Govt may review tax incentives offered to IFSC

A group having non-IFSC presence along with a unit in IFSC may be able to benefit from the jurisdictional blending at India level, it said.

It suggested offering incentives in other forms to keep the attractiveness of IFSC intact.

Pillar Two sets out aiming to ensure that large MNCs pay a minimum effective rate of tax of 15% on profits in all countries.

The report pointed out that units in IFSC may not have enough employees and assets to avail of the benefits, so these units will need to evaluate the overall tax impact in India, after the Pillar Two Globe Rules.

Conglomerates from the financial services industry that have set up base in the are incentivised with tax holiday benefits for a period of 10 out of 15 years, and a lower rate of alternate minimum taxes at 9%, along with surcharge and cess, which brings down the to below 15% .

This means their resident countries can apply top up tax on the income from IFSC.

While the majority of European countries have already announced the Pillar 2 framework, India is expected to announce steps in this direction in its full budget in July.

"The Pillar 2 overhang continues to dog policy makers in India," said Rohinton Sidhwa, partner - direct tax, Deloitte.

"It's possible that India could potentially be tempted to look at ways to unilaterally also boost gains from Pillar 2, albeit staying within the overall consensus," he said.