SEBI Circular

SEBI’s New Rules for Stock Brokers Trading on GIFT-IFSC

The Securities and Exchange Board of India (SEBI) issued a circular on May 2, 2025, simplifying the rules for investing and trading market securities in the Gujarat International Finance Tech City- International Financial Service Centre (GIFT-IFSC) through a separate business unit (SBU) quashing the previous rule of obtaining approval through them to operate in India’s first-ever global hub for financial services.

This change will simplify the compliance process and provide various benefits, such as tax incentives and foreign direct investment (FDI) opportunities for stock brokers. In this blog, we will explain the Securities and Exchange Board of India (SEBI) circular, its benefits for stock brokers and investors, the roadmap for stock brokers to implement SEBI’s new rules, and potential challenges.

GIFT- International Financial Services Centre (IFSC)- An Overview

The Gujarat International Finance Tech City-International Financial Services Centre, formally known as GIFT-IFSC, is not only India’s leading but also the primary global trading, financial, and securities trading hub.

The Indian central government, under the leadership of the Hon’ble Prime Minister of India, Shri Narendra Modi, approved and ratified the IFSC Authority Act of 2019 on December 19, 2019, and established the IFSC Authority on April 27, 2020. The GIFT-IFSC has been home to 125+ financial service companies since its operations in 2015.

From flexible compliance requirements to tax obligations, GIFT-IFSC is the dream of every Indian stockbroker. First enacted under the Special Economic Zone (SEZ) Act of 2005, it now serves as a combination of a special trade zone and global financial hub, giving tough competition to Dubai’s and Singapore’s IFSCs.

SEBI’s Clarifies Trading via SBU on GIFT for Stock Brokers

The Securities and Exchange Board of India (SEBI) through a circular, explained trading rules through Separate Business Units (SBU) on GIFT-IFSC for stock brokers.

The SEBI circular clarified that stock brokers:

• Are now free to carry out investing and trading activities as a separate business unit (SBU) without taking any preliminary approval from the Securities and Exchange Board of India (SEBI).
• Currently, investing or trading through a subsidiary company may continue to do so at their discretion even after the announcement of the said rules.
• must isolate and restrict its activities in the Gujarat International Finance Tech City- IFSC from that of the Indian stock market. They must treat their dealings in both markets as separate and independent from one another to ensure the continuity of the Arm’s length principles compliance.
• Carry out activities as permitted and approved by the International Financial Services Centres Authority (IFSCA).
• Must maintain and record separate accounts for their separate business unit (SBU) as per the guidelines of the Arm’s length principle.
• Must divide their net worth from that of the separate business unit (SBU) in the Indian stock market.
• Those who obtain the services of the separate business unit (SBU) in GIFT-IFSC will not get any grievance solutions with the Grievance Redressal Mechanism (GRM), Investor Protection Fund (IPF), and the Securities and Exchange Board of India Compliant Redressal System (SCORES).
• Must demonstrate the net-worth requirement based on their finances and shouldn’t influence or use their separate business unit SBU)’s financial position to perk up their reports to ensure fair competition in the securities market.
• Should determine the net worth of a separate business unit (SBU) as per the International Financial Services Centres Authority (IFSCA) rather than that of the securities market regulatory authority.
• Those who started a subsidiary or joint venture have the option to detach from such an alliance and start fresh through a separate business unit (SBU) of their broker company to trade on GIFT-IFSC.

The circular further explained that the International Financial Services Centres Authority (IFSCA) is the regulatory authority that has the complete jurisdiction to decide the matters concerning the policy, eligibility criteria, risk management factors, grievance redressals, claim enforcement, and other related activities for stock brokers operating separate business units (SBU) operating in the GIFT’s IFSC.

Benefits for Stock Brokers Operating SBUs in GIFT-IFSC

The Gujarat International Finance Tech-city (GIFT) is an International Financial Service Centre (IFSC) that provides high-tech infrastructure with tax benefits coupled with relaxed regulatory compliance approvals to promote foreign investments (FI) in India. The benefits for stock brokers operating separate business units (SBUs) in GIFT-IFSC are as follows:

• Minimum Alternate Tax

All companies and stock brokers engaged in investing and trading as a separate business unit (SBO) are subject to a 9% minimum alternate tax (MAT) rate.

• A 10% Tax on Dividends

Non-resident or foreign separate business units (SBUs) will only be liable to pay a 10% low tax on dividend payments as against the 20% nominal rate.

• Income Tax Exemptions

The GIFT-IFSC entitles corporates to obtain 100% tax exemptions for 10 consecutive years from the 15-year lock-in period. 

• STT & CTT Tax Relief

Stockbrokers and investors operating as Separate business units (SBUs) are exempted from paying securities transactions tax (STT), commodities transaction tax (CTT), and stamp duty on market securities transactions in the GIFT-IFSC.

• Tax Exemption on Interest Income

No tax on income earned through capital lending in GIFT IFSC by foreign and non-resident investors.

• GST & Duty-Free Transactions

All services within the GIFT-IFSC are exempt from goods and services tax (GST) and customs tariffs.

• Capital Gains Tax Concessions for Foreigners

Foreign and non-resident brokers can obtain a 100% capital gains tax exemption on the transfer of specific market securities listed on the GIFT-IFSC exchanges. 

• Simplified Business Start-up

The GIFT-IFSC regulates all separate business units (SBOs), which helps reduce compliance approvals with multiple regulatory bodies in India, facilitating easy business setup with fewer regulatory requirements.

• Exemption from Filing Annual Returns

The GIFT-IFSC exempts non-resident investors from registering for permanent account numbers (PAN).

• Ease of Doing Business

The foreign status of the GIFT-IFSC with fewer restrictions promotes foreign investments (FI) in India, enabling a smooth flow of capital funds in the form of dividends, royalties, and transfer profits.

• 0% Foreign Currency Control

All transactions are freely and easily converted to foreign currencies, providing ease of trading with no currency controls.

SEBI’s Stock Brokers’ Gateway to Global Trading Via GIFT-IFSC

Check the following key points if you’re a Securities and Exchange Board of India (SEBI) stock broker looking for a gateway to global trading via GIFT-IFSC as a Separate Business Unit (SBU):

1. Check Your Capacity

Stock brokers must evaluate their company’s human resources and financial capabilities before starting up as a separate business unit (SBU) to trade market securities on GIFT-IFSC.

2. Update the Arm’s Length Pricing Framework

Once operational, you must check if your separate business unit (SBU) is 100% compliant with India’s transfer pricing and arm’s length principle legal framework.

3. Obtain Relevant Approvals from the IFSCA and its Development Commissioner

You must check the eligibility requirements and acquire the mandatory approvals from the International Financial Services Centres Authority (IFSCA).

4. Register with IFSCA’s grievance redressal system

All stock brokers who wish to operate as separate business units (SBUs) in the GIFT-IFSC must implement and register with the International Financial Services Centres Authority (IFSCA)’s grievance redressal system.  

Challenges for Stock Brokers Operating SBUs in GIFT-IFSC  

Given below are the challenges that you might face if you’re a stockbroker planning to set up a separate business unit or already operating one in the GIFT-IFSC:

1. Arm’s Length Transactions

The SEBI’s mandate on the application of the arm’s length principle on the separate business unit (SBU)’s transactions practically require additional compliance and financial evaluations, which could be time-consuming, thereby contributing as a demotivating factor for stock brokers.

2. Annual Book-Keeping

Although GIFT-IFSC operates in foreign currency, you may still need to complete relevant administrative and statutory compliance requirements with Indian Rupees (INR). There are also some restrictions on the use of foreign currencies for Indian companies operating in the foreign market.  

3. Regulatory Compliance With the IFSCA

The SEBI necessitates that all stock brokers register their separate business units (SBUs) with the International Financial Services Centres Authority (IFSCA), which means a separate registration to obtain a license and fulfil annual financial obligations, resulting in more paperwork.

4. Less Competitive Advantage

Even though GIFT is India’s only international financial service center, it is yet to level with the top global hubs of Dubai’s IFSC and Singapore’s Marina Bay Financial Centre (MBFC) in terms of number of business entities and skilled workforce.

Conclusion: What’s the Takeaway for Stock Brokers?

With the rise of fintech in India, the SEBI’s new mandate couldn’t have come at a better time; now Indian stock brokers and investors can easily expand their market securities activities in the global market with better and improved tax incentives and flexible compliance requirements. The SEBI’s mandate not only simplifies the regulatory approvals but also gives a new sense of hope to Indian stock brokers for their future international endeavors in securities markets.

Contact Enterslice and get expert assistance in registering your separate business unit (SBU) in the Gujarat International Finance Tech-City-International Financial Services Centre (GIFT-IFSC). Together we’ll overcome all the challenges that stand in the way of international trade.

At Enterslice, we will help you:

• Securing a stock broker license.
• Start your IFSC company as a separate business unit (SBU).
• Ensure 100% compliance with SEBI’s & IFSCA’s regulatory approvals, including arm’s length and transfer pricing laws.
• Audit and structure your financial records and annual tax compliance as per the GIFT-IFSC regulations.

Frequently Asked Questions