GIFT City offers an attractive investment proposition for NRIs, blending tax advantages, business-friendly environment, and access to a global financial center. Investing in GIFT City is a golden opportunity for NRIs to diversify their investments and appreciate their asset taking advantage of India’s economic advancement. This article is an attempt to clarify investment options and taxation aspects for NRIs.
1. How is the current trend in NRI funds flowing into India?
The NRI deposit market in India is witnessing a consistent inflow of funds over recent years. The upward trend in NRI Deposits signifies the confidence and trust of NRIs in the country’s economic stability and growth. Generally, NRIs, prefer to invest in the currency of their country of residence or the well accepted currency USD. The GIFT IFSC provides a platform as one of the best options for our Indians residing abroad. The main objective of GIFT City, Alternative Investment Fund, (AIF) make it attractive for NRIs to outperform the NIFTY Index by approximate 6% over 2-3 years.
2. What are the Investment options available for NRIs?
The NRIs have the option of investing in securities like Offshore Bonds, Mutual Funds and Structured Notes. The NRIs need not visit India for investment purpose, the onboarding process and KYC happens digitally. The main criteria for investment in these funds in GIFT city has to flow from offshore bank account, however Non Resident Indian holding NRE account in India can invest through that account in these funds.
The key players operating in GIFT IFSC are International stock exchanges, IFSC banking units, brokers & intermediaries, insurers, and asset managers.
List of few investment options are as below:
1. Alternative Investment Funds
2. Global Equity market
3. Bonds
4. Term Deposits
5. REIT
6. Equity investor in Startups
3. What is the minimum investment requirement in GIFT City?
Recently a circular has been issued on2nd May 2024 to all fund management entities in IFSC specifying a threshold for the aggregate contribution of the NRI,OCI and Resident Indians in the corpus of the Foreign Portfolio Investors.
The minimum investment required for NRI to invest in specified assets if USD 1.5 million
There are leading Asset Management Companies invites funds for AIF. The Alternate Investment Fund (AIF) is a combination of mutual fund and PMS. It makes a perfect blend geared for generating optimum performance for a stipulated investment objective.
4. What are the measures taken by IFSC to make it more attractive for investors?
The IFSC is making efforts to ease the current challenges:
1. Prescribing a minimum corpus of 5 Million USD investment
2. Under income tax, classification of income under particular head of income
3. Special tax regime applicable for AIF (Alternate Investment Fund) is not extended to Retail schemes.
4. Common Payment gateway enablement to accommodate seamless flow of currency from any country.
5. Complying with AML guidelines
5. Are the investments applicable only to Non Resident Indians?
The above investments are applicable only for NRIs, foreign investors and foreign corporates.
6. What is the expected rate of return for NRI investors in GIFT City?
The investors are likely to expect more returns than normal returns due to the simple fact that Funds managed in GIFT City are overseen by IFSCA, with portfolio managers eligible for a 100% tax deduction on their income for ten years.
7. Whether Individual NRI investors need to file income tax returns in India on the capital gains earned in India?
It’s not mandatory for GIFT City NRI investors to have PAN in India. The tax filing as per Income Tax Act is not compulsory. The Investment Fund house takes care of the taxation part of investors by deducting TDS at appropriate rates.
8. What are the other benefits NRIs derive from investment in GIFT City?
1. The investors can open Global Current Account facility without having minimum balance criteria in foreign currency but without any interest.
2. The investors can open Savings bank account and earn interest
3. Term Deposit can be opened with minimum lock in of 7 days unlike one year in FCNR.
4. The investors get the benefit of Loan against their Deposit in foreign currency.
9. What are the applicable taxation w.r.t. investments made by NRIs?
i. Dividend Income is taxable at a concessional rate of 10% plus surcharge and cess
ii. Interest income on the moneys lent to IFSC units is not taxable
iii. Interest on Long Term Bonds and Rupee Denominated Bonds listed only on a recognised stock exchange in IFSC:
(1) Issuance before 01 July 2023 – Taxable at a lower rate of 4%
(2) Issuance on or after 01 July 2023 – Taxable at a rate of 9%
iv. Transfer of specified securities listed on IFSC not taxable as capital gain.
v. Surcharge and Cess not applicable for certain specified funds
Conclusion
GIFT City presents a unique and promising investment opportunity for NRIs, combining advanced infrastructure, strategic location, regulatory benefits, and strong government support. As GIFT City continues to develop and attract global businesses, the potential for significant returns on investment is high. For NRIs looking to diversify their investment portfolio and tap into India’s growing economic landscape, exploring investments in GIFT City could be a highly rewarding decision.
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