GIFT City: NRIs Invest Directly in India with USD

GIFT City provides a direct pathway for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) to invest in India through an International Financial Services Centre (IFSC). This platform facilitates investments directly in US Dollars (USD), bypassing any need for rupee conversion.

Dollar-Denominated Investments Simplified

This mechanism allows investors to engage with the Indian market using their foreign currency. However, it is essential for investors to remember the existing Liberalised Remittance Scheme (LRS) limit.

• The LRS limit stands at $250,000 per financial year.
• This cumulative cap applies across all remittances, including investments, travel, education, and gifts.

Key Benefits for International Investors

Investing through GIFT City offers several strategic advantages, as highlighted by Niteen Dongare, Director & CEO, Anand Rathi International Ventures IFSC Pvt Ltd. These benefits extend from product accessibility to tax efficiencies.

• Access to diverse investment products like mutual funds, Alternative Investment Funds (AIFs), global stocks, ETFs, and GIFT Nifty.
• Operations within a robust regulatory framework overseen by the IFSCA.

Furthermore, investors benefit from significant exemptions on various taxes and charges. These exemptions are available for eligible products traded within the GIFT City framework.

• Exemption from Securities Transaction Tax (STT).
• No Commodities Transaction Tax (CTT) or GST on transactions.
• Waivers on stamp duty and exchange turnover charges.

Seamless Repatriation and Fund Movement

Repatriation of both capital and investment returns from GIFT City is designed to be straightforward and without limits, according to Ankur Choudhary, CEO & Co-Founder, Belong. This offers considerable flexibility to investors.

• Funds can be invested from an overseas bank account or an NRE/NRO account.
• Withdrawals are also permitted to either an overseas bank account or an NRE/NRO account.

Navigating the Investment Process

The process for NRIs and OCIs to invest in GIFT City involves a clear, multi-step approach. This structured method ensures compliance and ease of access.

• Open an IFSC account.
• Complete Know Your Customer (KYC) procedures using documents such as passport, PAN, overseas address proof, and NRI/OCI documents.
• Fund the account directly in foreign currency.
• Select appropriate investment products based on individual risk profiles.
• Repatriate returns in foreign currency after fulfilling all applicable compliance requirements.

Tax Efficiency in Redemption

GIFT City also streamlines the redemption process, offering a more tax-efficient route compared to domestic options, as noted by Viram Shah, Founder & CEO, Vested Finance. This is particularly relevant for Indian mutual funds.

• Redeeming Indian mutual funds domestically often involves Tax Deducted at Source (TDS) deductions.
• This typically requires submitting a Tax Residency Certificate and Form 10F to claim treaty benefits, or filing an Indian tax return for a refund.

In contrast, an inbound Fund of Funds (FoF) in GIFT City simplifies this by eliminating TDS on withdrawal. Investors receive their redemption proceeds directly in US dollars.

Current Limitations to Consider

Despite its many advantages, certain investment avenues are not yet available through GIFT City. India-focused Portfolio Management Services (PMS) currently fall into this category.

• Discussions about reducing the PMS minimum investment limit to USD 75,000 do not apply to India-focused strategies.
• These inbound PMS offerings are not yet operational within GIFT City, as clarified by Viram Shah.

The increasing appeal of GIFT City among NRIs and OCIs stems from its ability to facilitate dollar-denominated investments in India, offering a regulated and tax-efficient gateway to the Indian market.