With Investment options rising locally and globally, GIFT City in India is becoming a popular choice for domestic as well as International investors to diversify their portfolios, thanks to clear regulations, tax benefits, and growing opportunities.
Some of my clients from Singapore and Dubai asked me for better tax-efficient investment options available in India and specifically wanted me to explore Gift City products.
Though not in search of Investment options but to attend a Conference I was in Ahmedabad 2 weeks back, and we happened to visit a few investment houses in GIft City too to get the feel of the whole Concept.
Gujarat International Finance Tec-City (GIFT City) is India’s first International Financial Services Centre (IFSC), strategically designed to attract global investment and facilitate international business operations. Initially designed to attract foreign investments, GIFT City now offers exciting opportunities for domestic investors too. Through IFSC Banking Units (IBUs), they can access global markets and carry out foreign currency transactions under the RBI’s Liberalised Remittance Scheme (LRS), which permits investments of up to $250,000 per financial year.
An International Financial Services Centre (IFSC) is a designated area within a country that provides financial services to non-residents and facilitates cross-border transactions. IFSCs operate under a specific regulatory framework that allows them to offer services such as banking, insurance, capital markets, and wealth management to clients outside the jurisdiction of the domestic economy.
This article explores GIFT City’s unique features, its significance in the global financial landscape, and the diverse investment opportunities it offers both Resident Indians and Non-Resident Indians (NRIs). (Read: 401k Planning for Returning NRIs)
What is GIFT City?
Established in 2007 and operational since 2015, GIFT City spans over 1,000 acres near Ahmedabad. It aims to create a world-class financial and technological hub that provides various financial services, including banking, insurance, asset management, and capital markets. GIFT City is rapidly emerging as a key player in global finance with over 700 already registered financial institutions, including banks, insurance companies, and asset management firms.
Why Was GIFT City Opened in India?
The primary goal of this IFSC is to bring back financial activities that are currently conducted in offshore centers by Indian corporations and foreign branches of financial institutions. By providing a conducive business environment and regulatory support, IFSCs aim to enhance India’s position in the global financial market.
In India, the IFSC is regulated by the International Financial Services Centres Authority (IFSCA), which oversees all financial products and services offered within these centers. This regulatory body ensures that IFSCs operate efficiently while maintaining compliance with international standards.
Entities operating in GIFT City in India benefit from a 100% tax exemption on business income for the first ten years. Additionally, there are no capital gains taxes on certain securities traded within the IFSC. This is the reason many local and international banks, investment houses, and Insurance companies are setting up their offices in Gift City. and with the International Financial Services Centres Authority (IFSCA) regulating GIFT City, provides a transparent framework that enhances investor confidence.
GIFT City was developed to position India as a competitive player in the global financial market. It aims to replicate the success of established financial hubs such as **Singapore** and **Mauritius**, which are known for their robust regulatory frameworks and favorable business environments.
– Singapore: Renowned for its strategic location and advanced infrastructure, Singapore serves as a global financial center with a highly developed banking sector.
– Mauritius: Often used as a gateway for investments into India due to its favorable tax treaties, Mauritius has attracted significant foreign investment.
GIFT City seeks to provide similar advantages through streamlined regulations, tax incentives, and state-of-the-art infrastructure.
Who Can Invest in GIFT City?
Investment opportunities in GIFT City in India are open to both Resident Indians and Non-Resident Indians (NRIs).
– Resident Indians can invest through various channels such as mutual funds, stocks, bonds, and real estate, available in Gift City
– Non-resident Indians and Foreign Nationals can access global markets without converting their funds into Indian Rupees (INR), thereby reducing currency risk while benefiting from simplified tax structures. (Read: How to Select the Right Financial Advisor for NRIs?)
Gift City in India – Advantages and the Investment Products Available
Domestic investors
Access to Global Markets: Investors can easily transact in foreign currencies and invest in international assets without the complexities associated with traditional routes. Domestic Indian investors can now open Foreign currency bank accounts in the Banks based in Gift City.
Diverse Investment Products: A wide array of financial products is available, catering to different investment strategies and risk appetites.
Non-Resident Indians
For NRIs specifically, GIFT City offers additional advantages:
– Ease of Investment – NRIs are not required to have a PAN card or Aadhar card. They can directly invest through their bank account in their respective country of Residence. This means that even Foreign nationals can invest.
– Reduced Exchange Risk: NRIs can invest and redeem directly in foreign currencies without converting their funds into INR.
– Simplified Tax Structure: NRIs benefit from no withholding tax on certain investments made through GIFT City. Some structures also offer Tax-Free Returns in India. But the Country of residence may levy taxes.
Additionally, the Central Board of Direct Taxes (CBDT) has granted tax exemptions for foreign investors earning income from capital markets in GIFT City.
– Wide Range of Investment Options: From equities to real estate and alternative investment funds (AIFs), NRIs have access to various products that can enhance portfolio diversification.
GIFT City in India provides an extensive range of investment products:
1. Inbound Products:
This is where the major traction is happening currently. Indian Investment managers are coming up with their products under the tax-efficient structure offered under Gift City and are offering a platform to earn Tax-free income by investing in India. Investment houses like Mirae, HDFC, Whiteoak, Marcellus, ASK, etc. have already started with their products providing Tax-Free Income In India to NRI Investors.
For now, the AIF structure is there, but slowly you may find Mutual funds and PMS’s too.
Please note that not all products are available to all Investors, and Minimum Investment requirements may also vary.
2. Outbound Products:
These products let the investors (Domestic as well as NRIs) Invest in Other markets outside India. You will find AIFs Investing outside India, Global Depository Receipts (GDRs), that allow investors to gain exposure to foreign companies while maintaining their investments within the Indian regulatory framework, and even International Bonds that are listedon exchanges within GIFT City.
3. Trading Exchange:
– India INX, NSE IFSC, and Bullion Exchange: These exchanges facilitate trading in equities, derivatives, commodities, and currencies. For instance, investors can trade in gold futures or index options that track global indices.
4. Real Estate Investments:
– The city offers opportunities for investing in commercial real estate projects designed for multinational corporations and startups. For example, office spaces within GIFT City in India are attracting major companies due to their modern infrastructure.
5. Insurance Products:
– Various insurance companies offer products tailored for NRIs that provide coverage while allowing investments linked to life insurance policies.
Should you Invest?
I would say you should explore. The city is working under a regulated structure and quite Interesting and Tax efficient products are Coming up for Investors. GIFT City in India is poised to become a leading destination for both Resident Indians and Non-Resident Indians looking to enhance their investment portfolios. After gaining popularity, you may find NRIs investing in India through Gift City Route only.
Also read: NRI Retiring in India – Important Points to Consider
