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Quite obviously, airlines need aircrafts to fly passengers. However, buying a plane is extremely expensive (between US$40 million to well over US$400 million list price, depending on the model). So instead of buying, many airlines lease a significant portion of their fleets.
GIFT IFSC (Gujarat International Finance Tec-City — International Financial Services Centre) is India’s special financial zone in Gandhinagar, Gujarat. It operates like an offshore financial hub while physically being present on Indian soil. IFSC is a new home for leasing companies and has been designed to compete with its international counterparts like Ireland and Singapore.
Talk about any Indian airlines plane operating today and there is a good chance the aircraft is owned by an overseas company. The lease rental for this plane flies out of India monthly in dollars or pounds to a foreign lessor. But now India intends to change that arrangement and GIFT IFSC in Gujarat is the country’s answer.
Leasing an airplane is quite common globally, as aircrafts are among the most expensive assets on this planet. None of the airlines are buying every plane that they are flying. Rather, they pay the rent monthly, fly the plane for a few years and hand it back. This keeps the balance sheet light and offers the flexibility to grow or shrink the fleet in hangars based on the demands of the season.
The problem for India has always been where that leasing activity takes place. Indian airlines in need of aircrafts have often gone to overseas lessors, especially those in Ireland. Whether it is lease rentals or interest payments, both have been paid to overseas lessors. India has watched this for years. However, it has now decided to build its own version of the same game on its motherland.
A good financial hub cannot do without a strong legal foundation. For GIFT IFSC, this foundation stems from the IFSCA Act passed in 2019 and the Finance Company Regulations that came into existence in 2021. Bundled as one unit, these two laws characterise:
The companies who want to lease aircrafts through GIFT IFSC must register with IFSCA, which is a single and unified regulator for this zone. These companies can register either as a Finance Company or a Finance Unit, depending on their business model and size.
IFSCA has officially recognised aircraft leasing as a financial product. However, this is not as technical as it sounds. Leasing can now be thought of the way insurance or banking is treated inside IFSC. It has regulations and well-defined rules.
The framework also divides leasing activities in two groups:
However, hybrid arrangements that combine features of both are also allowed by law. This sector defines how much currency a company must keep in reserve and how closely the regulator keeps an eye on it.
One of the specialities of GIFT IFSC is that all the companies incorporated here deal in freely convertible foreign currencies. It is not essential to deal in Indian currency within this zone.
| Benefit | What it means simply |
|---|---|
| Low/Zero taxes | Significant tax incentives subject to eligibility under applicable tax laws. |
| Foreign currency transactions | Can deal in USD, EUR etc. freely |
| Streamlined regulations | Faster approvals than mainland India |
| Repossession rights | Easier to take back aircraft if airline defaults |
| Cape Town Convention | International treaty followed here, protects lessor’s rights |
One of the many strengths of GIFT IFSC is that it gives companies several ways to set up their leasing operations. There is no one model fits all approach. The companies can choose the model that works for them. Here are four ways to structure a deal
The regulations have laid out multiple business activities that can be done here. Primary activities include financial leasing, lending to aviation businesses, helping companies get better borrowing terms, and more.
Apart from the primary activities, companies can also run operating leases, manage assets for others, and invest their spare funds in safe instruments.
What is interesting to note is that the permitted asset list has widened recently. It is not anymore about just commercial aircraft.
Helicopters and aircraft engines are also covered. Same goes for the vehicles and equipment used to service planes on the ground at airports. Aviation training simulators which are the machines used to train pilots without leaving the ground, are also included. Thus, GIFT IFSC now covers the complete range of equipment that keep the aviation industry running, and is not limited to just the airplanes flying in the sky.
IFSCA redefined its Aircraft Leasing Framework in 2025. The new update brought with it more clarity on which transactions are allowed and how the companies should operate.
Operating, financial and hybrid lease types are formally recognised. The types of deals that are permitted include:
The update also ensured that companies could manage aviation assets on behalf of other entities in their group and not just assets they directly own. A lessor has been defined clearly as any Finance Company or Finance Unit in IFSC that leases aircraft, engines, or related assets. This definition matches how lessors are defined in other major leasing jurisdictions around the world.
Before a company can start its operations here, it must demonstrate it has sufficient funds. The criteria for capital requirements is:
| Activity | Capital Requirement |
|---|---|
| Operating Lease | USD 200,000 |
| Financial Lease | USD 3 million |
Capital here refers to the money a company must necessarily have available to prove that it is serious about starting and running its business activity.
These criteria have been set to ensure that only genuinely capable companies operate here while being competitive with what other global leasing hubs demand.
Often taxes are the core deciding factor for a global leasing company to choose where it is going to set up its operations. GIFT IFSC has made an effort to make its tax offering attractive.
Section 80LA in the Indian tax law permits IFSC entities to deduct a considerably large portion of their income from tax. Simply put, it means they pay far less tax than a regular Indian company would. Once the initial tax holiday period ends, a lower-than-normal tax rate is applied instead of the standard corporate tax rate. International payments made such as lease rentals also benefit from efficient tax treatment, reducing the amount lost to tax when money crosses a country’s borders.
Every transaction must take place in internationally accepted foreign currencies. IFSC entities benefit from a liberal foreign exchange regime, subject to applicable FEMA, RBI and IFSCA regulations. This is important is because it signals that global companies do not need to go through foreign exchange complications that can make functioning in some countries difficult.
Even though they are physically inside India, IFSC units are treated almost like foreign entities for customs and indirect tax purposes. What this means is that import procedures are now simpler and the tax costs on cross-border transactions are lower.
While operating inside GIFT IFSC seems easy and comfortable, working here comes with its own set of responsibilities. Companies need to follow IFSCA’s rules on preventing illegal money from entering the financial system. This is to be done by verifying the identity of their trade partners and ensuring their funds are not connected with illegal activities. These are the standard requirements not only in GIFT city but also in every well-regulated financial centre globally.
The companies also need to submit their audited accounts regularly, confirm that they are complying with all regulatory requirements, and report whether they have enough money to cover their financial risks. Every record must be kept in foreign currency so as to stay consistent with how transactions are conducted.
India has made multiple practical changes simply to reduce friction for aircraft leasing in GIFT IFSC.
The aviation regulator Directorate General of Civil Aviation (DGCA) has made the process for bringing aircraft into India simpler. This means less paperwork and shorter timelines. Fewer roadblocks in the process mean companies can get their planes up in the air faster.
SEZ Rule 29A, a dedicated customs framework has been created specifically for aircraft imports into the IFSC units. It cuts through the traditional documentation complexity and makes the import process simpler.
There is a major reform for airlines going bankrupt. Earlier in the day, when an Indian airline collapsed, lessors could be legally blocked from taking their planes back for months or even years as court proceedings carried on. This major concern for global investors has now been fixed. Recent insolvency reforms have significantly strengthened repossession rights for aircraft lessors by implementing protections aligned with the Cape Town Convention. In plain terms, a lessor can get back their aircraft quickly if an airline defaults. This reform brings India in line with an international agreement, which is the Cape Town Convention. This convention protects the rights of aircraft owners and financiers when a borrower cannot pay. For global lessors who were skeptical about the Indian market, because of this issue, the reform removes their biggest worry.
GIFT IFSC has come quite a long way in a short span of time. The regulatory framework is in place. The tax benefits are real. The allowed range of assets and activities keeps growing. For global leasing companies, Indian airlines, and international investors contemplating Asia’s fastest growing aviation market, GIFT IFSC offers a credible base. The ecosystem is still growing but the groundwork is well in place. Early birds will have the advantage of moulding how this market develops in the near future.
