GIFT City benefits for NRIs

I have been an NRI living abroad for the past 10 years. I have heard a lot about GIFT city benefits for NRIs, and I would appreciate it if you could elaborate a bit. 

The International Financial Services Centre (IFSC) at GIFT City in Gujarat, India, offers several advantages to Non-Resident Indians (NRIs) living abroad. Since transactions in this jurisdiction are carried out in foreign currency, not Indian rupees, currency conversion is not a hassle. 

Any entity in IFSC, GIFT City, is considered a ‘non-resident’ under India’s foreign exchange norms. Accordingly, any transaction between an IFSC entity and an NRI will be considered non-resident-to-non-resident.

As an NRI, understanding how IFSC and GIFT City can benefit you, the ease of opening an account, the required KYC documents, and the various tax incentives and investment products available can help you make informed financial decisions. 

Access to Global Financial Products: GIFT City allows access to a wide range of financial products – both in India and globally, including derivatives, commodities, and foreign currencies. They can transact in 15 varied freely convertible foreign currencies in the IFSC jurisdiction (including Rouble and Dirham).

If you open a bank account in IFSC, you can access foreign markets if the bank has tie-ups with foreign brokers, depending on the services offered by the bank.

There are also two international exchanges in GIFT City, IndiaInx and NSE-IFSC. Through these platforms, you can access products such as derivatives and unsponsored depository receipts in global and currency markets. 

Further, IFSCA has recently allowed direct listing of Indian companies on stock exchanges in IFSC. As and when the same picks up, it can become a lucrative option for NRIs looking to explore primary markets in India. 

Through GIFT City, NRIs can access wealth products like PMS (portfolio management services) and AIF (alternative investment funds), which invest in either Indian or global markets. Coming to mutual funds, there are currently feeder funds from Indian asset management companies, which feeds into their Indian funds.

However, these products are currently not available for retail investors as the minimum ticket size is $1,50,000, which is more than Rs 1 crore in Indian rupees. Having said that, there are consultations going on to bring down the minimum investment size for PMS.

The IFSC, GIFT City banks also allow NRIs to open savings accounts and FDs in foreign currency, depending on the bank’s terms and conditions. Many banks also offer tailor-made solutions to the NRI’s specific needs.

NRIs also have the opportunity to get insurance from the IFSC jurisdiction.

Also, IFSC allows family investment funds to be set up, which, if efficiently structured, can help NRIs with their succession planning. 

Thus, through GIFT City, NRIs can efficiently manage investments across Indian and global financial markets from a single jurisdiction that provides all the ancillary and support ecosystem under one umbrella.

Incentives for NRIs

To promote GIFT City, a number of tax incentives are made available for NRIs. 

Nature of Income	NRI investing in GIFT City – Tax Liability in India
Dividend income	Taxable at the rate of 10% (as opposed to 20% in case of dividends received from a company in mainland India).
Capital gains on IFSC-listed shares and derivative income	Taxable at 9%, where such bond is issued on or after July 1, 2023, and listed on a stock exchange in GIFT City (as opposed to rates ranging from 20%-30%, if bond is listed on a stock exchange in mainland India).
Exempt from tax. The NRI could be liable for taxes in his/her resident country.	Exempt from tax. The NRI could be liable to tax in his/her resident country.
Income from Cat-III AIF & PMS	Exempt from tax in India if the income is accrued in foreign currency by investing outside India
Interest payable by a unit in GIFT City	Exempt from tax in India.

The tax rates mentioned above do not include surcharges, cess, or any additional taxes that NRIs may need to pay in their country of residence. The rates mentioned above are also subject to any relief available under an applicable tax treaty, depending on the country.

Apart from tax incentives, transactions carried out on the stock exchanges in IFSC and GIFT City are exempt from stamp duty and Securities Transaction Tax (STT), reducing the overall cost of investment.

Ease of Opening an Account in GIFT City

IFSC,GIFT City operates under a unified regulator, the IFSC Authority (“IFSCA”), which greatly reduces regulatory risk and has faster, more efficient procedures. 

The banks in IFCS, GIFT City, are quite facilitative in opening accounts for NRIs. NRIs have an opportunity to open a savings or a current account in IFSC, GIFT City, depending on the offerings provided by the bank. Most banks in IFSC offer online account opening services, which can be completed without the need for a physical presence in India. 

The common KYC documents that are accepted by banks are Valid passports, PAN cards, or any other government-issued ID. Additionally, banks also accept an Overseas Citizen of India (OCI) card, employment/work visa, or a certificate of residency from the host country to verify an individual’s NRI status. Depending on the financial institution, additional documents such as bank statements from the home country or tax residency certificates may also be required. A bank account in IFSC should be established within a few days of submission of the relevant document.  

Conclusion

IFSC,GIFT City offers NRIs numerous benefits, including tax incentives, ease of opening accounts, and access to a wide range of investment products. With streamlined processes and a unified regulatory framework, investing through IFSC, GIFT City can be a strategic decision for NRIs looking to diversify their portfolios and optimize returns. Ensure you have the necessary KYC documents ready and consult with your legal and financial advisors to maximize the advantages offered by IFSC, GIFT City.

The views and opinions expressed in this blog are those of the author. All content provided is for informational purposes only and should not be taken as professional advice.