Detailed Guide on GIFT City Investments for NRIs

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You may have heard the buzz around GIFT City, India’s first international financial services centre, but what exactly does it mean for you as an investor? Let us walk you through everything you need to know about GIFT City—from its significance to the unique investment opportunities it offers and why it is an investing paradise for Non Resident Indians (NRIs).

 

What is GIFT City?

GIFT City, or Gujarat International Finance Tec-City, is a special city located in Gujarat, India. The city is granted special status by making it an Special Economic Zone (SEZ) so the normal Indian rules of the country do not apply here. It is designed to offer global financial services with lots of benefits, especially for people like NRIs or foreign investors. It’s India’s first such financial hub and it’s changing the way we think about investing in India.

Now, why is GIFT City such a big deal for you as an investor? You see, the GIFT City ticks all four important things which is a dream for an investor-
a. Unique investment opportunities
b. Well regulated environment
c. Limited compliance
d. Tax incentives

First, GIFT City provides access to global markets. This means you can invest in international assets and opportunities right from GIFT City, without the needing to go through multiple complicated channels. It makes investing easier and more seamless. So, whether you’re looking at stocks, bonds, or other financial products, GIFT City connects you to the world of opportunities.

Second, GIFT City helps you simplify compliance and documentation. Normally, investing involves a lot of paperwork. However, the process is streamlined in the GIFT City. The rules are clear, and many investments can be made without the usual red tape, so you don’t have to worry about constantly keeping up with changes in regulations. This has been done strategically by having only one regulator, International Financial Services Centre Authority (IFSCA), for all financial products instead of having multiple regulators like the RBI, SEBI, IRDA, PFRDA, and others.

Lastly but most importantly, the Indian government has set it up to attract foreign investors, so they’ve made it a tax-friendly zone. If you invest through GIFT City, you can enjoy lower taxes on your earnings, and in some cases, there are even exemptions from taxes on certain types of income. This means your investments could be much more profitable compared to regular investments in India.

GIFT City is strategically located on the banks of the Sabarmati River, connecting Gujarat’s business capital, Ahmedabad, with its political capital, Gandhinagar. The city is well-connected to the world through the Ahmedabad International Airport, which is just 20 kilometers away.

 

What is an IFSC?

An International Financial Services Centre (IFSC) is a special area where international financial activities like trading, banking, and insurance can take place with special rules and regulations different from the rest of the country. An area is provided this special status in India by making it as an Special Economic Zone (SEZ). The IFSC at GIFT City is approved and regulated under India’s Special Economic Zones Act, 2005.

The purpose of establishing an IFSC is to provide international markets to overseas global institutions by offering benefits such as easy compliance, fewer restrictions, lower taxes to attract financial transactions that are currently conducted outside the country. This creates a win-win situation by helping businesses grow and brings in foreign money to the country. GIFT City in Gujarat is India’s first IFSC, designed to create opportunities for global financial activities within India.

 

Unique Investment Opportunities for NRIs in the GIFT City

GIFT City offers unique and diverse investment opportunities especially for NRIs-

• Global equities and bonds – GIFT City IFSC exchange provides access to global equities and bonds. NRIs and OCIs can easily invest in international markets from India.
• Alternative Investment Funds (AIFs) – AIFs in GIFT City offer exposure to diverse asset classes such as equities, fixed income securities, private equity, real estate, and venture capital. These funds offer high growth potential for specialised investments. Currently, AIFs are the most in-demand financial product in the GIFT City. They have a minimum investment limit of USD 75,000 (revised down from USD 1,50,000 via IFSCA circular dated 19-Feb-2025.)
• Real Estate Investment Trusts (REITs) – REITs listed on the GIFT City exchange allow for low-cost access to the Indian real estate market. NRIs can invest in premium real estate without the need to buy and maintain property directly.
• Offshore banking and deposits – Banks and financial institutions in GIFT City offer offshore banking services and foreign currency term deposits. NRIs can invest in multiple currencies and earn competitive interest rates.

 

Key Benefits of investing through the GIFT City

There are many notable benefits of investing through the GIFT City for NRIs. More importantly, the GIFT City solves many exisitng challenges that you face as an NRI when investing in India. To understand the benefits better, let us firstly understand the existing challenges-

• KYC Compliance – The first step involved in the investment process is KYC compliance. KYC (Know Your Customer) is required because it helps financial institutions like banks and investment companies verify the identity of their customers. This is important to ensure that the money being used in transactions or investments is from legitimate sources and not being used for illegal activities like money laundering or fraud.

KYC checks also protect both the institution and the customer by ensuring that the right person is using the account or making the investment. It’s simply a way to keep everything secure and transparent. Complying with Know Your Customer (KYC) norms can be time-consuming. Incomplete or incorrect documentation often causes delays in transactions.

An updated Aadhaar, PAN, interlinked Aadhaar and PAN, and access to an Indian mobile number registered with Aadhaar is mandatory to complete the KYC process online. However, we have seen that many NRIs find it difficult to comply with all these requirements.

• Physical Presence – Some investments require the physical presence of the investor at the time of investing. The investor has to sign a formal declaration that the person was physically present in India at the time of investing. This makes it difficult to comply with the process.
  
• NRE/ NRO Bank Account – As an NRI (Non-Resident Indians), you are required to open NRE (Non-Resident External) or NRO (Non-Resident Ordinary) bank accounts once you move abroad. These accounts also follow specific tax and foreign exchange rules, ensuring that you comply with Indian laws. Normal savings accounts are meant only for people living in India, so you need NRE/NRO accounts to manage your finances legally.

Your regular Indian savings accounts are no longer valid for managing your income and investments in India. These special accounts help you easily manage money you earn abroad (NRE account) or income you get from India (NRO account). Opening NRE (Non-Resident External) or NRO (Non-Resident Ordinary) accounts requires some extra paperwork.

• Currency Conversion costs – Every time you have to invest in India, you need to convert your home currency into the Indian Rupee. Foreign exchange conversion fees, taxes, and transaction costs can eat into returns.

These charges are often overlooked but can reduce the overall profits from investments to some extent. Moreover, depending on the country you are residing in, you may face banking charges for international transactions, adding to the overall expense.

• Rupee Depreciation – One of the major challenges you face as an NRI is the rupee depreciation against their home country’s currency. This impacts the returns on investment. For instance, if the Rupee weakens, the value of the investment decreases when converted back to your home currency.
  
• Double Tax issues – As an NRI, the tax rules for you are different from those for resident Indians. You are required to manage taxes in both India and your country of residence, which adds another layer of complexity. You need to ensure that you comply with the tax laws of both countries, which can be difficult. You may still face the risk of double taxation, meaning you might be taxed twice on the same income.

The Double Taxation Avoidance Agreements (DTAA) are in place to address this but documentation, compliance and professional assistance is necessary to take benefit of these provisions. DTAAs are agreements between two countries to help people avoid paying tax on the same income in both countries.

For you, this means if you earn money in India and live in another country, the DTAA can ensure you’re not taxed twice—once in India and once in your country of residence. Instead, the agreement helps you either pay tax in just one country or get a tax credit in one for what you’ve paid in the other. Though, understanding and applying the provisions of DTAA correctly is crucial and requires professional assistance.

• Tax Deducted at Source (TDS) – TDS (Withholding Tax, as used in western countries) is a way for the Indian government to collect taxes directly from the income you earn in India. For you, this means that when you get income from rent, interest, or investments in India, a certain amount is deducted as tax before the money reaches you. This makes sure that taxes are paid on your income right away.

The government has framed this rule so it doesn’t have to worry about collecting taxes from you later as it may be difficult to do that as you reside outside India. However, from your viewpoint, if you have no/ low tax payable than the TDS deducted, you have to claim refunds or adjust the TDS amount when filing your tax returns. This adds a layer of complexity and delays money in your hands.

• Tax Filing – You need to file Income Tax Returns in India and report income from rent, interest, or investments earned in India. If the TDS is deducted, you must file returns to claim refunds, which requires careful paperwork. Plus, balancing tax rules between India and your resident country adds extra complexity.
• Limited investment options – Regulatory restrictions limit NRIs’ ability to fully explore the range of investment avenues in India. For instance, many mutual fund companies do not take investments from NRIs residing especially in the US and Canada. Also, some mutual fund companies take investments from them but mandate their physician presence at the time of investment. These restrictions limit the investment options available to some of the NRIs.

The GIFT City provides a host of benefits and addressess all above challenges as explained in the table below-

Challenges Faced by NRIs		Benefits of investing through the GIFT City
KYC Compliance	NRIs face difficulty in complying with KYC norms like linking Aadhaar and PAN. Many struggle with completing documentation and accessing Indian mobile numbers.	No need to go through stringent KYC. IDs like passports and utility bills are adequate.
Physical Presence	Some investments require NRIs to be physically present in India, making it hard for them to manage investments remotely.	Some companies offer digital process or physical copies of documents. There is no requirement of physical presence.
NRE/NRO Bank Accounts	NRIs need to open special bank accounts (NRE/NRO), as regular savings accounts are no longer valid for their investments and income.	You can invest directly from your foreign bank account in your country of residence. There is no need of Indian bank account.
Currency Conversion Costs	Converting foreign currency into Indian Rupees for investments can incur high costs, impacting overall returns.	You can invest directly in your currency. There is no requirement to convert your currency to the Indian Rupee.
Rupee Depreciation	Rupee depreciation reduces returns when converting investments back to foreign currency.	There is no application of Rupee depreciation as investment happens in your currency.
Double Taxation Issues	NRIs face complex tax rules and risk double taxation on income earned in India and their resident country.	There is no income tax applicable on investments through the GIFT City. Your investments will be taxable only in your country.
TDS (Tax Deducted at Source)	TDS is automatically deducted on income in India, even when NRIs may not owe taxes, requiring them to claim refunds.	There is no application of TDS as the investments are not subject to any income tax.
Tax Filing	Tax Implication mandate Income Tax Return filing in India	There is no requirement to file Income Tax Return in India due to investment income as it is exempt from taxes.
Limited Investment Options	Regulatory restrictions limit NRIs’ ability to access certain mutual funds and other investments, especially for those in the US and Canada.	There is no limitation on investment options as the regulatory restrictions are very limited.

Tax Benefits of Investing through the GIFT City for NRIs

• Products and services offered in GIFT City are exempted from domestic laws; instead, GIFT City follows international practices. Therefore, as an investor, you need not pay any tax in India. However, you will have to pay taxes in your respective country.
• If there is no tax in your country of residence, you will not be required to pay any taxes on your investments.
• Investing through the GIFT City has several other tax incentives listed below-

Benefits	Explanation
Lower TDS on Dividend Income	The Tax Deducted at Source (TDS) on dividend income from investments in GIFT City is lower compared to investments outside GIFT City
Tax-Free Interest Income	Interest income earned from lending money to IFSC units is completely exempt from tax
Tax Benefits on Long-Term Bonds	Rupee-denominated bonds listed on the IFSC exchange enjoy lower tax rates- Bonds listed before July 1, 2023, are taxed at 4% Bonds listed after July 1, 2023, are taxed at 9%
No Tax on Listed Securities Transfers	Gains from the transfer of specified listed assets by NRIs or Category III AIFs located in IFSC are not considered taxable in India
Tax-Free Income on Derivatives	Income from non-deliverable forward contracts and over-the-counter derivatives entered with a banking unit is exempt from tax
Tax-Free Income on Financial Securities Managed by Fund Managers	Income earned by NRIs from financial instruments managed by fund managers in GIFT City is exempt from tax, provided it accrues outside India and is not considered to arise in India
No GST on Transactions	Transactions done in GIFT City are exempt from Goods and Services Tax (GST)
No Additional Indirect Taxes	Transactions done on IFSC exchanges are exempt from securities transaction tax, commodities transaction tax, and stamp duty

Latest update of growth and government incentives in the GIFT City

The Indian government is taking significant steps to position GIFT City as a leading global financial hub. In the 2025 Union Budget, Finance Minister Nirmala Sitharaman announced a series of long-term tax incentives, extending benefits for financial institutions operating in GIFT City until March 2030. This gives businesses and investors more clarity and confidence to establish operations in GIFT City.

New tax advantages have also been introduced for mutual funds, ETFs, and foreign investors, while restrictions on fund managers have been relaxed to make it easier for them to operate from India. These changes make GIFT City a much more attractive base for international investors and strengthening India’s financial ecosystem.

GIFT City has already seen substantial growth. As of December 2024, GIFT City-

• has over 740 entities registered including several international ones
• has two stock exchanges of its own i.e. India INX and NSE IX
• has around 30 banks, almost half of them are international banks
• has total banking assets of around USD 78 billion
• has 200 funds with total assets of USD 7 billion
• has conducted over 200 bond issues with total capital raised of USD 75 to 80 billion
• supports around 15 currencies including US Dollar (USD), Great Britain Pound Sterling (GBP), Euro (EUR), Canadian Dollar (CAD), UAE Dirham (AED), Australian Dollar (AUD), Hong Kong Dollar (HKD), and Singapore Dollar (SGD)

These new incentives are expected to further accelerate its development and the government’s unidirectional moves only add to the expected growth and benefits.

 

Can you invest through the GIFT City?

• If you are an NRI or a foreign national, you can invest in inbound funds i.e. funds which invest in Indian markets through direct stocks or mutual funds. 
• If you are a Resident Indian, you can also invest through IFSC provided the fund should have outbound structure i.e. funds investing in other countries.

 

Conclusion

India is one of the fastest growing large economies in the world. Investing in India is anyways a compelling proposition for resident as well as Non Resident Indians (NRIs) even with the current challenges. With the unique investment opportunities and benefits of the GIFT City, it’s a no-brainer for NRIs and foreign nationals to start investing in India’s growth story. If you are an NRI residing in any country that has no tax like most middle east countries, you cannot ask for a better investment opportunity than this! For Resident Indians, this is a great way to take exposure to global investment opportunities.

 

How Can Zenith Finserve Help You to Invest through GIFT City?

At Zenith Finserve, we understand that as an NRI, managing your investments in India can be tricky, especially when it comes to finding reliable financial advice. You may be dealing with conflicting opinions, making it hard to confidently make decisions, and you might miss out on good opportunities. Plus, the physical distance, time zone differences, and staying updated with the Indian market can add to the challenge.

That’s where we step in. With our expertise, we simplify the investment process for you. We guide you through the unique opportunities that GIFT City provides as we have been following the developement right since the beginning. Whether you’re investing for the first time or looking to expand your portfolio, we tailor strategies to fit your risk profile and financial goals.

 

Frequently Asked Questions

• What is the concept of GIFT City?
  GIFT City is India’s first international financial hub, designed to offer world-class infrastructure and services for financial operations, including global market access and tax-efficient investments.

 

• Who regulates GIFT City?
  GIFT City is regulated by the International Financial Services Centres Authority (IFSCA) under the Special Economic Zones (SEZ) Act.

 

• Is GIFT City tax free?
  GIFT City offers significant tax benefits like no securities transaction tax (STT) and capital gains tax exemptions for certain transactions, making it highly tax-efficient for investors.

 

• Can Indian residents invest in GIFT City?
  Yes, Indian residents can invest in GIFT City through specific financial products available within the International Financial Services Centre (IFSC).

 

• Is it good to invest in GIFT City?
  Yes, investing in GIFT City can be beneficial due to its tax advantages, access to global markets, and innovative financial products, especially for long-term growth.

 

• What is the minimum investment in GIFT City?
  The minimum investment varies depending on the product, but many options are available for both small and large investors.

 

• What are the benefits for NRIs in GIFT City?
  NRIs benefit from tax exemptions, easy repatriation of funds, and access to global investment opportunities in foreign currencies through GIFT City.

 

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