Investing in GIFT City: 5 Key Questions Answered

GIFT City is short for Gujarat International Finance Tec-City. Situated close to Ahmedabad, GIFT City facilitates all financial transactions in India using foreign currency (not Indian rupees).

Though it is located within India, it is considered a jurisdiction separate from the rest of India.

You might wonder what the use of GIFT City is. Countries aspire for other countries to conduct international transactions within their borders because it can fuel economic growth and bring foreign capital into the country. So, some countries set up International Financial Services Centres (IFSC) within their territory, facilitating such transactions. 

One that is close to us and widely known is DIFC – Dubai International Financial Centre. GIFT City is India’s first IFSC centre.

Many financial products have been introduced in the GIFT City so that NRIs can invest in foreign currencies without converting to Indian rupees. Numerous tax advantages are also given to such investments to attract more investors and capital.

Here, we look at some frequently asked questions about GIFT City.

1. Can individuals trade on the stock exchange in the GIFT City, and what is the minimum investment amount?

 The following individuals can trade through entities on GIFT City exchanges

(a) a person resident outside India;

(b) a non-resident Indian (NRI);

(c)  an individual resident in India who is eligible under FEMA to invest funds offshore to the extent allowed under the Liberalised Remittance Scheme (“LRS”) of RBI, which is up to USD 250,000 per financial year

The point ‘c’ above suggests that Indian residents can invest in GIFT City only under the Liberalised Remittance Scheme (LRS) scheme, which has a limit of USD 250,000 per financial year.

2. What instruments can be traded/invested in the GIFT City? 

 Some of the instruments that can be traded/invested in GIFT City include:

 (i) shares, scrips stocks, bonds, debentures, debenture stock or other marketable securities

(ii)  derivatives

(iii)  units under any mutual fund scheme or any other pooled investment vehicle;

(v)   exchange-traded funds, open-ended schemes, close-ended schemes and investment trusts;

(vi)  Government securities

All these instruments in the GIFT City would be in a foreign currency other than Indian rupees. Further, these are just some of the instruments and investments in them are subject to applicable conditions.

3. What are the benefits of trading/investing in GIFT City?

1. The central government has exempted capital gain tax on the transfer of the following securities listed on a recognized stock exchange located in IFSC for non-residents –  (i)  foreign currency-denominated equity share of a company;  (ii)  foreign currency-denominated bond; (iii) bullion depository receipt; (iv) unit of investment trust; (v) unit of a scheme; (vi) unit of an Exchange Traded Fund launched under IFSCA FME Regulations, 2022.
2.   Exemption from requirement to obtain PAN by certain non-residents who qualify as foreign investors, subject to fulfilment of certain conditions.
3. Exemption from stamp duty for transactions carried out on the IFSC exchanges.
4. Exemption from commodities transaction tax and securities transaction tax in respect of transactions carried out on the IFSC exchanges.
5. While there are no tax benefits specifically for Indian residents, it allows investment in foreign stocks or  Unsponsored Depository Receipts (representing foreign shares) that are being traded on the exchange in the GIFT City.

4. What are the risks of investing and trading in GIFT City?

The general risks of any investments in any asset class remain the same as outside GIFT City. Since it has been in the early stages of setting up, the lower transactional volume could impact investors’ liquidity.

5. What are the opportunities for Indian investors in GIFT City, and what are the key points to remember?

1. NSE IFSC allows trading in Unsponsored Depository Receipts (“NSE IFSC Receipts”), which offers Indian retail investors an opportunity to invest in the US Stocks listed on exchanges like NYSE and NASDAQ easily and affordably.
2. An Indian investor who has invested under the LRS route has to repatriate the income earned on funds back to India within a period of 180 days from the date of receipt of such income if such income is not reinvested.
3. BSE’s INX Global Access IFSC Limited (“INX Global Access”) is a centralized trading platform in IFSC that provides a single-window interface for trading in global markets. This eliminates the need for investors to register separately on each global exchange, thereby decreasing the overall costs of accessing global markets from GIFT IFSC. This allows investors access to ETFs and foreign shares (not depository receipts) across countries.