Non-Resident Indians (NRIs) constantly look for investment avenues that can maximise their returns on the capital invested. Other than lucrative investment avenues, their big concern is to either earn tax-free returns or minimize their tax liability. GIFT City, an emerging investment route for NRIs, can help them earn better returns with much more flexibility and tax advantages. In an interview with Financial Express Online, Nishant Kohli, Founder and CEO, NRI Nivesh, discusses the factors that make GIFT City an attractive option for the NRIs.
NRI’s have several options to invest in India and abroad. How different is the GIFT City investment route?
For many NRIs, one of the biggest challenges has always been finding a place where they can comfortably hold and invest their money in the same currencies they earn in, like dollars or euros.
The moment money comes into India, it usually gets converted to rupees, which limits flexibility. GIFT City has finally changed this situation in a meaningful way.
It allows NRIs to keep money and invest directly in multiple global currencies while still being connected to an Indian offshore centre.
This means an NRI can now build a proper global, multi-currency portfolio from India itself, something that simply wasn’t possible earlier. For many NRIs living abroad and juggling financial lives in two countries, this brings a sense of relief and control.
What are the major tax benefits for NRIs investing through GIFT City?
Taxation on Gift City or any offshore Gift City for NRI offers a favourable tax treatment across different formats for retail funds, PMS, AIF’s and others.
However, NRIs must consider their country of tax residence ( where they are staying ) taxes -capital gains, dividends, or interest as it varies from country to country and they have to pay it as per that country’s Tax Laws.
Also, products across Gift City enjoy no Securities Transaction Tax (STT), no Commodity Transaction Tax (CTT), no stamp duty on trades in IFSC and no GST, giving the investment products an edge and cost efficiency for investors in the long run.
What are the practical steps and eligibility criteria for NRIs to start investing via GIFT City, for example, opening accounts, KYC, choosing products, and repatriation?
For an NRI who wants to begin their investment journey in GIFT City, the process is straightforward. It starts with understanding personal financial goals and deciding the currency in which those goals make sense.
Basic KYC and IFSC standard documents need to be completed, after which one can open a foreign-currency bank account in GIFT City, often beginning with something simple like a dollar account or dollar fixed deposit.
From there, the entire investment universe, from retail funds, PMS, AIFs, to insurance solutions, is available to them. Most importantly, investments and returns can be freely repatriated, making the experience seamless for someone living overseas.
From a risk and compliance standpoint, what should NRIs be aware of when investing through GIFT City, including tax residency issues, double taxation, and global regulatory reporting?
The most important thing for any NRI is to understand Global Taxation and Double Taxation Avoidance Agreements to ensure tax paid or withheld in GIFT City can be credited against your home-country tax liability.
IFSC entities are subject to global regulatory standards. Also, while investing in Funds in Gift City, be aware and understand if they have lock-in or limited redemption windows, and also a mix of Outbound or Inbound investment options.