get its first IFSC in Gujarat’s GIFT City, a special economic zone (SEZ). The GIFT IFSC was operationalised in April that year, and a competitive tax regime was provided to the same during the Union Budget in 2016. In the following years, tax incentives were announced for alternative investment funds (AIFs) to be set up in GIFT IFSC. 

The FM’s recent announcement is expected to encourage offshore Indian funds registered in tax-friendly jurisdictions such as Singapore, Ireland and Mauritius to transfer their funds to Indian entities registered in GIFT IFSC. 

An earlier Inc42 story titled “Will A Mint-Fresh Fintech Hub Boost GIFT City, PM Modi’s Dream Project?” examined the chequered past of the SEZ city, the key potential areas and whether the planned fintech park in the city is doomed to fail.

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