New Delhi, Jun 13 (KNN) The upcoming Union Budget may pave the way for foreign-domiciled Indian startups to relocate their corporate headquarters to the Gujarat International Finance Tec-City (GIFT City) with minimal tax implications.

In an effort to enhance GIFT City's competitiveness with global financial hubs such as Dubai and Singapore, the Indian government has been exploring tax breaks and other incentives to entice companies to the special economic zone, according to industry insiders familiar with the matter.

Highly placed sources indicate that the government might subsequently introduce an additional policy measure allowing companies domiciled in GIFT City to list on Indian stock exchanges like the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

Such moves could facilitate the relocation of major startups like Razorpay, Zepto, and Meesho back to India while enabling them to tap into the growing domestic appetite for tech stocks among mutual funds and retail investors.

Potential eligibility criteria for the proposed scheme may stipulate that the startup must have been founded by Indian citizens, remain unlisted, and derive substantial value from assets or business operations within India's borders.

"Discussions are underway to make the shift to GIFT City tax-neutral for foreign-domiciled startups, similar to the 2021 Budget announcement allowing foreign funds to redomicile to GIFT City tax-free," a source privy to the developments explained.

The government's annual Economic Survey of 2023 had acknowledged the challenges faced by startups seeking to reverse their domicile to India.

It advocated measures such as simplifying employee stock option (ESOP) taxes, capital gains tax regimes akin to Singapore, the United Arab Emirates, and the Netherlands, and capital flow procedures comparable to the United States and Singapore to accelerate reverse-flipping.

(KNN Bureau)