Entry into GIFT IFSC is a single-window process (Article 3). Exit is not. It involves at least two separate authorities, and for a company that wishes to cease to exist altogether, a third. Nothing in the framework consolidates them, and the sequencing between them is left to the entity to work out. This article sets out the components.

Decide What Kind of Exit Is Intended From GIFT IFSC

Four types of exit from GIFT IFSC are possible, each involving different regulatory and procedural requirements:

1. Ceasing a regulated activity while keeping the entity and its IFSC unit — surrender of one registration only.
2. Leaving the IFSC but keeping the company alive elsewhere in India — surrender of all IFSCA registrations, plus exit as an SEZ unit, plus corporate changes.
3. Winding up the company — the above, plus a liquidation or winding-up process.
4. Transferring the business to another IFSC unit rather than closing it — an asset transfer under the SEZ Rules rather than an exit.

Surrendering the IFSCA Registration

There is no single surrender provision. Each rulebook has its own, and they share a structure with instructive variations.

Three points follow. First, surrender is not unilateral: in every framework examined, it takes effect only when IFSCA accepts it. Second, the Authority’s consideration is substantive, not ministerial — the payment services test is expressly framed around effect on users and on the ecosystem, and comparable considerations inform the others. Third, client-facing obligations come first. A fund manager must deal with its schemes, a payment service provider with user balances, and an insurance office with its policy obligations, before the registration can sensibly be given up. Surrender is the last step of a wind-down, not the first.

A surrender must also be distinguished from suspension or cancellation by the Authority, which is an enforcement outcome with different consequences (Article 4).

Leaving the SEZ

An Gift City IFSC unit is a unit in a Special Economic Zone, and exit is governed by rule 74 of the SEZ Rules, 2006. Its features are:

• the unit may opt out with the approval of the Development Commissioner. For a unit requiring IFSCA registration, authorisation or licence, that function is discharged by the Administrator (IFSCA) under section 12 of the SEZ Act as modified by the notification of 28 February 2024 (Article 3); GIFT SEZ’s exit SOP (G1.1, 3 February 2025) accordingly directs IFSC units to the Office of the Administrator (IFSCA) and other units to the Development Commissioner, GIFT SEZ;
• exit is subject to payment of applicable duties on imported or indigenous capital goods, raw materials, components, consumables, spares and finished goods in stock — with capital goods depreciated in accordance with rule 49(1);
• a unit that has failed to achieve positive Net Foreign Exchange is liable to penalty under the Foreign Trade (Development and Regulation) Act, 1992;
• penalties must be paid, and where an appeal is pending, a stay order and bank guarantee are required;
• where approval conditions remain unfulfilled, a legal undertaking is executed for any penalty that may be imposed;
• the unit retains its status as a unit until the date of final exit; and
• a legal undertaking in Form L is executed on exit.

For a services-only IFSC unit, the duty exposure is usually confined to imported capital goods — typically IT equipment and fit-outs — but it is real, and it is calculated on depreciated value rather than waived.

Rule 74A offers the alternative: transfer of assets to another unit, subject to conditions including minimum tenure of approval or lease, a minimum period of operation, approval by the relevant committee, and transfer of duties and obligations to the transferee. Where a group wishes to consolidate rather than close, this route preserves value that a rule 74 exit would surrender.

The Corporate Layer

A company that ceases to be licensed in the IFSC cannot simply carry on. The exemption notifications of 4 January 2017 require its name to carry the “IFSC” element and its registered office to remain at the IFSC at all times (Article 44). Exit therefore entails a change of name and of registered office — and, at the same moment, the loss of the governance relaxations the notifications conferred, including on independent directors, committees and board meeting frequency. A board that has been meeting twice a year must revert to the ordinary regime.

Where the intention is to dissolve the company, the route is constrained by an issue examined in Article 46. Voluntary liquidation under section 59 of the Insolvency and Bankruptcy Code is available to a corporate person, and section 3(7) excludes a financial service provider. An IFSC entity that holds an IFSCA authorisation to carry on an activity within section 3(16) of the Code is very likely outside section 59, and must look to winding up under Chapter XX of the Companies Act, 2013. This should be established before a wind-down timetable is published to stakeholders, because the two routes differ substantially in duration and in the role of the Tribunal.

A Workable Sequence

1. Settle the client and counterparty position — redeem or transfer schemes, close out positions, discharge user balances, and run off or novate policies.
2. Apply for surrender of each IFSCA registration, allowing time for acceptance and for any conditions the Authority imposes.
3. Quantify the SEZ exit cost — duties on depreciated capital goods, any NFE shortfall exposure, and pending proceedings.
4. Obtain the opt-out approval from the Administrator (IFSCA), or from the Development Commissioner where that office remains the approving authority, and execute the Form L undertaking, remembering that unit status continues until final exit.
5. Make the corporate changes — name, registered office, and reinstatement of the ordinary Companies Act governance obligations.
6. Close the FEMA position — foreign currency accounts with IFSC Banking Units, and final reporting.
7. Choose and begin the dissolution route, if the company is not to survive.

What is not Consolidated

There is no single “exit framework” for GIFT IFSC comparable to the single-window entry process, and no published instrument was traced that sequences the IFSCA surrender against the SEZ exit. In practice the two must be run in parallel, with the regulatory surrender conditioned on the wind-down and the SEZ exit conditioned on the duty settlement. Entities planning an exit should expect to negotiate the timetable with both authorities rather than to follow a prescribed one.

The Letter of Approval while Winding Down

IFSCA’s circular of 10 August 2026 directs every regulated entity to hold, at all times, a valid and subsisting Letter of Approval under the SEZ Act together with its IFSCA registration, licence or other regulatory instrument. The circular records that a Letter of Approval is valid for one year where operations have not commenced and five years after commencement, and that renewal must be sought at least two months before expiry. Business may not be conducted without these documents. For an entity in run-off, the practical point is that the Letter of Approval must not be allowed to lapse while client positions, assets or obligations remain to be wound down, even though surrender of the regulatory instrument is in train.

FAQs

1. What are the main steps for exiting GIFT IFSC?

Exit from GIFT IFSC generally involves surrendering IFSCA registrations, obtaining SEZ exit approval, completing corporate changes and closing the FEMA position.

2. Can an IFSC entity surrender its IFSCA registration unilaterally?

No. Surrender generally becomes effective only after IFSCA accepts the application, subject to the applicable regulations.

3. What happens when a company exits the IFSC but continues in India?

It must address its SEZ exit, change its name and registered office as required, and comply with ordinary Companies Act governance requirements.

4. Can an IFSC entity use voluntary liquidation under the IBC?

An entity authorised to provide financial services may fall outside the voluntary liquidation route under Section 59 of the IBC. Its eligibility must be assessed before choosing the winding-up procedure.

5. Can an IFSC business transfer its assets instead of closing?

Yes. Rule 74A of the SEZ Rules, 2006, provides a conditional route for transferring assets to another SEZ unit.

The post Exiting GIFT IFSC: Surrendering IFSCA Registration and Leaving the SEZ appeared first on Bhatt & Joshi Associates.

GIFT IFSC entities frequently enter cross-border contracts containing arbitration clauses. However, an international transaction does not automatically qualify as an international commercial arbitration under Indian law. Understanding this distinction is essential when drafting arbitration clauses, selecting a foreign seat and determining the availability of interim relief.

The Statutory Test is About Incorporation, not Internationality

Section 2(1)(f) of the Arbitration and Conciliation Act, 1996 defines “international commercial arbitration” as an arbitration relating to commercial legal relationships where at least one of the parties is:

• an individual who is a national of, or habitually resident in, a country other than India;
• a body corporate which is incorporated in any country other than India;
• an association or body of individuals whose central management and control is exercised in a country other than India; or
• the Government of a foreign country.

An IFSC company is incorporated in India under the Companies Act, 2013 (Article 44). It is not a body corporate incorporated outside India. So an arbitration between an IFSC company and another Indian company is not an international commercial arbitration, however international the underlying transaction.

This is worth stating plainly because the opposite intuition is encouraged by exchange-control law. Regulation 3 of the FEMA (International Financial Services Centre) Regulations, 2015 treats a financial institution set up in an IFSC as a person resident outside India. Residence under FEMA and nationality for the purposes of section 2(1)(f) are different concepts answering different questions. An entity can be non-resident for exchange control and Indian for arbitration.

The characterisation matters in practice. Where the arbitration is an international commercial arbitration seated in India, appointment of arbitrators under section 11 lies with the Supreme Court (section 11(9)), not with the High Court as it would in a domestic arbitration, and the Commercial Courts Act allocates applications and appeals differently. A clause drafted on a mistaken assumption produces applications filed in the wrong forum.

Two IFSC Entities, or an IFSC Entity and an Indian Party, May Still Choose a Foreign Seat

The second common question is whether parties who are both Indian may agree to arbitrate outside India. Before 2021, the position was contested. It was settled in PASL Wind Solutions Private Limited v. GE Power Conversion India Private Limited (Civil Appeal No. 1647 of 2021), decided by the Supreme Court on 20 April 2021.

The Court held, in terms, that “nothing stands in the way of party autonomy in designating a seat of arbitration outside India even when both parties happen to be Indian nationals“. Two Indian companies had arbitrated in Hong Kong, and the resulting award was a foreign award enforceable under Part II of the Act.

The judgment did something else of practical importance. The proviso to section 2(2) preserves the application of sections 9 (interim measures by court), 27 (court assistance in taking evidence) and 37(1)(b) and (3) (certain appeals) to an “international commercial arbitration” even where the place of arbitration is outside India. The Gujarat High Court had held that the expression there bore the section 2(1)(f) meaning, so that two Indian parties arbitrating abroad could not seek interim relief from an Indian court. The Supreme Court disagreed: the expression in the proviso does not take the section 2(1)(f) definition but refers to arbitrations taking place outside India whose awards are enforceable under Part II. It accordingly set aside that finding and held the section 9 application maintainable.

The combined position is therefore favourable to parties transacting through GIFT IFSC:

That last row deserves emphasis. Parties who choose a foreign seat and also exclude the proviso lose access to Indian interim relief against Indian assets. That is a deliberate choice, and it should be a conscious one.

An Arbitration Centre for the IFSC: Proposed, not Enacted

The Union Budget 2022–23 announced plans to establish an international arbitration centre in GIFT City IFSC. On 16 July 2024, an IFSCA expert committee recommended a broader Alternative Dispute Resolution Centre offering arbitration, mediation and online dispute resolution.

The committee’s proposals are ambitious and, importantly, legislative. They include:

• amending the IFSCA Act, 2019 to insert a Third Schedule modifying the Arbitration and Conciliation Act, 1996, the Mediation Act, 2023 and the SEZ Act, 2005, but only to the extent they apply to arbitrations seated at an IFSC;
• enabling IFSCA to discharge the functions of the Arbitration Council of India and the Mediation Council of India in relation to the centre;
• establishing the centre as a section 8 company, with shares available only to institutions and a holding cap of 5%; and
• a three-phase court structure: first a designated bench of the Gujarat High Court, requiring no statutory change; then a separate “IFSC International Court” for all IFSCs with the powers of a High Court other than writ and criminal jurisdiction; and then international judges sitting in it — the second and third phases, on the committee’s own analysis, requiring amendments to the Constitution of India.

As at 17 September 2026, no legislation implementing these recommendations was traced. The committee’s report is a policy document, not law. The Arbitration Council of India itself, contemplated by the 2019 amendment, had still not been constituted as at February 2026. Drafting practice should therefore proceed on the existing framework, and a clause that refers to institutional rules of a GIFT IFSC centre should be tested against whether such an institution and such rules currently exist.

Drafting Points

• Do not describe the arbitration as an international commercial arbitration unless a party actually satisfies section 2(1)(f); the label does not create the status.
• Choose the seat expressly, and distinguish it from the venue.
• Decide consciously about section 9. Silence preserves Indian interim relief in a foreign-seated arbitration; an exclusion removes it.
• Check the arbitral institution and rules named in the clause exist and administer the seat chosen.
• Think about enforcement at the drafting stage — where the assets are, and under which regime an award against them will be enforced (Article 48).

Frequently Asked Questions

1. Is arbitration involving a GIFT IFSC entity an international commercial arbitration?

Not automatically. Under Section 2(1)(f) of the Arbitration and Conciliation Act, 1996, at least one party must satisfy the statutory criteria, including foreign incorporation for a body corporate.

2. Can two Indian companies choose a foreign seat of arbitration?

Yes. In PASL Wind Solutions v. GE Power Conversion India Private Limited (2021), the Supreme Court upheld the right of two Indian parties to choose a foreign seat.

3. Can Indian courts grant interim relief in foreign-seated arbitration?

Yes. Section 9 may permit interim relief from Indian courts, subject to the statutory conditions and any agreement excluding its application.

4. Has the proposed GIFT IFSC arbitration centre been established by law?

The proposed centre remains a policy recommendation unless implemented through the necessary legal and regulatory measures. Parties should verify the current institutional framework before naming a centre in their arbitration clauses.

The post Arbitrating With a GIFT IFSC Entity: Seat, “International” Character and the Choice of a Foreign Seat appeared first on Bhatt & Joshi Associates.

A lender dealing with a company in GIFT IFSC needs to know what happens if the borrower defaults. The obvious answer is the Insolvency and Bankruptcy Code, 2016 (IBC), but it may not apply. The Code excludes financial service providers from the ordinary corporate insolvency process, raising an important question about GIFT IFSC insolvency: what remedies are available to creditors when the usual insolvency route is closed?

The Exclusion Built into the Code

The Code applies its corporate insolvency resolution process to a corporate debtor, which is a corporate person who owes a debt. Section 3(7) defines a corporate person as a company under the Companies Act, an LLP, or any other person incorporated with limited liability under any law — “but shall not include any financial service provider“.

Section 3(17) defines a financial service provider as a person engaged in the business of providing financial services in terms of an authorisation issued or registration granted by a financial sector regulator. Section 3(16) defines “financial service” by an inclusive list that covers, among other things, accepting deposits; safeguarding and administering assets consisting of financial products; effecting contracts of insurance; offering or managing assets consisting of financial products belonging to another; advising on or soliciting the buying or selling of a financial product; establishing or operating an investment scheme; maintaining or transferring records of ownership of a financial product; underwriting; and providing payment services.

Section 3(18) defines a financial sector regulator as “an authority or body constituted under any law for the time being in force to regulate services or transactions of financial sector”, and includes RBI, SEBI, IRDAI, PFRDA “and such other regulatory authorities as may be notified by the Central Government”.

The NCLAT applied this chain in Nitin Pannalal Shah v. Vipul H. Raja (14 September 2023), holding that a SEBI-registered stock broker is a financial service provider, that section 3(16)(e) is an inclusive definition, and that a section 7 application against such an entity is not maintainable.

Applying the Chain to an IFSC Entity

The IFSCA is constituted under the IFSCA Act, 2019, to regulate financial products, financial services and financial institutions in an International Financial Services Centre (IFSC). Although no notification expressly adding the IFSCA to Section 3(18) of the Insolvency and Bankruptcy Code, 2016 (IBC) has been traced, the provision defines a financial sector regulator in broad terms and lists the RBI, SEBI, IRDAI and PFRDA as included authorities rather than an exhaustive list. On this interpretation, the IFSCA may fall within the definition of a financial sector regulator for GIFT IFSC insolvency purposes.

If this interpretation is accepted, an IFSC banking unit, finance company, fund management entity, capital market intermediary, insurance intermediary or payment service provider holding an IFSCA authorisation and carrying on an activity covered by Section 3(16) may qualify as a financial service provider (FSP) and consequently fall outside the definition of a corporate person under Section 3(7). This distinction has three important implications for insolvency proceedings and creditor recovery in GIFT IFSC:

1. Corporate insolvency resolution process (CIRP): Applications under Sections 7 and 9 of the IBC would generally be unavailable against an entity excluded from the definition of a corporate person.

2. Liquidation under the IBC: The Code’s ordinary corporate liquidation process would likewise not apply to such an entity.

3. Voluntary liquidation: Section 59 of the IBC is available only to a corporate person. A solvent IFSC entity falling within the exclusion would therefore need to consider the applicable winding-up provisions under the Companies Act, 2013, rather than rely on Section 59.

The Gateway that Has Barely Been Opened

Section 227 is the safety valve. It permits the Central Government, in consultation with the appropriate financial sector regulators, to notify financial service providers or categories of them for insolvency and liquidation proceedings under the Code, conducted in such manner as may be prescribed. The FSP Rules, 2019 supply that manner: the appropriate regulator applies to the Adjudicating Authority and proposes an Administrator who exercises the powers of an insolvency professional, an advisory committee may be constituted, and the regulator’s no-objection is required before any new management takes control under a resolution plan.

But the gateway has been opened once. The only notification under section 227, S.O. 4139(E) dated 18 November 2019, notifies a single category: non-banking finance companies, including housing finance companies, with asset size of ₹500 crore or more as per the last audited balance sheet, with the Reserve Bank of India as the appropriate regulator. No category defined by reference to IFSCA registration has been notified, and IFSCA is not named as an appropriate regulator in that notification.

So What Does Apply?

The answer depends on the legal form and the licence, and a creditor should establish it before lending rather than after default.

The practical consequence for a creditor is that the familiar leverage of an insolvency petition may simply be unavailable. Security, guarantees from entities that are corporate persons, contractual events of default, and — where the counterparty’s regulator has powers — regulatory complaint routes carry correspondingly more weight.

The Cross-border Dimension

Where an IFSC entity is the creditor, the analysis reverses and is more familiar: it can proceed under sections 7 or 9 against an Indian corporate debtor like any other creditor, subject to the same thresholds. Where assets lie abroad, sections 234 and 235 of the Code contemplate agreements with foreign countries and letters of request to foreign courts, but they depend on bilateral arrangements, and no such agreement was traced as at 17 September 2026.

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 enacted enabling provisions for group insolvency and for cross-border insolvency, including recognition, relief and judicial cooperation. Substantial parts of that Act were brought into force on 26 May 2026 by S.O. 2625(E), but the notified list does not include section 42 of the Amendment Act, identified in published analysis as the clause inserting the group insolvency chapter. The cross-border architecture likewise depends on rules yet to be prescribed. Until those steps are taken, the position described above stands.

What a Counterparty Should Do

• Ask, at diligence, whether the entity is a financial service provider. The answer determines whether an insolvency petition is even available.
• Do not assume section 59 is available for a solvent wind-down of a licensed IFSC entity.
• Take security and guarantees from entities that are corporate persons, or from entities in jurisdictions with a functioning insolvency regime.
• Track section 227. A single notification could bring a category of IFSC entities within the Code, with the regulator, not the creditor, controlling the trigger.

Frequently Asked Questions

1. Does the Insolvency and Bankruptcy Code apply to GIFT IFSC entities?

Not automatically. An entity qualifying as a financial service provider is generally excluded from the Code unless brought within its framework through the applicable statutory mechanism.

2. Can a creditor initiate CIRP against an IFSC finance company?

Ordinarily, not under Sections 7 or 9 if the company qualifies as a financial service provider and no applicable notification brings it within the Code.

3. How can a GIFT IFSC company wind up voluntarily?

A qualifying financial service provider generally cannot use Section 59 of the IBC. Its winding-up route depends on its legal form and the applicable Companies Act and IFSCA framework.

4. Can a GIFT IFSC entity initiate insolvency proceedings against an Indian borrower?

Yes. An eligible IFSC entity acting as a creditor may initiate proceedings against an Indian corporate debtor, subject to the applicable requirements and thresholds.

The post Insolvency of a GIFT IFSC Entity: Who Is a “Corporate Person”, and What Happens If No One Is appeared first on Bhatt & Joshi Associates.

A company incorporated in GIFT IFSC remains an Indian company governed by the Companies Act, 2013. However, the MCA notifications dated 4 January 2017 provide specific exemptions, modifications and adaptations for eligible IFSC public and private companies. Understanding these Companies Act exemptions for GIFT IFSC companies is essential for corporate structuring, regulatory compliance and assessing whether the exemptions extend to companies licensed by IFSCA.

The Enabling Power

Section 462 of the Companies Act permits the Central Government, in the public interest, to direct that any provision of the Act shall not apply to a class of companies, or shall apply with exceptions, modifications and adaptations. A notification under it must be laid in draft before both Houses of Parliament.

Using that power, the MCA issued G.S.R. 08(E), for a “Specified IFSC public company”, and G.S.R. 09(E), for a “Specified IFSC private company”. The public-company notification reaches further, because an unlisted public company would otherwise carry governance obligations a private company does not.

What Both Notifications Do

Several Companies Act exemptions for GIFT IFSC companies apply to both specified public and private companies under the 2017 MCA notifications.

Identity and location. The company must be limited by shares (s. 3(2)); its name must include “International Financial Service Company” or the suffix “IFSC” (s. 4(1)(a)); its objects must be confined to the financial services activities permitted under its licence and the SEZ framework (s. 4(1)(c)); and its registered office must be at the IFSC location at all times, with changes permitted within the IFSC by Board resolution but not outside it (s. 12(1) and (5)).

Time. A recurring pattern is the doubling of statutory periods. Thirty days becomes sixty for registered-office intimation (s. 12(2)), beneficial-interest declarations (s. 89(6)), filing of resolutions (s. 117(1)) and director particulars (s. 170(2)); fifteen days becomes sixty for change of office (s. 12(4)); sixty becomes ninety for the return of allotment on private placement (s. 42(6)); and charge registration may be made within three hundred days with the Registrar’s approval and additional fees (s. 82(1)).

Financial year. An IFSC company that is a subsidiary or holding company of a company incorporated outside India may align its financial year with that company without applying to the Tribunal (s. 2(41)).

Meetings and the Board. The first Board meeting is due within sixty days of incorporation, and thereafter at least one meeting in each half of a calendar year (s. 173(1)) — a material relaxation from four meetings a year. An extraordinary general meeting may be held anywhere within or outside India with shareholder consent (s. 100(1)). Section 118(10), which requires observance of secretarial standards, does not apply, and minutes need only be prepared and signed at or before the next meeting (s. 118(1)). Board powers under s. 179(3) may be exercised by resolution passed at a meeting or by circulation. An interested director may participate in a meeting if the interest is disclosed before or at it (s. 174(3)).

Audit and internal controls. Internal audit under s. 138 applies only if the articles so provide. The provisos to s. 139(2) on mandatory rotation of auditors do not apply, and the period for filling a casual vacancy is extended (s. 139(1), fourth proviso). Where Central Government approval is sought for removal of an auditor under s. 140(1), approval is deemed if there is no response within sixty days.

Corporate social responsibility. Section 135 does not apply for five years from the commencement of business.

Loans and investments. Section 186(1), on layers of investment companies, does not apply; sub-sections (2) and (3) do not apply where the Board passes a resolution at a meeting or by circulation.

Foreign companies. Sections 384(2) and (4) are adapted so that the relief from s. 92 and Chapter VI applies mutatis mutandis to a foreign company operating from an IFSC.

What the Public-Company Notification Adds

An unlisted public company in GIFT IFSC benefits from additional Companies Act exemptions and corporate governance relaxations under the 2017 MCA notification, covering key requirements for directors, committees, managerial remuneration, share capital and shareholder meetings.

The pattern is coherent. These are wholly-owned or closely-held subsidiaries of regulated financial groups, supervised by a financial regulator, whose governance is driven by the group and by IFSCA’s own requirements — including the fit and proper, principal officer and compliance officer conditions found across the IFSCA rulebooks (Article 40). The Companies Act machinery designed for widely held Indian public companies is displaced, not because governance is unimportant, but because it is delivered elsewhere.

The Definitional Question

Both notifications define the beneficiary class by reference to a company “licensed to operate by the Reserve Bank of India or the Securities and Exchange Board of India or the Insurance Regulatory and Development Authority of India from an International Financial Services Centre located in an approved multi services Special Economic Zone”.

That language reflects the position in January 2017. Since 1 October 2020, licences in GIFT IFSC are granted by IFSCA. Section 13(1) of the IFSCA Act provides that, notwithstanding any other law, all powers exercisable by an appropriate regulator specified in the First Schedule under the Acts listed there shall, in an IFSC, be exercised by IFSCA. The Companies Act, 2013 is not one of those Acts, and no amendment substituting IFSCA in the two notifications was traced as at 17 September 2026.

Two readings are possible. On the first, a licence granted by IFSCA is granted in exercise of the very powers that section 13(1) transferred from RBI, SEBI and IRDAI, so the description continues to be satisfied in substance. On the second, the notifications are to be read literally, and a company licensed only by IFSCA falls outside them. The first reading is the one that gives the notifications continuing work to do and accords with the evident purpose of the transfer, and it is the reading on which the market has proceeded. But the point has not, so far as traced, been settled by amendment or by judicial decision, and a company relying on a governance relaxation — no audit committee, no independent directors, two Board meetings a year — is relying on it for provisions whose breach carries penal consequences. Prudent practice is to document the basis of reliance, and to watch for a clarificatory amendment.

Frequently Asked Questions

1. Do Companies Act, 2013 provisions apply to GIFT IFSC companies?
Yes. The Companies Act, 2013 applies to GIFT IFSC companies, subject to the exemptions, modifications and adaptations prescribed under the MCA notifications dated 4 January 2017.

2. Which notifications provide Companies Act exemptions to IFSC companies?
G.S.R. 08(E) covers specified IFSC public companies, while G.S.R. 09(E) covers specified IFSC private companies.

3. Are independent directors mandatory for IFSC public companies?
The 2017 public-company notification exempts qualifying companies from several independent-director requirements under Section 149.

4. How many Board meetings must an IFSC company hold annually?
The applicable modification generally requires at least one Board meeting in each half of the calendar year.

5. Do the 2017 exemptions automatically cover companies licensed by IFSCA?
This remains an interpretive question because the notifications name RBI, SEBI and IRDAI, rather than IFSCA. The position has not been conclusively settled by amendment or judicial decision, based on the research described in the article.

The post Companies Act Exemptions for GIFT IFSC Companies, and the Definitional Question They Now Raise appeared first on Bhatt & Joshi Associates.

Ship leasing in GIFT IFSC is often described as the maritime counterpart of aircraft leasing (Article 41). The regulatory architecture is indeed similar, and deliberately so. But the two differ in one respect that matters commercially: aircraft financing in India now rests on implemented treaty law with a statutory repossession machinery (Article 42), whereas ships remain governed by the general shipping and admiralty statutes, which were themselves rewritten in 2025.

Bringing Ship Lease inside The Perimeter

The Ministry of Finance notified, by S.O. 5199(E) dated 14 December 2021, operating leases and hybrids of such products or equipment as IFSCA may specify. Exercising that power under section 12 of the IFSCA Act, IFSCA notified, on 7 January 2022, “ship lease” — operating lease and hybrid of operating and financial lease of a ship or ocean vessel, its engines or any part — as a financial product under section 3(1)(d).

The definitions in the framework are wider than the word “ship” suggests. “Ocean vessel” covers every description of watercraft used or capable of use in the marine environment, including boats, submersibles and semi-submersibles, hydrofoils, non-displacement and amphibious craft, barges, lighters and Mobile Offshore Drilling Units, and extends to inland water vessels and coasting vessels. Fishing and sailing watercraft are excluded from both “ship” and “ocean vessel”. Offshore energy support assets therefore sit inside the regime.

Two Regimes in One Framework

The Framework for Ship Leasing (circular dated 16 August 2022, updated to 20 May 2026) is structured in two parts, following the classification under the IFSCA (Finance Company) Regulations, 2021:

Application and registration fees are USD 1,000 and USD 12,500 in both cases, and IFSCA may require additional capital as a risk-management measure. An entity already registered for operating leases must apply separately if it wishes to undertake financial leases or hybrids.

Legal form. The applicant may be a company, an LLP, a trust or a branch — including a branch of a wholly owned subsidiary of the IFSC-registered entity — which is a wider menu than the aircraft framework offers. Promoters, partners or trustees must be located in a FATF-compliant jurisdiction.

Permissible activities under Part I extend beyond leasing to voyage charters, contracts of affreightment, employment in shipping pools and other commercial transactions for the employment of ships — but only where the lessor holds absolute or leasehold right over the vessel. Asset management support services may be provided for assets owned or leased out by the lessor or its group entities in IFSCs, and sale and leaseback, purchase, novation, transfer and assignment are permitted. Whether a transaction is a lease is determined by Ind AS 116.

Currency and accounts. Invoices are raised in a currency specified in the First Schedule to the IFSCA (Banking) Regulations, 2020, and payment is received in a foreign currency account with an IFSC Banking Unit. For business transactions outside the IFSC, the lessor may open a special non-resident rupee account with an authorised dealer in India under Schedule 4 of the Foreign Exchange Management (Deposit) Regulations, 2016.

The Anti-Relocation Condition

Clause O.1, inserted on 8 May 2024 and amended on 7 April 2025, is the provision most likely to defeat a proposed structure. A lessor may not undertake a transaction involving transfer, in any form, of ownership or leasehold right of a ship or ocean vessel from a person resident in India to an IFSC entity for the purpose of providing services solely to a person resident in India in any single financial year. Two provisos preserve genuine expansion: acquiring a new vessel or entering a new leasehold contract with a person resident outside India in order to serve Indian customers, and acquiring a new vessel from a shipyard in India.

IFSCA’s FAQs of 23 July 2024 work this through. An Indian-owned vessel serving Indian clients, moved into an IFSC lessor to serve Indian clients only, is not permitted. An Indian shipping business setting up in the IFSC to pursue global operations or foreign contracts is permitted. A vessel acquired from outside India even solely to serve Indian clients is permitted, as is a newly built vessel bought from any shipyard, Indian or foreign. Critically, the FAQs state that an existing business or contract with Indian residents cannot be shifted into the IFSC, though new compliant contracts may be routed through the lessor once the existing contract concludes.

The Shipping-Law Layer

Clause C(ii) of the framework requires compliance with the statutes governing shipping and with instruments issued by the Director General of Shipping. That layer changed in 2025. The Merchant Shipping Act, 2025 (Act 24 of 2025), which received assent on 18 August 2025, consolidates and replaces the earlier law. Two provisions matter to a lessor:

• Section 15 sets who may own an Indian vessel — a citizen of India including a non-resident Indian or Overseas Citizen of India; a company or body established under a Central or State Act with its registered office or principal place of business in India; or such other person or body as the Central Government may notify — with the proportion of ownership itself left to notification.
• Section 16 permits a foreign vessel chartered by an Indian charterer on a bareboat charter-cum-demise contract to be registered, subject to prescribed conditions.

The Act came into force on 15 March 2026 under S.O. 1244(E) dated 10 March 2026, and rules under it have been notified through 2026, including the Merchant Shipping (Registration of Vessels) Rules, 2026. The framework circular, however, still refers to the Merchant Shipping Act, 1958. That is a drafting lag rather than a substantive divergence, but it means the operative shipping-law requirements must be taken from the current statute and rules, not from the circular’s citation.

Enforcement against a vessel remains a matter for admiralty jurisdiction. There is no maritime equivalent of the Cape Town regime; a lessor’s principal in rem remedy is arrest under the Admiralty (Jurisdiction and Settlement of Maritime Claims) Act, 2017, exercised by High Courts with admiralty jurisdiction.

The Tax Position

Under the Income-tax Act, 2025, ships are treated alongside aircraft. Section 147(3)(d) brings within the deduction income from the transfer of an asset being a ship leased by an IFSC unit which commenced operations by 31 March 2030. Schedule VI exempts, in the hands of a non-resident, royalty or interest on the lease of a ship paid by such a unit (Sl. No. 6); capital gains on shares of a domestic company that is an IFSC unit primarily engaged in ship leasing, for ten tax years (Sl. No. 8); and dividends from such a unit received by another IFSC Unit (Sl. No. 11). “Ship” is defined for these entries to include an ocean vessel, its engine or any part (Articles 5 and 7).

Points to Settle before Applying

• Classify the transaction as operating or financial lease under Ind AS 116; the capital requirement differs fifteenfold.
• Test clause O.1 vessel by vessel and year by year, since the restriction is framed by reference to a single financial year.
• Do not plan on migrating an existing Indian contract. The FAQs close that route expressly.
• Check the current shipping statute and rules, not the circular’s reference to the 1958 Act, for registration, flag and ownership questions.
• Diarise the 31 March 2030 commencement condition on which several tax entries depend.

Update to 15 October 2026

IFSCA issued a consultation on 13 August 2026 on a consolidated framework for leasing activity in the IFSC (Article 41). Any final framework may also bear on ship leasing. The existing framework circular remains operative until a final framework is issued; as at 15 October 2026 none had been.

Frequently Asked Questions

1. What is ship leasing in GIFT IFSC?

Ship leasing in GIFT IFSC allows registered entities to lease ships, ocean vessels, engines and related equipment under IFSCA’s regulatory framework.

2. What is the minimum capital requirement for ship leasing?

Operating lease activities require a minimum owned fund of USD 200,000, while financial leases and hybrids require USD 3 million.

3. Can an Indian ship be transferred to a GIFT IFSC lessor?

Restrictions apply where a vessel is transferred from an Indian resident to an IFSC entity to serve only Indian residents in a financial year, subject to specified exceptions.

4. What tax benefits are available for ship leasing in GIFT IFSC?

Eligible units may claim deductions under Section 147 of the Income-tax Act, 2025, and benefit from specified exemptions under Schedule VI, subject to applicable conditions.

5. Which laws govern ship leasing in GIFT IFSC?

Ship leasing is governed by IFSCA’s Ship Leasing Framework, the applicable Finance Company Regulations, the Merchant Shipping Act, 2025, and relevant admiralty laws.

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An IFSC unit’s employment compliance in GIFT IFSC involves three key areas: Indian labour laws, SEZ and Gujarat state requirements, and IFSCA staffing rules governing designated officers and their place of employment.

The Labour Codes Are in Force

On 21 November 2025, the Central Government made the four labour codes effective:

• the Code on Wages, 2019;
• the Industrial Relations Code, 2020;
• the Code on Social Security, 2020; and
• the Occupational Safety, Health and Working Conditions Code, 2020.

The Government’s announcement records that the codes replace 29 existing labour laws, and makes two points that matter for practical compliance.

First, rules, regulations and schemes under the codes are still being framed, with stakeholder engagement. Second, and critically, during the transition the relevant provisions of the existing labour Acts and their rules, regulations, notifications, standards and schemes continue to remain in force.

The first point has since moved on. On 8 May 2026 the Central Government notified the final Central Rules under all four codes: the Code on Wages (Central) Rules, 2026, the Social Security (Central) Rules, 2026, the Occupational Safety, Health and Working Conditions (Central) Rules, 2026 and the Industrial Relations (Central) Rules, 2026 (G.S.R. 342(E)). They apply where the Central Government is the appropriate government, which includes establishments such as banking and insurance companies. That matters in GIFT IFSC, because an IFSC Banking Unit is part of a banking company and an IFSC insurance office is part of an insurer. For other establishments the appropriate government will generally be the State. Gujarat has final rules under all four codes: the Code on Wages (Gujarat) Rules, 2021 and the Industrial Relations (Gujarat) Rules, 2021 (notified 5 October 2021), the Code on Social Security (Gujarat) Rules, 2023 (notified 30 December 2023) and the Gujarat Occupational Safety, Health and Working Conditions Rules, 2025 (notified 6 June 2025). Each set is expressed to come into force with the corresponding code, and so took effect on 21 November 2025; amendment notifications issued in 2026 are published on the Labour Commissionerate’s labour-codes page and should be checked for the specific obligation in issue.

The practical consequence is that an employer in GIFT IFSC cannot simply switch its compliance to the codes and discard the earlier framework. Even with the Central and Gujarat rules in place, instruments issued under the repealed enactments continue under the savings clauses until superseded, so the overlap must be mapped obligation by obligation; and because labour is a concurrent subject, the rule-set that applies depends on which government is the appropriate government for the establishment.

For an employer in Gujarat, therefore, three questions should be asked of each obligation: which code provision now governs it; whether the Central or the Gujarat rules apply to the establishment and what form, register or authority they prescribe; and whether any pre-existing instrument continues to apply under the savings clauses in the interim.

SEZ and State Formalities

Operating inside GIFT SEZ adds a set of practical registrations. IFSCA’s published workflow for setting up a unit (Article 3) lists, among the steps after the Certificate of Registration:

• registration under the Gujarat shops and establishments framework for the unit;
• professional tax registration for the employer and for employees; and
• issuance of SEZ employee identity cards.

These are not optional conveniences. Entry into the SEZ and the ordinary state-law obligations of an employer depend on them, and they sit on the critical path between registration and the commencement of operations.

What IFSCA itself Requires

The most distinctive workforce obligations in GIFT IFSC come from the financial regulations rather than from labour law. Several frameworks require named officers and, importantly, require them to be physically based in the IFSC:

These requirements have employment-law consequences. Role descriptions, reporting lines, relocation terms and secondment structures must be capable of satisfying a regulator that the named individual genuinely performs the function from the IFSC. Where a group wishes to use a shared resource, the question is whether the relevant framework permits it, as the cyber security amendment expressly does for certain categories, or whether it requires a dedicated person.

Foreign Nationals

Employment of foreign nationals in GIFT IFSC is governed by India’s general immigration framework, including the employment visa regime administered by the Central Government, together with the registration requirements that apply to foreign nationals resident in India. Conditions, including any minimum remuneration thresholds and exemptions, are set by the relevant Government instructions and are amended from time to time. Because those conditions determine whether a proposed hire is permissible at all, they should be confirmed against the current instructions before an offer is made rather than assumed from earlier practice.

Social security for internationally mobile employees is governed by the Code on Social Security, 2020 framework read with the transitional continuation of existing schemes, and by any applicable social security agreement between India and the employee’s home country. Where a social security agreement applies, certificate-of-coverage procedures may avoid duplicate contributions.

Employee Data

An IFSC unit that relies on section 17(1)(d) of the Digital Personal Data Protection Act, 2023 for its client-facing processing does not obtain any exemption for the personal data of its own employees in India (Article 37). Employee data processing is ordinary data fiduciary activity, and it should be brought within the unit’s data protection programme ahead of the phased commencement dates.

A Practical Sequence for a New Unit

A new IFSC unit should approach employment compliance in a clear sequence, addressing regulatory staffing requirements, state and SEZ registrations, labour code transitions, employee role documentation and data protection before operations begin.

1. Map the regulatory staffing requirements for the specific licence before recruiting, since several roles must exist before commencement of operations.
2. Complete the state and SEZ registrations on the critical path: shops and establishments, professional tax and SEZ identity cards.
3. Run a transition analysis on the labour codes: what is now governed by a code, what still runs on the earlier Act pending rules, and what Gujarat has notified.
4. Document residence and role, since “based out of IFSC” is a supervisory expectation that must be evidenced.
5. Build employee data protection into the unit’s compliance programme from the outset.

Frequently Asked Questions

1. Which labour laws apply to employees in GIFT IFSC?

The applicable Indian labour laws, including the four Labour Codes brought into force in November 2025, govern employment obligations.

2. Do GIFT IFSC units need to comply with Gujarat labour requirements?

Yes. Applicable Gujarat-specific requirements and SEZ-related formalities must also be considered.

3. Does IFSCA prescribe staffing requirements for IFSC units?

Yes. Depending on the regulated activity, IFSCA regulations may prescribe specific officers, qualifications and location requirements.

4. Can GIFT IFSC units employ foreign nationals?

Yes, subject to applicable immigration, visa, employment and other legal requirements.

5. Are IFSCA staffing rules a substitute for labour law compliance?

No. Regulatory staffing conditions and general employment law obligations apply separately.

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GIFT IFSC provides a regulated framework for global financial institutions to establish back-office and support operations in India. The IFSCA (Global In-house Centre) Regulations, 2025 govern captive services provided to entities within a financial institution group, while the IFSCA (TechFin and Ancillary Services) Regulations, 2025 cover eligible service providers serving third-party clients. Understanding the scope of each framework helps businesses identify the appropriate registration, eligibility requirements and compliance obligations for their operations in GIFT IFSC.

The GIC Regime

A Global In-house Centre in GIFT IFSC is a unit providing services in relation to financial products and financial services to entities of its own Financial Institution Group. The IFSCA (Global In-house Centre) Regulations, 2025 govern registration and operation.

Eligibility and form. The applicant must be connected with a Financial Institution Group, whose group entities are defined to include financial institutions in an IFSC. Where the framework permits a third-party model, the application may be made by the third party with the prior authorisation of the Financial Institution Group, evidenced by an authorisation letter furnished to IFSCA. Promoters or partners must be from jurisdictions not identified in the FATF public statement.

The unit may be a company or LLP incorporated in the IFSC, a branch of a company or LLP incorporated outside the IFSC, or another form IFSCA permits.

Registration. Operations may not commence without a certificate of registration. Applications go through the SWIT portal. IFSCA communicates deficiencies and allows thirty days to rectify, and may not reject without a reasonable opportunity to make written submissions. IFSCA may grant in-principle approval, after which the applicant has 180 days, extendable, to comply with the regulations and the conditions. The certificate then remains valid unless suspended or cancelled, or surrendered and accepted, and the unit must immediately inform IFSCA of material changes.

What a GIC may do, and for whom. A GIC Unit provides services in relation to financial products and services, to entities of its group located in jurisdictions that are not FATF-listed. A proviso permits services to Indian entities of the group, for the purpose of delivering GIC services from the IFSC, not exceeding 10% of the GIC Unit’s total revenue for the relevant financial year. That 10% cap is the boundary between an export-facing captive and a domestic outsourcing operation, and it must be monitored annually.

A separate restriction states that a GIC Unit shall not be set up by transferring existing operations. This mirrors conditions found elsewhere in the IFSC framework, including in the 2024 notification of book-keeping and related services and in the anti-splitting condition for the income-tax deduction (Article 5). The policy is consistent: the IFSC is intended to attract new activity rather than to relocate existing Indian activity for concessional treatment.

People and currency. The GIC Unit must have a principal officer responsible for overall activities and a compliance officer responsible for policies, procedures, records and applicable laws, reporting to the board or head of the organisation. Both must be full-time employees based in the IFSC. Operations and the balance sheet must be in specified foreign currencies, and reporting to IFSCA is in US dollars unless otherwise specified.

Relaxation. IFSCA may relax strict enforcement on application with a non-refundable fee, and must process a complete application within thirty days, recording reasons.

The Ancillary Services Regime

Where the services are provided to persons outside the provider’s own group, the relevant framework is the IFSCA (TechFin and Ancillary Services) Regulations, 2025 (Article 38). Its First Schedule permits a wide range of services that support financial activity, including fund administration and fund accounting, compliance management support, enterprise governance support, risk management support, auditing, actuarial services, valuation, secretarial services, insolvency professional and liquidation support, knowledge and legal process outsourcing, human resources and payroll, customer care, marketing support, family office support, and global mobility services.

Its Third Schedule excludes core activities that a home regulator does not permit to be outsourced, activities regulated under other IFSCA frameworks, facility management, transport and logistics, and anything that does not constitute making arrangements for carrying on the financial services listed in the IFSCA Act.

Choosing the Right Registration

Choosing the right registration in GIFT IFSC requires distinguishing between the IFSCA (Global In-house Centre) Regulations, 2025, which govern eligible captive operations, and the IFSCA (TechFin and Ancillary Services) Regulations, 2025, which cover eligible services provided to third-party clients.

An entity that begins as a captive and later wishes to serve third parties, or vice versa, is changing regime, not merely expanding. That change should be planned as a fresh authorisation question.

An AML Point that is Easy to Misread

Under clause 1.2.3 of IFSCA’s AML, CFT and KYC Guidelines, a GIC registered under the IFSCA Global In-house Centres Regulations is exempt from those Guidelines, as is a Financial Crime Compliance Services Provider registered under the 2024 book-keeping regulations. The exemption is conditional: exempt entities must still undertake and document a business risk assessment, and any financial institution transacting through third-party service providers remains subject to that requirement (Article 35).

Exempt status also does not remove the obligations of the group entities being served, which remain subject to their own regulators’ AML requirements, nor the cyber security obligations that apply to regulated entities, where GICs and small entities received a conditional three-year relief in March 2026 (Article 36).

Practical Checklist

• Fix the service perimeter first, since it determines which regulation applies.
• Model the 10% Indian-revenue cap for a GIC and build the reporting to evidence it annually.
• Do not build on transferred operations. Both the GIC regulations and other IFSC instruments contain anti-relocation conditions.
• Staff the IFSC office genuinely. The principal officer and compliance officer must be full-time and based in the IFSC.
• Plan the 180-day window between in-principle approval and registration, since it drives premises, hiring and systems timelines.

Frequently Asked Questions

1. What is a Global In-house Centre (GIC) in GIFT IFSC?

A GIC provides services related to financial products and financial services to entities within its own Financial Institution Group.

2. Which regulations govern GICs in GIFT IFSC?

The IFSCA (Global In-house Centre) Regulations, 2025 govern the registration and operation of GICs.

3. Can a GIC provide services to Indian group entities?

Yes. Services to Indian group entities are permitted, subject to the limit of 10% of the GIC Unit’s total revenue for the relevant financial year.

4. What regulations apply to third-party ancillary service providers?

The IFSCA (TechFin and Ancillary Services) Regulations, 2025 govern eligible providers serving clients beyond their own group, subject to the applicable schedules.

5. Can an existing operation be transferred to GIFT IFSC to establish a GIC?

No. The GIC Regulations expressly prohibit setting up a GIC by transferring existing operations.

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GIFT IFSC has a provision that surprises many lawyers: “Legal services” is a permitted ancillary service, listed in the First Schedule to the IFSCA (TechFin and Ancillary Services) Regulations, 2025, alongside legal process outsourcing, secretarial services, fund administration and valuation. That listing sits within a financial-services regulator’s rulebook. It does not, by itself, change who may practise Indian law or how. The relationship between the two frameworks, IFSCA’s and the Bar Council of India’s, is the subject of this article.

What IFSCA Permits

The 2025 Regulations create a single registration for “TechFin and Ancillary Service Providers”. “Ancillary Services” are defined as services which, directly or indirectly, aid or assist activities in relation to financial products, financial services and financial institutions.

The First Schedule lists the permitted ancillary services. They include actuarial services; advisory services; asset management support; auditing; business process outsourcing; compliance management support; customer care support; enterprise governance support; fund administration including fund accounting; human resources and payroll; insolvency professional services and liquidation support; knowledge process outsourcing; legal process outsourcing; legal services; management consulting; marketing support; risk management support; secretarial services; broking for leasing activities permitted in the IFSC; supply chain management support; trusteeship including facility agent functions, but excluding debenture trustee services permitted under the Capital Market Intermediaries Regulations, 2025; valuation services; voice broking for banking services; family office support services; and global mobility or immigration support services for students and employees coming to the IFSC.

The Third Schedule lists what may not be provided under this registration, including core activities that a home-jurisdiction regulator does not permit to be outsourced, activities regulated under any other IFSCA regulation or framework, facility management, transport and logistics, and any service that does not constitute making arrangements for carrying on the financial services listed in the IFSCA Act.

Registration is mandatory before commencing operations. Entities previously authorised under the ancillary services framework circular of 10 February 2021, or as FinTech entities under the circular of 27 April 2022, must obtain registration under the 2025 Regulations within twelve months of their commencement, extendable by the Chairperson for recorded reasons up to an aggregate of twenty-four months, and continue to be governed by the earlier frameworks until they are registered.

What the Bar Council Rules Permit

The practice of law in India is governed by the Advocates Act, 1961 and the Bar Council of India’s rules, not by IFSCA. The Supreme Court settled the basic position in Bar Council of India v. A.K. Balaji, (2018) 5 SCC 379, which addressed the extent to which foreign law firms and lawyers may operate in India.

The BCI’s rules for registration and regulation of foreign lawyers and foreign law firms, made in 2022 and notified in their current form in May 2025, permit registered foreign lawyers and firms to practise in non-litigious matters only, subject to conditions and limitations, and to advise on foreign law, international law and international arbitration. Registration is by application in the prescribed form, with fees, a guarantee amount and a processing charge, and is valid for five years, renewable.

Registered foreign lawyers and firms may not appear before Indian courts, tribunals or regulatory authorities unless expressly permitted; may not undertake conveyancing, investigation of title to property or similar work; and may not draft or file documents for Indian court proceedings.

A fly-in, fly-out permission allows foreign lawyers to advise without registration, subject to conditions including an aggregate presence of not more than sixty days in a year, advisory work on foreign or international law only, and the absence of an office in India.

As at 17 September 2026, no IFSC-specific carve-out or special regime was traced within the BCI rules.

Reading the Two Together

Three propositions follow, and they should be kept distinct.

First, IFSCA’s listing is a financial-services authorisation, not a licence to practise law. IFSCA regulates the provision of ancillary services that support financial activity in the IFSC. It does not, and under the IFSCA Act cannot, displace the Advocates Act or the Bar Council’s jurisdiction, which are outside the First Schedule to the IFSCA Act (Article 1). An entity registered as an ancillary service provider for “legal services” remains subject to the professional rules governing who may render legal advice in India and in what form.

Second, the Third Schedule reinforces the boundary. Services that do not constitute making arrangements for carrying on the financial services listed in the IFSCA Act fall outside the registration entirely. The registration is tethered to the financial ecosystem it serves.

Third, the two frameworks answer different questions. IFSCA answers: may this entity operate from the IFSC, and on what conditions. The Bar Council framework answers: who may give legal advice, on which law, and in what capacity. A structure must satisfy both. Neither regulator’s permission cures a defect under the other’s rules.

Practical Questions a Firm Should Ask

• What exactly is being provided? Legal process outsourcing, document review and knowledge process work occupy different ground from advising a client on the law. The First Schedule lists both, but the professional-conduct analysis differs.
• Whose law is being advised on? The BCI framework distinguishes sharply between foreign and international law on the one hand, and Indian law on the other.
• Who is the adviser? Indian advocates, registered foreign lawyers, registered foreign law firms and non-lawyer service entities each occupy a different position.
• Is the activity regulated elsewhere by IFSCA? Items regulated under another IFSCA framework are excluded from the ancillary services registration, which matters for trusteeship and for any activity that shades into a licensed financial service.
• What professional conduct rules apply to the firm’s own advocates? For Indian advocates, the Bar Council’s rules on advertising, solicitation and professional conduct apply to their work regardless of where the office sits.

The Position as at 17 September 2026

Legal services are a permitted ancillary service in GIFT IFSC under IFSCA’s 2025 Regulations, subject to registration and to the Third Schedule exclusions. The entry of foreign lawyers and foreign law firms into India is governed by the Bar Council of India’s rules, as they stood following their May 2025 notification, read with the Supreme Court’s decision in A.K. Balaji. No IFSC-specific exception within the Bar Council framework was traced. Firms structuring legal-services operations in the IFSC should therefore plan on satisfying both regimes, and should verify the current text of the Bar Council rules, which have been amended more than once since 2022.

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A significant part of GIFT IFSC’s service economy involves processing personal data for offshore clients, whether through fund administration, global in-house centres or back-office operations. Section 17(1)(d) of the Digital Personal Data Protection Act, 2023 provides an exemption for certain activities involving data of individuals outside India, subject to specific conditions. Understanding the scope of the DPDP Act exemption for GIFT IFSC, its limitations and when the remaining compliance obligations take effect is important for businesses handling personal data in the IFSC.

The Provision

Section 17(1) of the DPDP Act provides that the provisions of Chapter II, except sub-sections (1) and (5) of section 8, and those of Chapter III and section 16, shall not apply where, under clause (d):

“personal data of Data Principals not within the territory of India is processed pursuant to any contract entered into with any person outside the territory of India by any person based in India”.

The conditions are cumulative. The data principals must not be within the territory of India, the processing must be pursuant to a contract with a person outside India, and it must be undertaken by a person based in India, which an IFSC unit will ordinarily be. In practice the first two conditions are where disputes arise.

Chapter II contains the core obligations of data fiduciaries, including notice, consent, purpose limitation, security safeguards, breach notification and the obligations of significant data fiduciaries. Chapter III contains the rights and duties of data principals. Section 16 restricts transfer of personal data outside India to countries or territories restricted by the Central Government. The exemption is therefore substantial where it applies, but it is not total. Two provisions of Chapter II are expressly carved out of it and continue to apply. Section 8(1) keeps the data fiduciary responsible for complying with the Act in respect of processing undertaken by it or on its behalf. Section 8(5) requires it to protect personal data in its possession or under its control by taking reasonable security safeguards to prevent a personal data breach. Fully offshore-facing processing in the IFSC therefore still carries a statutory security obligation under Indian law.

Limits of the DPDP Act Exemption for GIFT IFSC

It does not exempt the entity. The exemption is activity-specific. An IFSC unit that also processes personal data of Indian data principals, for example its own employees in India, customers in India, or vendors, is a data fiduciary in respect of that processing and must comply in full.

It does not survive a change in the contractual counterparty. The processing must be pursuant to a contract with a person outside India. Where the same operation begins serving an Indian group entity or an Indian client, the second condition fails for that work.

It does not displace other obligations. Section 17(1) exempts the specified chapters and section, save for section 8(1) and (5), which continue to apply. Obligations outside them, and obligations under other laws, continue. In the IFSC context, three in particular remain: IFSCA’s AML, CFT and KYC guidelines with their record-keeping and reporting requirements (Article 35); IFSCA’s cyber security and cyber resilience guidelines, which require confidentiality, integrity and availability of IT assets, incident handling, audit trails and third-party risk management (Article 36); and contractual and foreign-law obligations owed to the offshore client, which are frequently more demanding than Indian law.

It does not answer the foreign-law question. Data relating to individuals in other jurisdictions may attract those jurisdictions’ laws. An Indian statutory exemption does not affect, for example, obligations owed under the law governing the client’s own processing.

When the Obligations Begin

The DPDP Act was enacted in 2023, but its operative provisions were sequenced through the Digital Personal Data Protection Rules, 2025, notified in November 2025. The commencement is phased:

The practical consequence for an IFSC entity is that the compliance deadline is not immediate but is fixed. As at 17 September 2026, the substantive obligations are not yet in force, and the intervening period is the window in which policies, systems and contracts are expected to be aligned. The dates above are computed from the Gazette publication of the Rules (G.S.R. 846(E), dated 13 November 2025), from which the one-year and eighteen-month periods run. Where a specific day is critical, the counting convention should be confirmed against the commencement provisions.

Building for the Exemption

1. Contract with a person outside India. The processing must be traceable to such a contract. Intra-group arrangements should be documented as contracts with the offshore entity, not assumed from the group relationship.
2. Data principals outside India. The operation should be able to show, by design, that the data sets processed under that contract relate to individuals outside India. Mixed data sets are the most common risk, and segregation is easier to build at the outset than to retrofit.
3. Segregate the exempt and non-exempt processing. Employee data, vendor data and any India-facing service line should be managed under a full DPDP compliance programme. Two regimes running in one entity is manageable; one undifferentiated regime is not.
4. Align with the security obligations that apply regardless. Section 8(5) of the Act itself continues to apply to exempt processing. The cyber security guidelines and AML record-keeping requirements already demand much of what a data protection programme requires, including access control, audit trails, incident response and third-party oversight. Building one control set that satisfies both is more efficient than parallel programmes.
5. Check the client’s own requirements. Offshore clients frequently impose their own data protection terms, and those obligations are enforceable as contract regardless of the statutory exemption.

Why this Matters for the IFSC’s Service Economy

The 2024 notification of book-keeping, accounting, taxation and financial crime compliance services as financial services, the Global In-house Centres framework and the TechFin and Ancillary Services Regulations have together made GIFT IFSC a location for processing work, not only for financial risk-taking. Section 17(1)(d) is the provision that makes that model workable under Indian data protection law, because it removes the notice-and-consent architecture from processing that has no Indian data subject.

But the exemption is drafted narrowly and by reference to facts that change over time: who the counterparty is, and where the individuals are. It should be treated as a condition to be maintained, not a status to be acquired.

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Payments regulation everywhere begins with a definitional question: which activities are payment services, and which merely support them. The IFSCA (Payment Services) Regulations, 2024 answer that question with a short list, a longer list of exclusions, and a proportionality mechanism that scales obligations with size. For a fintech considering GIFT IFSC, those three elements determine whether authorisation is needed at all, and what it will cost.

The Five Payment Services

Under Schedule I, Part A, of the IFSCA (Payment Services) Regulations, 2024, five activities qualify as payment services in GIFT IFSC:

• Account issuance service, including e-money account issuance.

• E-money issuance service.

• Escrow service.

• Cross-border money transfer service.

• Merchant acquisition service.

Under Regulation 3, any person seeking to provide payment services in or from GIFT IFSC must obtain a certificate of authorisation from the International Financial Services Centres Authority (IFSCA), unless specifically exempt. This requirement also covers providers operating from GIFT IFSC while serving customers outside India, as the regulations recognise payment service users both within and outside the IFSC.

A payment service provider in GIFT IFSC must be a company. However, persons specified in Schedule IV are exempt from the authorisation requirement, subject to the applicable conditions.

What is not a Payment Service

Part B excludes a series of activities that would otherwise be caught. They include:

• payment transactions by a commercial agent authorised to negotiate or conclude the sale or purchase of goods or services;
• transactions based on paper instruments such as cheques, cashier’s orders, demand drafts, traveller’s cheques, gift cheques and paper postal orders;
• transactions within a payment or securities settlement system between payment service providers, settlement agents, central counterparties, clearing houses, central banks and other participants;
• securities asset servicing payments such as dividends, income, distributions, redemptions or sales carried out by such persons;
• transactions between payment service providers, their agents or branches for their own account;
• intra-group transactions between a holding company and its subsidiary, or between subsidiaries of the same holding company, without intermediary intervention by a payment service provider other than group entities;
• cash-in-transit services;
• technical service providers that support payment services without at any time possessing the funds to be transferred, including processing and storage of data, trust and privacy protection services, data and entity authentication, information technology, communication networks, and provision and maintenance of terminals and devices; and
• limited-network and limited-range instruments, being instruments usable only at the issuer’s premises, within a limited network of providers with direct commercial agreements, or for a very limited range of goods or services.

The technical service provider carve-out is the one most often relied on by technology vendors. Its condition is precise: the provider must never be in possession of the funds. A vendor that touches settlement flows, even briefly, falls outside it.

Regular and Significant Providers

The regulations create two tiers. A regular payment service provider is any authorised provider other than a significant one. IFSCA designates a provider as significant when the Part C thresholds are met:

Designation is not merely a label. It changes the capital requirement and brings heightened supervisory expectations.

Net Worth

Schedule V sets minimum net worth on an ongoing basis:

• a regular provider must have net worth of USD 100,000 on the date of commencement of operations, rising to USD 200,000 by the end of the third financial year from the year of commencement; and
• a significant provider must reach USD 250,000 within ninety days of designation, rising to USD 500,000 by the end of the third financial year from the year of designation.

Net worth is defined to comprise paid-up equity capital, compulsorily convertible preference shares, free reserves, share premium and capital reserves representing surplus on sale of assets, excluding revaluation reserves, and adjusted for accumulated losses, intangible assets and deferred revenue expenditure.

Authorisation and Lifecycle

Application and evaluation. Applications are made under regulation 4 in the specified manner. IFSCA evaluates against the criteria in regulation 8, and grants authorisation under regulation 10 when satisfied that the conditions are met. Where authorisation cannot be granted, IFSCA communicates the deficiencies before refusing.

Fit and proper. Relevant persons must satisfy the fit and proper requirements in Schedule II. The provider must establish systems and controls to ensure this, and carry out evaluations in the prescribed format both at appointment and at reasonably regular intervals thereafter.

Commencement. Operations must begin within six months of authorisation.

Surrender and withdrawal. A provider may apply to surrender its authorisation in the format in Schedule III, with separate requirements depending on whether operations have commenced. IFSCA may act where a provider fails to comply with conditions.

Operating Obligations

The regulations impose a governance and risk framework that will be familiar to regulated payment businesses elsewhere:

• comprehensive and clear documentation of governance arrangements;
• a risk management policy covering the range of risks arising in or borne by the provider;
• a risk-based framework to assess criticality, with planning and due diligence before entering into arrangements, addressing outsourcing risk; and
• identification, documentation and, so far as practically feasible, testing of the matters specified.

Safeguarding of user money. Regulation 23, read with Schedule VI, governs safeguarding of money received from payment service users. This, together with the escrow-service definition, which requires money to be held in an escrow account with an IFSC Banking Unit or as otherwise specified, is the core customer-protection mechanism of the regime.

Points to Settle before Applying

• Classify the activity precisely. The difference between a payment service and a technical service is possession of funds, and it decides whether authorisation is needed.
• Model the designation thresholds. Growth into “significant” status brings a ninety-day capital deadline.
• Plan the safeguarding architecture early, including the IBU relationship for escrow and user funds.
• Check the intra-group exclusion if the proposed flows are between group entities, since the exclusion is conditioned on there being no intermediary intervention by a non-group payment service provider.
• Read the regulations with the wider IFSC rulebook, including AML and KYC obligations (Article 35) and cyber security requirements (Article 36), which apply to authorised providers as regulated entities.

Frequently Asked Questions

1. What are the IFSCA (Payment Services) Regulations, 2024?

They regulate payment service providers operating in or from GIFT IFSC, including authorisation, capital, safeguarding and compliance requirements.

2. Which activities qualify as payment services under IFSCA regulations?

The five services are account issuance, e-money issuance, escrow, cross-border money transfer and merchant acquisition.

3. Is authorisation mandatory for payment service providers in GIFT IFSC?

Yes. Regulation 3 generally requires a certificate of authorisation to provide payment services in or from the IFSC, subject to specified exemptions.

4. What is the minimum net worth for a payment service provider?

Regular providers must initially maintain USD 100,000, while significant providers must reach USD 250,000 within 90 days of designation, subject to the prescribed requirements.

5. What are the safeguarding requirements for payment service providers?

Regulation 23 and Schedule VI govern the safeguarding of money received from payment service users.

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