GIFT City vs Traditional Forex Settlement: A Comparative Analysis

JUST 2 WEEKS AGO HON’BLE FM LAUNCHED FOREIGN CURRENCY SETTLEMENT SYSTEM IN GIFT CITY. KNOW WHAT IT IS.

In 2025, GIFT City IFSC (Gujarat International Finance Tec-City International Financial Services Centre) is redefining how businesses handle international payments. It’s built to make forex settlements faster, simpler, and more transparent, something traditional banking systems have struggled with for years.

For companies trading or servicing across borders, every hour counts. A delay in payments can affect supplier trust, investment cycles, or even day-to-day operations. That’s why many businesses are turning to the GIFT  City forex trading system or GIFT City forex settlement system, designed for real-time currency movement and efficient global transactions.

According to The Economic Times, 60 fintechs registered just in 2025 at the GIFT International Financial Services Centre (IFSC), which is governed by IFSCA. This steady growth shows how strongly businesses are responding to this globally aligned model.

At its core, GIFT City IFSC allows banks and financial institutions to settle trades in international currencies directly within India. These settlements earlier took 36–48 hours as they were routed through different participants and NOSTRO Banks. In simple words, India was dependent on foreign banks to settle global currency transactions.

The turning point came in October 2025, when Finance Minister Nirmala Sitharaman launched the Foreign Currency Settlement System (FCSS). This system makes real-time currency settlements possible inside GIFT City itself.

For businesses, this means transactions that once took days now clear within seconds or minutes. Faster settlements improve liquidity, reduce exchange risk, and enhance operational efficiency, key factors for any company managing international cash flow.

This brings GIFT City IFSC among the few global financial centres that have such advanced settlement infrastructure.

Moreover, the RBI announced that exporters with foreign currency accounts in GIFT City can now keep foreign exchange proceeds for up to three months instead of just one.

GIFT City vs. Traditional Forex Settlement

Traditional forex systems rely on multiple banks across countries. Each link in that chain adds time, cost, and compliance steps. GIFT City IFSC removes those extra layers by providing direct global access under one unified digital framework.

Aspect	GIFT City Forex Settlement	Traditional Forex Settlement outside GIFT City
Regulation	IFSCA (internationally aligned)	RBI (domestic framework)
Speed	Real-time through FCSS	At least 1–2 business days
Currency Access	Ability to operate in multiple foreign currencies	Mostly INR-based
Tax benefits	Multiple exemptions for global operations	Regular domestic taxes
Compliance	One global standard	Multiple regional rules

As India deepens its integration with global financial systems, GIFT City vs Traditional Forex Settlement becomes a defining benchmark for future-ready finance.This structural independence is what gives GIFT City a decisive edge over legacy systems still bound by cross-border dependencies.

Implementation Framework of GIFT City 

• A local settlement bank will act as the settlement hub.
• Member IFSC Banking Units will open accounts with this settlement bank, and foreign currency transactions will be settled using these accounts, reducing the long chain of intermediaries.
• The system will settle USD transactions first and later expand to other foreign currencies.
• As announced by FM during the launch, the system will be regularised under the IFSCA regulatory framework via the PSS Act, 2007.
• CCIL IFSC Ltd (a CCIL subsidiary) will serve as the Payment System Operator, and the supporting software is under development by Indian Financial Technology & Allied Services (IFTAS), an RBI subsidiary.
• As a pilot, Standard Chartered, designated as the Partner Bank for USD settlements, has already initiated operations, reducing settlement time from 1–2 days to just 4–5 seconds.

GIFT City Benefits

Here are a few reasons why companies are choosing GIFT City IFSC as their preferred base for global forex settlements:

1. Efficiency that Saves Time and Cost

Every global business understands the cost of waiting. A delayed transfer can affect deals, supply chains, or investor confidence. GIFT City IFSC minimizes that risk by removing unnecessary middle steps in international transactions.
Its direct connection to global banking systems allows companies to move funds quickly, manage working capital efficiently, and maintain better financial agility — all key for staying competitive in fast-moving markets.

2. Transparent Regulatory Framework

Global investors and corporations value consistency and clarity. GIFT City IFSC’s regulatory structure is designed with that in mind. 

Regulatory powers of four financial regulators like IRDA, RBI, SEBI, and PFRDA are merged into IFSCA, creating a unified authority for financial institutions, services, and products within IFSC.This clarity helps companies plan confidently and operate with fewer uncertainties.

Navigating multiple regulators can be slow and costly. GIFT City simplifies this by operating under a single regulator, IFSCA, which oversees all financial activities within the zone.

This unified approach means companies spend less time on compliance and more time expanding, innovating, and managing global operations efficiently.

GIFT City Tax Benefits

One of the biggest GIFT City benefits lies in its favourable tax structure, which is designed to make cross-border operations more competitive and business-friendly.

Key GIFT City Tax Benefits for Units in IFSC

• 100% income-tax exemption for 10 consecutive years within a 15-year window.
  
• No GST on offshore transactions or on IFSC/SEZ Units.
  
• MAT / AMT @ 9% of book profits for Co./LLP and no MAT in the new tax regime.
  
• Several state subsidies available.
  
• Dividend taxed in shareholder hands.

Key GIFT City Tax Benefits for Investors

These gift city tax benefits make the zone highly attractive for treasury operations, forex trading desks, or fund management activities. These are as follows-

• Interest income paid to non-residents on monies lent to IFSC Units is not taxable.
• Long-term bonds & rupee-denominated bonds listed on IFSC exchanges are taxable at a lower rate of 4%.
• Transfer of specified securities listed on IFSC exchanges by NR or AIF-III in IFSC not treated as transfer gains.
• No GST, STT, CTT, or stamp duty on IFSC-exchange transactions.

Exemptions in GIFT City under Companies Act

• CSR provisions not applicable for the first 5 years.
  
• Resident director mandatory only after 1st year.
  
• Internal audit is not mandatory.
  
• Audit Committee, Nominations & Remuneration Committee not mandatory.
  
• Limits on managerial remuneration not applicable.
  
• Flexibility to follow the same FY as a holding company.
  
• EGM allowed at any place in or outside India.
  
• Exemption to foreign companies for subscription.

State Subsidies under IT/ITeS Policy of Govt. of Gujarat

• One-time support of 25% of CAPEX (max ₹500 mn) for IT City / Townships.
• Support for 50% of monthly rentals (max ₹10k) for 2 years and 25% (max ₹5k) for next 3 years.
• One-time support of 25% of eligible CAPEX up to ₹200 mn for Cloud Systems.
• One-time support of 25% of eligible CAPEX up to ₹1.5 bn & power tariff subsidy of ₹1/unit (5 years) for Data Centres.
• One-time support of 60% of machinery cost up to ₹50 mn to establish R&D institutes.
• Additional benefits for capital & operational expenses, electricity duty, EPF contribution, interest subsidy, and employment incentives. 

These incentives make GIFT City particularly attractive for companies running treasury operations, forex trading desks, or fund management activities.

Learn how smart tax strategies help global businesses stay efficient. Explore our post on Role of Accounting in Tax Planning.

Who Can Operate in GIFT City IFSC

Participation isn’t limited to large financial institutions. Banks, NBFCs, corporate treasuries, exporters, importers, insurers, capital-market intermediaries, fund managers, fintech companies, and ancillary professional services can all participate.

This broad entry base opens global opportunities for Indian and international businesses alike, whether they’re managing trade flows, funding ventures, or running currency desks.

Conclusion

GIFT City is changing how cross-border finance operates from India. With faster settlements, clear rules, and direct access to global currencies, it’s setting a new rhythm for international business. What once relied on several offshore layers can now happen seamlessly within a unified system. 

That shift doesn’t dismiss traditional frameworks but it simply shows how financial infrastructure can evolve when innovation meets intent. GIFT City vs Traditional Forex Settlement captures this transition, where India’s financial ambitions are beginning to meet global expectations in real time.

FAQs

1. What is GIFT City IFSC and how is it different?

GIFT City IFSC refers to the International Financial Services Centre located in GIFT City, Gujarat. It’s a special zone designed to host global financial services, allowing cross-border transactions within India under a unified framework.

2. How does forex settlement work in GIFT City IFSC for global businesses?

In GIFT City IFSC, forex settlement happens through offshore banking units tied to global networks. The new Foreign Currency Settlement System (FCSS) launched in October 2025 enables real-time settlement of foreign-currency transactions, reducing delays from 36-48 hours to seconds.

3. What are the key GIFT City benefits for companies doing cross-border business?

The main benefits include faster settlement of foreign-currency deals, lower operational cost for global transactions, transparent regulation, and global currency access which supports better cash-flow and competitive advantage.

4. What are the GIFT City tax benefits available for businesses and funds?

Eligible units in GIFT City IFSC enjoy 100% income tax exemption for 10 years within a 15-year period, plus reduced MAT/AMT and multiple GST, stamp duty and transaction tax exemptions. More details are covered in the above section.

5. Who regulates GIFT City IFSC operations and why does it matter?

The zone is regulated by the International Financial Services Centres Authority (IFSCA). A single global-standard regulator simplifies compliance, reduces ambiguity, and aligns GIFT City with top international financial hubs.

6. Can small firms or fintech startups participate in GIFT City IFSC?

Yes! Both Indian and international entities, including banks, NBFCs, fintech startups, exporters/importers, and corporate treasuries, can set up units in GIFT City IFSC. This inclusivity creates equal access to global financial infrastructure.

7. How does using GIFT City IFSC improve settlement speed compared to traditional channels?

Because of direct access to global clearing networks and the real-time Foreign Currency Settlement System (FCSS), settlement of foreign-currency transactions in GIFT City now happens within seconds instead of days.