Fund management entities (FMEs) had filed the requisite Form 10CCF to claim deductions under Section 80LA of the Income Tax Act, but the system was not recognising these submissions while processing returns, leading to the denial of tax holidays, said a senior tax expert.
“These are not conscious denials. They are technical issues,” the consultant said, adding that the tax office had assured that the cases would be resolved.
Experts added that the issues involving their clients had largely been resolved after the matter was taken up with the tax authorities, with the International Financial Services Centres Authority (IFSCA) also raising concerns.
According to an earlier report, several Category-III Alternative Investment Funds (AIFs) had raised concerns over tax notices seeking surcharges on dividend and interest income despite relief for specified funds, potentially arising from system errors. A registered fund management entity, Artha Bharat Investment Managers IFSC, had said it was shifting two funds to Abu Dhabi Global Market, citing uncertainty over tax deductions, compliance requirements, and investor restrictions.
The firm had said its deduction claim under Section 80LA was disallowed, a matter it was pursuing.
While the consultant's comments indicate that some technical issues are being addressed, legal experts said clarity on tax administration and compliance would be important to sustain GIFT City's competitiveness.
“GIFT City's tax benefits are real, but the conditions to be fulfilled for claiming them are critical. A fund has to meet tests on its investor base, share of resident investors, and its corpus. Master funds feel this the most. When Section 80LA deductions are not allowed over technical (glitch), a manager cannot be sure if the tax holiday will actually be available. Goods and services tax (GST) adds to the problem,” said Rajul Bohra, partner, JSA.
She explained that services within the IFSC are effectively outside GST, yet the units have to register to keep up with the filings that come with registration.
“GIFT City now needs simpler, investor-level taxation of the kind leading fund jurisdictions use, and an end to registrations that serve no fiscal purpose. That is how centres such as ADGM are growing,” she added, noting that recent changes have helped, including a longer tax holiday and a clearer definition of a “specified fund”.
Kunal Savani, partner at Cyril Amarchand Mangaldas, said the requirement for FMEs to obtain and maintain GST registration despite having no GST liability imposed recurring administrative costs, including nil-return filings, without a corresponding revenue benefit to the exchequer.
“Such registrations also expose FMEs to future scrutiny. The concerns, if unaddressed, risk undermining the jurisdiction's competitiveness vis-à-vis ADGM, Mauritius, and Singapore,” he noted.
As of June 2026, GIFT City had around 235 registered FMEs and more than 400 schemes, with cumulative commitments in non-retail fund management of about $45 billion.
Rohit Jain, managing partner at Singhania & Co, described the issues as transitional challenges typical of a new financial jurisdiction rather than structural deficiencies.
“The regulatory framework has already demonstrated responsiveness in the past when the requirement to furnish PAN for eligible non-residents and foreign companies opening IFSC bank accounts was relaxed. I am confident that a similar facilitative approach would address concerns around tax and GST administration,” he stated.
 "Gujarat International Finance Tec-City (GIFT City) in Gandhinagar")