Corporate Treasury Centres: Managing your money with a window to the world
– Payal Agarwal, Partner | payal@vinodkothari.com
Global/ Regional Corporate Treasury Centres (GRCTCs) set up in IFSCs, are recognised as Finance Companies under the IFSCA (Finance Company) Regulations, 2021. An updated Framework for Finance Company/Finance Unit undertaking the activity of Global/ Regional Corporate Treasury Centres was issued on 4th April, 2025 in order to encourage ease of doing business and in alignment with the international best practices, after a public consultation on the same.
The Union Budget 2025-26 also provided specific tax incentives for transactions involving GRCTC, exempting such transactions from the purview of deemed dividend under section 2(22)(e) of the Income Tax Act, 1961. Vide a recent amendment to Companies (Meetings of Board and its Powers) Rules, 2014, published on 6th November, 2025 in the Official Gazette, Finance Companies undertaking the activities of GRCTCs have been exempt from the application of section 186 of the Companies Act, 2013 with respect to compliances pertaining to granting of loans, making investments, providing security or guarantee.
What is a GRCTC?
Simply put, a treasury centre is supposed to be an in-house bank, managing funds and providing liquidity across different entities in the group. Thus, the main objective of a GCRTC is to manage funds centrally and optimise the use of funds within the various entities of the group. Key responsibilities include intra-group financing, managing cash and liquidity and providing financial advisory services to group entities.
Activities of Global/ Regional Corporate Treasury Centres (GRCTC)
| Service Recipients [Clause 12] | Permissible Activities [Clause 13] |
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Borrowing and Lending by GRCTCs – Compliance Considerations and Tax Implications
Compliance with FEMA Directions
Pursuant to the notification of the FEM (International Financial Services Centre) Regulations, 2015, any financial institution or branch of a financial institution set up in the IFSC and permitted/ recognised as such by the Government of India or a Regulatory Authority shall be treated as a person resident outside India. A Finance Company established in IFSC, including GRCTC, is recognised as a financial institution and hence, shall be treated as a person resident outside India (PROI) for the purpose of FEMA Directions.
Therefore, from compliance perspective, the applicability of FEMA Directions may be understood as follows:
| Lender | Borrower | Applicability of FEMA Directions |
| Person Resident Outside India | GRCTC | Not applicable |
| GRCTC | Person Resident Outside India | Not applicable |
| GRCTC | Person Resident in India | Applicable |
| Person Resident in India | GRCTC | Applicable |
Thus, the borrowing/ lending between a GRCTC and an Indian company will be governed by the FEM (Borrowing and Lending) Regulations, 2018. The Draft Foreign Exchange Management (Borrowing and Lending) (Fourth Amendment) Regulations, 2025, issued on 3rd October 2025 contains a proposal on explicit inclusion of entities in IFSC as a recognised lender for the purpose of External Commercial Borrowings (ECBs).
Compliance requirements under Companies Act, 2013
GRCTC is a Finance Company or Finance Unit, incorporated as a company under the Companies Act, 2013 or as a branch of such a company. Therefore, compliance with the provisions of the Companies Act, 2013 attract. Certain exemptions are also extended to IFSC entities from the provisions of the Companies Act. Refer to the table below:
| Activities by GRCTC | Applicable provisions | Relaxation to GRCTCs |
| Lending by GRCTC | Section 179 – Approval of Board | May be taken through circular resolution instead of board meeting |
| Section 186 – Limit on loans, investments, guarantee, security Unanimous approval of board Approval of shareholders Minimum rate of interest on loans Disclosure in financial statements Maintenance of registers | Does not apply, exemption granted to GRCTCs vide the Companies (Meetings of Board and its Powers) (Amendment) Rules, 2025 notified on 6th November, 2025 | |
| Borrowing by GRCTC | Section 179 – Approval of Board | May be taken through circular resolution instead of board meeting |
| Section 180 – Limits on borrowings and approval of shareholders | Does not apply in case of private companyIn case of public company, relaxations may be provided through the Articles |
Tax implications
The tax benefits available to IFSC units coupled with the exemption granted to GRCTC vide the Finance Act, 2025 incentivise fund raising from foreign sources in India. For instance, an Indian group incorporates a GRCTC in IFSC. The GRCTC may avail borrowings from non-residents, and lend the same to the Indian company. In such a case, the following tax benefits attract:
- The GRCTC borrows money from a non-resident. The interest paid on such borrowings is exempt from tax in terms of section 10(15)(ix) of the IT Act, 1961. Since the interest income itself is exempt, the question of withholding tax does not arise.
- GRCTC is merely a treasury centre, the funds will ultimately be utilised by one or more of the group entities. To this end, lending/ borrowing between a GRCTC and its group entities is exempt from the application of deemed dividend u/s 2(22)(e) of the IT Act.
In terms of section 2(22)(e) of the IT Act, loans or advances by a closely held company to the following are taxable as “deemed dividend” under income from other sources:
- Shareholder holding 10% or more of the voting power of such company,
- Any concern in which such shareholder is a member or a partner and in which he has a substantial interest (beneficial entitlement to 20% or more of the voting power)
Sub-clause (iia) of the said section read with Explanation 3 thereto, provides exemption from such treatment where one of the entity is a GRCTC for undertaking treasury activities/ services and the parent entity/ principal entity is listed on the stock exchange of a country or territory outside India (except for countries falling under the restricted list notified by CBDT, if any).
- Pursuant to the exemptions granted to a Finance Company vide notification dated 7th March 2024, no TDS is required to be deducted on the interest income on ECBs/ loans as required in terms of section 195/ 194A of the IT Act.
- Interest income of GRCTC qualifies for tax holiday in terms of section 80LA of the IT Act.
Concluding Remarks
GRCTC seems to be an effective means of managing the finances of large groups, with an access to the world at large, towards the funding needs of the group. The non-resident status under FEMA coupled with the income tax exemptions and the exemptions from procedural compliances under the Companies Act makes it easier to manage the group wide funds, with more flexibility and lesser compliance burden.
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