Gujarat International Finance Tec-City, popularly known as Gift City, is India's first International Financial Services Centre (IFSC). It is home to banks, financial institutions, and other global businesses, offering them a conducive environment in which to set up their shop and run their operations smoothly. In Gift City, asset management companies (AMCs) have launched their funds, which are known as gift city funds. They come with a unique set of benefits addressing the issues of non-resident Indians (NRIs) and Overseas Citizens of India (OCIs) faced with mutual fund investing in India.
Funds in GIFT City
Gift City funds are mutual funds launched by AMCs in the Gift City. They operate under the regulations of International Financial Services Centre Authority (IFSCA). These funds invest in global markets, offering exposure to international securities such as equities and bonds. Moreover, they allow you to invest in various currencies, making investing simple and hassle-free.
Features Of Gift City Funds
The following are some of the important features of Gift City funds:
- Positioned as offshore funds: Gift City funds are structured as offshore funds. This ensures that fund managers have a wide choice of investment options to choose from. This results in exposure to global financial securities.
- Regulatory compliance: Gift City funds are governed by the rules and regulations of IFSCA, which ensures investor interests are taken care off.
- Professional fund management: These funds are managed by well-experienced fund managers. They have extensive knowledge to perform market research to pick the best securities for the portfolio of gift city funds.
- Currency options: Gift City funds are denominated in multiple currencies, allowing NRIs and OCIs from different parts of the world to invest in them directly without any hassle.
Investment Opportunities in Gift City for NRIs
The Gift City offers several investment opportunities for NRIs and OCIs to choose from, and they are listed below.
- Offshore banking and deposits: Banks and financial institutions established in the Gift City offer offshore banking deposits and foreign currency term deposits. NRIs can invest in them in various currencies and earn competitive interest rates.
- Global equities and bonds: Through the Gift City IFSC exchange, NRIs and OCIs can get access to global equities and bonds.
- Alternative Investment Funds (AIF): AIFs set up in the Gift City offer exposure to several asset classes, including equities, debt securities, private equity, real estate and venture capital investments.
- Real Estate Investment Trust (REIT): The Gift City IFSC exchange has listed REITs, which gives easy access to the Indian real estate market at a low cost.
Benefits Of Investing in Gift City for NRIs
- Ease of investment: Gift City funds are denominated in major global currencies, allowing you to invest in them with ease. Moreover, invested funds can be repatriated fully with ease without any restrictions. Here’s a blog on how repatriation works.
- Diversification: These funds invest in global securities across multiple currencies. They offer the right amount of diversification hedging the risk in the portfolio.
- Tax benefits: Unlike domestic mutual funds, Gift City funds are exempt from tax deducted at source (TDS). Moreover, they operate in tax-friendly jurisdictions, offering lower rates of taxes on capital gains. Apart from this, you can also benefit through different tax treaties signed between India and your country of residence (if any).
- Investor protection: Gift City funds operate under international financial standards. Hence, they ensure strong investor protection metrics are in place.
- Professional management: These funds are managed by experienced fund managers who possess the knowledge and expertise to select securities for the portfolio and generate high returns.
Tax Incentives Offered Under Gift City to NRIs And OCIs
- Concessional rates of tax on dividend income: The TDS deducted on dividend income on Gift City investments will be lower than the TDS deducted in case of investments outside Gift City.
- Tax-free interest income: Interest income earned from money lent out to IFSC units is completely tax-free.
- Tax benefits on long-term bonds: Rupee-denominated bonds that are listed on the IFSC exchange enjoy lower tax rates. Bonds listed before July 1, 2023, have a 4% tax rate, and bonds listed after this date have a 9% tax rate.
- Tax benefits on listed securities: If an NRI or a Category III AIF located in IFSC transfers a specified listed asset, it is not considered a taxable transfer, and the gains are not taxed in India.
- Income earned on derivatives is tax-free: Income earned from non-deliverable forward contracts, and over the counter derivates entered with a banking unit are exempt from tax.
- Income earned on financial securities managed by fund managers: Income earned by an NRI from financial instruments managed by a fund manager on behalf of the NRI in an account with a banking unit is exempt from tax as long as accrues outside India and is not considered to arise in India.
- No GST: No GST will be charged on transactions done in the Gift City.
- No additional indirect taxes: No securities transaction tax, commodities transaction tax, and stamp duty for transactions done on IFSC exchanges.