This article discusses the advantages of a GIFT City investment for NRIs who wish to reap the rewards of multiple investment avenues and various Government and regulatory perks.
What is GIFT City? India's Global Financial Hub
GIFT City stands for the Gujarat International Finance Tec-City, and it is the country's first operational smart city cum IFSC (International Financial Services Centre). The GIFT City financial hub for NRIs aims to be a global powerhouse with competitive taxation and regulatory provisions. It also offers a platform for the convergence of global and domestic markets.
Why GIFT City is attracting NRI investors
There are several GIFT City IFSC advantages for NRIs, including tax benefits, easy access to global financial instruments, and better regulatory frameworks.
Government initiatives and regulations supporting NRI investments
There are highly favourable investment regulations for NRIs in GIFT City, including tax holidays for up to 10 out of 15 years and zero capital gains tax on eligible securities transactions made through specified fund structures. The IFSCA regulates the IFSC at GIFT City as well. Cross-border financial services and products are also enabled in international currencies.
Why NRIs Should Consider Investing in GIFT City
Strategic location and international financial services hub
One of the benefits of investing in GIFT City for NRIs is the highly strategic location between Gandhinagar and Ahmedabad, which has excellent connectivity and easy access to skilled talent.
Special economic zone (SEZ) benefits and regulatory advantages
As an SEZ, GIFT City comes with duty-free exports and imports, streamlined regulatory procedures, tax incentives, and more. There is an exemption from Commodity Transaction Tax, Long-Term Capital Gains, and Securities Transaction Tax. Those within the IFSC can enjoy lower corporate tax rates, while businesses will be eligible for GST exemption like other SEZ units.
RBI and SEBI policies making GIFT City attractive for NRIs
Making a GIFT City investment is also beneficial since investments can be made in foreign currencies without mandatory rupee conversion. However, currency fluctuations may still impact returns depending on repatriation. While several tax exemptions apply to investments within the IFSC, applicable tax treatment may vary based on the investment vehicle and the NRI's country of residence. SEBI has also allowed NRIs to completely own global funds based here. NRIs can make 100% aggregate contributions by submitting PAN cards and revealing economic interests in the FPI (foreign portfolio investment).
Tax Benefits & Financial Advantages for NRIs
Zero capital gains tax on certain investments
Capital gains tax is exempted on specific investments, including units of ETFs, schemes, and trusts launched under the International Financial Services Centres Authority (Fund Management) Regulations, 2022.
No securities transaction tax (STT) and commodities transaction tax (CTT)
CTT and STT are completely exempted from transactions within the IFSC exchanges along with stamp duty.
Exemptions on interest income from foreign currency deposits
Interest income from foreign currency deposits is exempted within the GIFT IFSC.
Corporate tax benefits for businesses set up by NRIs
Companies can enjoy a 100% tax holiday for any 10 consecutive years out of a block of 15 years, with transactions exempt from GST. Also, in certain cases, interest income on money lent to businesses through approved entities here may qualify for tax exemptions subject to regulatory conditions.
Investment Opportunities for NRIs in GIFT City
There are several investment options ranging from foreign currency term deposits and offshore deposits to global equities and bonds, AIFs, and fintech and startup entities.
Banking and financial services
NRIs can open global savings accounts in foreign currencies, right from USD to GBP and HKD. They may be held in single/multiple currencies with joint account holders and nomination facilities. You can also avail yourself of professional wealth management in GIFT City for NRIs through leading BFSI players.
Stock market trading through GIFT City exchanges
You can also trade in stocks via the India INX and NSE International Exchanges.
Investment in alternative asset classes (funds, derivatives, bonds)
You can also invest in alternative asset classes here, including bonds, derivatives, and funds, with a view towards diversifying your portfolio.
How to Invest in GIFT City as an NRI?
Wondering how NRIs can invest in GIFT City? You may invest via the AIF (alternative investment fund) route, putting in at least $150,000. This will enable investments in equities and other financial products without foreign currency conversion. You can also invest directly in GIFT City funds.
Eligibility criteria and documentation requirements
You have to furnish your passport, visa, and address proof, along with your FCNR/NRE account. You will also have to be a PIO/NRI to qualify.
Types of accounts NRIs can open in GIFT City
You can open global savings accounts to hold funds in various foreign currencies. Other options include:
- Offshore deposits - Allow you to park funds for up to five years at attractive interest rates
- Call accounts - Like savings accounts with withdrawal facilities
- Global current accounts - Multi-currency money transfer and competitive remittance rates
- Term deposits - Foreign currency deposits at globally benchmarked rates
- Demat accounts - For securities trading and investment
Regulatory framework and compliance considerations
Consider seeking professional guidance on the regulatory framework and compliance requirements from experts before investing.
Start Considering GIFT City Investments
GIFT City investment for NRIs makes for an appealing proposition due to the multitude of tax benefits, regulatory perks, and, of course, attractive investment options. As an NRI, this is the ideal option for exploring India's burgeoning global investment opportunities to build your corpus and financial security for the future.
