What is GIFT City?
GIFT City is the short version for Gujarat International Finance Tec-City. It is India’s first operational smart city and international financial services center (IFSC). Located in Gujarat, it has been designed with world-class infrastructure and regulatory frameworks to attract global investors and financial institutions. The ongoing buzz around it is because of its unique offerings, including tax incentives, simplified regulations, and innovative opportunities in financial services, insurance, and technology sectors.
What’s special about GIFT City?
Unlike the rest of India, GIFT City operates as a separate jurisdiction, where all financial transactions are conducted in foreign currencies rather than Indian rupees.
Countries often establish IFSCs to encourage international transactions, driving economic growth and attracting foreign capital. A well-known example is the Dubai International Financial Centre (DIFC). GIFT City, India’s first such centre, aims to bring similar benefits to the country.
Several financial products have been introduced within GIFT City to allow Non-Resident Indians (NRIs) to invest directly in foreign currencies without the need for currency conversion to INR. These investments are further incentivized with attractive tax advantages to encourage more investors.
Also read: GIFT City: India’s International Finance Hub for NRIs and OCIs!
Who can invest in GIFT City?
Individuals eligible to trade on GIFT City exchanges include:
- Non-resident Indians (NRIs)
- Residents outside India
- Indian residents who are allowed to invest abroad under the Liberalised Remittance Scheme (LRS) of RBI.
What is the minimum investment amount in GIFT city?
The minimum investment in Gift City is USD 150,000 and Indian residents can only invest under the LRS with a cap of USD 250,000 per financial year.
NRIs investments in GIFT City
NRIs or the Non-Resident Indians can invest in GIFT City. The regulatory framework facilitates investment through authorized banks and brokers, It enables NRIs to participate in various financial services like trading, setting up businesses, or investing in funds. The government is actively promoting GIFT City as a hub for international financial activities and making it accessible and attractive to NRIs.
Where can NRIs invest in the GIFT City?
1. Mutual Funds and Feeder Funds
NRIs can invest in feeder funds linked to Indian mutual funds.
What is a feeder fund?
A feeder fund invests in another fund (usually a larger, more diversified one) rather than directly in individual assets. It allows investors to access global markets or specialized funds with a lower entry cost.
2. Portfolio Management Services (PMS) and AIFs
Access to wealth management products like PMS and AIFs, which invest in Indian and international markets. Currently, the minimum investment size for these products is $150,000, but discussions are underway to reduce this threshold.
What are Portfolio Management Services (PMS) & Alternative Investment Funds (AIFs):
Portfolio Management Services (PMS) offer personalized investment strategies, where a professional manager tailors a portfolio based on an investor’s goals. Alternative Investment Funds (AIFs) pool money to invest in non-traditional assets like real estate or private equity, offering higher potential returns with more risk.
3. Savings Accounts and Fixed Deposits
NRIs can open foreign currency savings or fixed deposit accounts in GIFT City banks, depending on the terms offered by the bank.
4. Insurance
Tailored insurance solutions for NRIs are also available within the IFSC framework.
5. Family Investment Funds
NRIs can establish family investment funds for succession planning, offering efficient and consolidated management of family wealth.
Is investing in GIFT City better than traditional investments?
GIFT City investments provide a unique opportunity for NRIs to diversify portfolios, leverage global market access, and enjoy significant tax benefits. However, they may involve higher regulatory and market volatility risks.
For NRIs focused on traditional, stable investments, conventional options like mutual funds or real estate might feel safer but they lack the international exposure and tax incentives that GIFT City offers.
Here is a detailed comparison of GIFT City vs Traditional investments.
| Metric | GIFT City Investments | Traditional Investments |
| Tax Benefits | – Zero capital gains tax on certain transactions.- No STT (Securities Transaction Tax) or CTT (Commodities Transaction Tax).- Tax holidays for businesses (10 years). | – Taxable capital gains (varies by asset class).- STT and other charges apply.- Limited tax exemptions for NRIs. |
| Currency Flexibility | – Investments in multiple foreign currencies.- Protection from INR depreciation.- No complex currency conversion required. | – Requires currency conversion to INR for most products.- Exposed to currency risks. |
| Global Market Access | – Trade in international financial products, derivatives, and bonds.- Offshore insurance and reinsurance options.- Access to up to 15 freely convertible currencies (e.g., USD, Euro, Dirham, Rouble). | – Limited to domestic financial products.- International markets require additional setups. |
| Ease of Compliance | – Single-window clearance for approvals.- Simplified regulations under IFSCA.- Transactions classified as non-resident-to-non-resident, simplifying compliance. | – Complex regulatory framework with multiple clearances required.- Lengthy compliance processes. |
| Investment Options | – Access to IFSC-specific products (e.g., AIFs, bonds).- Opportunities in global markets and offshore funds.- Trade on international exchanges like India INX and NSE-IFSC. | – Primarily domestic assets (mutual funds, real estate, etc.).- Limited international options through Indian brokers. |
| Minimum Investment | – PMS and AIF products may require higher minimums (e.g., $150,000). | – Varies; some products may require higher capital. |
| Liquidity | – High liquidity for global instruments.- Transactions supported by world-class financial infrastructure. | – Liquidity depends on the investment type and market conditions. |
| Regulatory Oversight | – Regulated by IFSCA with internationally benchmarked rules. | – Governed by SEBI and RBI with more stringent rules. |
| Infrastructure Support | – World-class infrastructure with advanced technology. | – Infrastructure varies by location and investment type. |
| Risks | – Dependent on the evolving regulatory environment.- Exposure to global market volatility. | – Relatively stable but subject to domestic market risks.- Limited global exposure. |
Also read: GIFT City FD vs Other FD for NRIs: Detailed Comparison!
Why should NRIs invest in GIFT City?
NRIs should consider investing in GIFT City because there are plenty of benefits for them like:
- Capital Gains Tax Exemption: No capital gains tax on the transfer of foreign currency-denominated securities, such as equity shares, bonds, ETFs, and investment trust units listed on GIFT City exchanges.
- No PAN Requirement: Certain non-residents may be exempt from obtaining a PAN, provided they meet specific criteria.
- Tax Exemptions: No stamp duty, commodities transaction tax (CTT), or securities transaction tax (STT) on transactions carried out within the IFSC exchanges.
- Global Investment Options: Indian investors can access foreign stocks and Unsponsored Depository Receipts (UDRs) through GIFT City exchanges.
- Digital Accessibility: Many Gift City services, including banking and trading, are accessible online, allowing NRIs to manage their accounts and investments remotely.
However, Indian residents do not enjoy specific tax benefits, although they can invest in foreign stocks or UDRs.
How can NRIs invest in Gift City?
You can start investing in GIFT city with 100% online platforms like SBNRI.
Investing in GIFT City through SBNRI is straightforward and efficient, thanks to the user-friendly platform tailored for NRIs. Here’s how you can get started:
- Visit the SBNRI website or download the SBNRI app and sign up using your NRI/OCI details.
- Complete your identity verification easily with minimum documentation and online KYC process.
- Get tailored investment advice from SBNRI’s financial experts.
- Open necessary accounts like NRE, NRO, or foreign currency accounts with their help.
- Browse and choose from investment options available in GIFT City and start investing.
- Track your investments and manage your portfolio through the platform’s dashboard.
Why should NRIs choose SBNRI for GIFT city investments?
- Comprehensive NRI services: Beyond investments, SBNRI offers services like PAN card application, tax advisory, and remittance solutions.
- Expert guidance: SBNRI’s financial advisors help you navigate GIFT City’s offerings and ensure compliance with regulations.
- Diverse investment options: SBNRI enables you to access diverse investment options in GIFT City, such as PMS, AIFs, and feeder mutual funds. Get curated recommendations on investment opportunities tailored to your risk profile and financial goals.
- Tax optimization assistance: Leverage SBNRI’s expertise to maximize the tax benefits offered by GIFT City investments.
- User-friendly platform: Navigate investments, compliance and account management with ease.
- Secure transactions: Benefit from robust security measures ensuring safe and compliant transactions.
- 24/7 support: Dedicated customer support ensures that your queries are resolved quickly, no matter your time zone.
Opportunities for Indian investors in GIFT city:
GIFT City provides a range of investment opportunities for NRIs and Indian residents, with access to global markets through various platforms, including NSE IFSC, INX Global Access, and more. These platforms offer unique benefits such as foreign currency transactions, tax exemptions, and reduced investment barriers.
Indian residents can invest through the Liberalized Remittance Scheme (LRS), which permits remittance of up to USD 250,000 per year for such investments.
- NSE IFSC: Enables trading in Unsponsored Depository Receipts (NSE IFSC Receipts), allowing Indian investors to invest in U.S. stocks listed on NYSE and NASDAQ.
- INX Global Access: BSE’s INX Global Access offers a unified platform to trade in global markets, eliminating the need for separate registrations and reducing the cost of accessing ETFs and foreign shares.
Please Note: Indian investors need to repatriate any income from LRS investments back to India within 180 days, unless the income is reinvested.
Wrapping up
Investing in GIFT City can be a game-changer for NRIs seeking to optimize their portfolios. With SBNRI, you can experience effortless account opening, expert guidance, and secure investment management. Let SBNRI be your partner in exploring the numerous benefits of GIFT City.
India Investment Made Easy for NRIs/OCIs with SBNRI
SBNRI is an authorized Mutual Fund Distributor platform & registered with the Association of Mutual Funds in India (AMFI). ARN No. 246671.
NRIs willing to invest in GIFT City in India can download the SBNRI App and choose from 2,000+ mutual fund schemes or can connect with the SBNRI wealth team to better understand Mutual Fund investments.
Visit our blog and YouTube channel for more details.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions. SBNRI does not intend to predict future returns, please read all related documents before investing.
FAQ:
Q1: Which companies are operational in GIFT City?
Several global and Indian companies operate in GIFT City, including:
- Banks: State Bank of India, HSBC, and Standard Chartered.
- Stock Exchanges: India INX and NSE IFSC.
- Insurance Providers: ICICI Lombard, GIC Re, and Lloyd’s of London.
- IT and Tech Firms: TCS, Infosys, and several startups.
This diverse range of companies ensures opportunities across finance, technology, and insurance sectors.
Q2:What instruments can be traded/invested in GIFT City?
GIFT City provides various investment opportunities in foreign currencies. These include:
- Shares, bonds, debentures, and other marketable securities
- Global equities & Derivatives
- Green Bonds and ESG Investments
- Units under mutual funds and pooled investment vehicles
- Mutual funds, exchange-traded funds (ETFs), investment trusts, and both open- and closed-ended schemes
- Government securities
- Reinsurance and Insurance Products
These investments are available in foreign currencies, with specific terms and conditions governing them.
Q3. What are the risks of investing and trading in GIFT City?
The risks are similar to those of investing in any other market. However, since GIFT City is still in its early stages, lower transaction volumes might affect liquidity for investors.
Q4: Are investments in GIFT City subject to currency risks?
Yes, since investments in GIFT City are made in foreign currencies, fluctuations in exchange rates can impact returns. However, this also allows diversification and protection against INR depreciation.
Q5: Can NRIs repatriate profits from GIFT City investments?
Yes, NRIs can freely repatriate profits and investment proceeds from GIFT City to their home country, subject to applicable regulations and bank compliance.
Q6: Are there any restrictions on the sectors or instruments available for investment in GIFT City?
While GIFT City offers a wide range of investment options, certain instruments and sectors might have restrictions based on regulatory guidelines. It’s advisable to consult a financial expert or review IFSCA regulations for clarity. SBNRI can help you connect with experts.
Q7: How does GIFT City compare to other international financial centers like DIFC?
GIFT City offers similar benefits to international financial centers such as tax exemptions, currency flexibility, and global market access. However, being a relatively new hub, it is still evolving and may have limited market depth compared to established centers like DIFC.
