Aircraft Leasing in GIFT IFSC: Regulatory Framework, Structures and Compliance Guide

GIFT IFSC is emerging as a strategic aircraft leasing hub aimed at reducing India’s reliance on offshore jurisdictions such as Ireland. With a dedicated regulatory framework under IFSCA, aircraft leasing has been formalised as a financial activity, enabling global lessors to establish onshore structures. The framework integrates tax incentives, foreign currency flexibility, and regulatory clarity, positioning IFSC as a competitive jurisdiction for aviation financing and leasing transactions.

Legal & Regulatory Backbone

Aircraft leasing in GIFT IFSC is primarily governed by the IFSCA Act, 2019 and the IFSCA (Finance Company) Regulations, 2021. Entities undertaking leasing activities are required to be registered as either a Finance Company (FC) or a Finance Unit (FU), depending on their structure and operational model.

A key regulatory milestone has been the classification of aircraft leasing—covering operating, financial, and hybrid lease structures—as a “financial product”. This classification provides regulatory certainty and aligns leasing activities with the broader financial services ecosystem in IFSC.

Further, the regulatory framework distinguishes between:

• Core activities: Financial lease transactions
• Non-core activities: Operating lease transactions

Hybrid structures are permitted, offering flexibility for structuring transactions based on commercial and accounting objectives. This classification has implications for capital requirements, prudential norms, and regulatory oversight.

Structuring Models in IFSC

GIFT IFSC enables a wide range of structuring options comparable to global leasing jurisdictions.

Direct Leasing Model

Under this model, the IFSC entity directly leases aircraft to airlines. It is suitable for lessors with a focused portfolio and straightforward financing structures.

SPV-Based Leasing Model

Aircraft assets are housed in ring-fenced Special Purpose Vehicles (SPVs). This structure is widely adopted globally as it enables:

• Risk isolation at asset level
• Easier financing and securitisation
• Efficient exit and transfer mechanisms

Sale & Leaseback (SLB)

A commonly used structure in aviation financing, SLB involves acquiring aircraft from an airline and leasing it back. This provides immediate liquidity to airlines while allowing lessors to deploy capital efficiently.

Cross-Border Leasing

IFSC entities can lease aircraft to both domestic and international airlines. Since transactions are conducted in freely convertible foreign currency, IFSC becomes an effective platform for global leasing operations.

From a structuring perspective, IFSC allows integration with holding companies, treasury centres, and financing entities, enabling multi-layered global leasing structures.

Permissible Activities in IFSC

The Finance Company Regulations provide a broad framework of permissible activities.

Core Activities

• Financial leasing
• Lending and credit enhancement
• Securitisation and portfolio acquisition

Non-Core Activities

• Operating lease (including aircraft leasing)
• Asset management support services
• Investment activities for liquidity and treasury management

Expanded Scope

Recent regulatory developments have expanded the scope of permissible activities to include:

• Aviation training simulators
• Aircraft ground support equipment (GSE)

This expansion reflects a shift from aircraft-only leasing to a holistic aviation ecosystem approach.

Aircraft Leasing Framework – Latest Update

IFSCA has issued a comprehensive Aircraft Leasing Framework, updated in 2025, which provides operational clarity for leasing entities.

Leasing Types Recognised

• Operating lease
• Financial lease
• Hybrid lease (combination structures)

Permitted Transactions

The framework allows a wide range of transactions including:

• Sale & leaseback
• Transfer and assignment
• Novation of lease contracts
• Portfolio acquisitions

Asset Management Support

Entities are permitted to provide Asset Management Support Services (AMSS) for assets owned or leased, including those held by group entities.

Definition of Lessor

A “lessor” is defined as an entity registered as an FC or FU in IFSC, engaged in leasing aircraft, engines, or related aviation assets under operating, financial, or hybrid structures.

This framework aligns IFSC with globally accepted leasing jurisdictions and provides a standardised operating environment.

Eligible Assets under IFSC Leasing

The scope of assets eligible for leasing has expanded significantly.

Aviation Assets

• Aircraft
• Helicopters
• Aircraft engines

Expanded Ecosystem Assets

• Aircraft ground support equipment (GSE)
• Aviation training simulators

This broader coverage enables IFSC entities to participate across the aviation value chain, including maintenance, training, and airport operations support.

Capital & Registration Requirements

Aircraft leasing entities must comply with minimum capital requirements prescribed under the framework.

These thresholds ensure adequate financial capacity while keeping entry barriers relatively competitive compared to global jurisdictions.

Entities must obtain registration from IFSCA prior to commencing operations. The regulatory approach balances ease of entry with prudential safeguards.

Tax & Regulatory Advantages

One of the key drivers of IFSC’s attractiveness is its favourable tax and regulatory regime.

Tax Incentives

• Eligibility for Section 80LA tax benefits
• Potential concessional tax regime post-tax holiday
• Efficient withholding tax structures

A detailed understanding of the Section 80LA income tax deduction for IFSC entities is essential for structuring tax-efficient aircraft leasing models.

Foreign Currency Operations

All leasing transactions are required to be conducted in freely convertible foreign currency, ensuring:

• No forex restrictions
• Alignment with global leasing practices

GST & Customs Positioning

• IFSC units enjoy a quasi-offshore status
• Simplified import/export procedures
• Reduced tax leakage in cross-border transactions

Overall, IFSC offers a combination of tax efficiency, regulatory certainty, and operational flexibility.

Operational & Compliance Requirements

Aircraft leasing entities are subject to ongoing compliance and reporting obligations.

AML / KYC Compliance

Entities must adhere to IFSCA’s AML, KYC, and CFT guidelines, ensuring alignment with global financial compliance standards.

Reporting Requirements

• Submission of audited financial statements
• Regulatory compliance confirmations
• Capital adequacy reporting

Books of Accounts

Books and financial records must be maintained in freely convertible foreign currency, ensuring consistency with transaction currency and global reporting standards.

Ease of Doing Business Enhancements

India has introduced several reforms to improve the ease of doing business for aircraft leasing in IFSC.

DGCA Relaxations

Procedural simplifications in aircraft import and acquisition have reduced regulatory friction and timelines.

SEZ Rule 29A

A dedicated framework has been introduced to streamline aircraft import into IFSC units, simplifying customs procedures and documentation requirements.

IBC Exemption

A significant structural reform is the exemption of aircraft leasing transactions from the moratorium provisions under the Insolvency and Bankruptcy Code (IBC).

This aligns India with the Cape Town Convention principles, providing:

• Enhanced protection for lessors
• Improved recovery rights
• Increased confidence for global investors

Conclusion

Aircraft leasing in GIFT IFSC reflects India’s strategic intent to build a globally competitive aviation financing ecosystem. With a clear regulatory framework, capital flexibility, and strong legal safeguards such as IBC exemption, IFSC provides a viable alternative to traditional leasing hubs. While the ecosystem is still evolving, it offers significant opportunities for global lessors, airlines, and investors to structure efficient, compliant, and tax-optimised leasing platforms within India.

For aviation companies, global lessors, and investors evaluating IFSC, early entry offers a first-mover advantage in a rapidly evolving jurisdiction with strong regulatory backing.