What NRIs Need To Know Before Investing Via GIFT City Funds?

GIFT City funds have seen a rising interest from NRIs as a potential gateway to the Indian market and also global markets, backed by the well-marketed "tax efficiency and regulatory support" aspect.

But NRI investors must be cautious of the fact that GIFT is still very new, with evolving rules. Recently, regulators prohibited investments into certain US-based ETFs, highlighting policy unpredictability, which can derail financial planning.

CA Sonu Jain, Chief Risk and Compliance Officer of 9Point Capital says for NRIs, this means added tax complexity and possible scrutiny from Indian authorities. Unless one lacks access to India-focused index funds or mutual funds in their country of residence, GIFT City may not yet be the best route. It's an exciting platform, but caution and clarity must precede participation, especially when it deals with financial aspects.

From KYC to Repatriation: The Complete NRI Investment Journey at GIFT City

These are the main factors to take into account before investing in GIFT City, which is a potent center for NRIs since it blends ease of use, tax efficiency, and strategic flexibility, as per Amit Suri Mutual fund distributor & founder of AUM Wealth and Saurabh Bansal, Founder, Finatwork Investment Advisor, a SEBI RIA (Registered Investment Advisor.

1. Eligibility & process for NRIs to invest via GIFT City

GIFT City provides a unified, step-by-step process for NRIs. Investors need to first verify NRI or OCI status and complete KYC. Then, when it is appropriate to open an IFSC account and add a demat account where appropriate, they need to sign the correct disclosures with the provider of their choice. Investors can reach out to their trusted financial consultant, who can help investors through the entire process.

Finally, investors will need to fund in foreign currency, invest via the route of choice and repatriate the proceeds, all under a single regulatory environment.

It is easy for NRIs to access GIFT City. An NRI or OCI individual, who has undertaken their standard KYC with passport, visa, address proof and PAN where applicable, can open an IFSC account with leading banks. After that, they can choose whatever route they want - IFSC mutual funds in foreign currency, AIFs, or the FPI but funding and repatriation in foreign currency keep things fairly straightforward and simple.

2. Tax advantages & regulatory clarity

The major benefit of GIFT City for NRIs is its offshore treatment under Indian legislation. Any capital gains realized while here are not taxed in India. Investors must only adhere to taxation in their country of residence, making this framework hugely attractive for cross-border wealth planning.

What distinguishes GIFT City is its available tax and regulatory framework. NRIs benefit from a lower tax incidence on capital gains and dividends, exemptions from GST, STT, and stamp duty. These represent some of the advantages that make GIFT city funds distinct from typical mutual funds. Combined with global standard regulation from IFSCA, it gives NRIs the ease of investing in India.

3. Suitability of GIFT City funds in overall financial planning

A number of NRIs have the dream of going home at some point and that means they want a part of their money to continue to grow in India while they are abroad. GIFT City funds allow for that. You are investing directly in dollars, avoiding the normal tax withholdings, and staying connected to Indian markets without all the paperwork nightmares. It is a terrific way to create some financial planning for the day of your choosing to get back home.

GIFT City funds can be a perfect fit for NRIs who want to diversify their portfolios. Investors will have access to both Indian and global markets in foreign currency, avoiding the headache of converting rupees. For investors who already have assets outside of India, GIFT City is a natural investment option to invest into the Indian markets.

$150,000 Entry Ticket: Why GIFT City Funds Suit Globally-Minded NRIs?

The concept of having an International Financial Centre is to position India as a global financial hub and promote international capital into the country. And therefore, GIFT city funds are generally more beneficial to foreign investors as they give them tax-efficient structures and global access.

"For NRIs, the biggest point to look at is taxation. GIFT city has a very different tax structure, like no TDS on incomes distributed to non-residents, exemption on Capital gain earned through securities listed on IFSC exchange, corporate tax exemptions, etc," said Kresha Gupta, Director & Fund Manager Steptrade Capital.

"Specifically for NRIs, this gets affected by their resident country. While GIFT City funds won't deduct tax when distributing income, NRIs are still required to pay taxes in the country where they live. This is why the first step for any NRI should be to assess the exact tax liability they would face in their resident country when earning income from a GIFT City fund," Kresha Gupta further added.

Another factor is the minimum ticket size. For AIFs in India, the minimum ticket size is Rs. 1crore, while in GIFT funds, the entry level is usually around ~$150,000, which means these funds are better suited for wealthier NRIs who already think in terms of global portfolios.

The good part is that you can invest in any of the global currencies like USD, GBP, SGD, etc, removing the hassle of converting money into INR thereby saving conversion cost too. The downside is that the investment will always be open to currency fluctuations.

Also, foreign investors don't hold a Permanent Account Number in India, and this is the benefit GIFT funds offer. But being an NRI, PAN is compulsory, which will eventually lead to a burden on compliance. Although the upside is that the investment capital and income are fully repatriable in foreign currency.

"In short: GIFT City funds work best for investors looking for global or Indian exposure without the hassle of INR conversion, with the ability to repatriate funds freely. For NRIs, they remain a strong option but with the added step of PAN compliance and careful review of your tax residency," commented Kresha Gupta.

Why GIFT City Funds Could Be the Smartest Way for NRIs to Tap India's Growth Story?

"NRIs and OCI holders should view GIFT City funds as a promising and tax-efficient gateway to invest in India, but a few critical points must be understood before you consider that! First is the regulatory clarity, the investments are governed by SEBI and IFSCA, which is a great point because you can be assured your investments are safer than you think (consider looking at how SEBI is strictly penalizing companies for not following guidelines) but in addition, you as an investor will have to comply with all the KYC rules and regulation- which might be simple if you have all the right documentation ready, if not, I suggest get them right first!" said Saksham Bhagat CEO & Co-Founder Swiftmoney.ai.

Second, the tax benefits- No TDS is deducted, and long-term capital gains can be exempt, though local taxation in the country of residence may still apply.

Third, investment structure—while new retail mutual fund schemes with lower entry amounts are emerging, most current offerings are Alternative Investment Funds (AIFs) with high minimums (often USD 150,000).

And fourth, the currency and repatriation- investments are typically USD-denominated, with free repatriation of capital and returns, avoiding double forex conversion.

"Finally, risks remain: Indian market volatility, fund manager performance, and evolving regulations. Careful due diligence and tax consultation are essential before committing capital. But overall, India's economy still has one of the highest potentials in the world. We feel very confident, and GIFT City does seem like a spot for NRIs!," Saksham Bhagat further commented.

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