What Is GIFT City And How It Enables Foreign Companies To Invest In India
Gujarat International Finance Tec-City, or GIFT City, is India's first International Financial Services Centres (IFSC) that facilitates all financial transactions made in India using foreign currencies. Several countries boast of an IFSC to encourage international transactions within their border and enhance economic growth, while also bringing foreign capital into their country.
India's own IFSC is GIFT City, which offers multiple financial products for NRIs and foreign investors to invest in Indian equities in foreign currencies without converting them into Indian rupees. GIFT City also provides tax advantages to NRI investors.
GIFT City also enables Indian investors to explore global investment opportunities. Eligible resident Indians can also invest in foreign companies and assets through GIFT City, subject to certain conditions.
It's India's first operational smart city and a global financial and business hub located in Gandhinagar, Gujarat.
Here's a more in-depth summary of GIFT City, based on its rules, opportunities and the tax benefits given to foreign investors.
Individuals can trade through entities on GIFT City exchanges provided they are: a person resident outside India, or a non-resident Indian (NRI), or an individual resident in India, who under FEMA is eligible to invest funds offshore to the extent allowed under the Liberalised Remittance Scheme ('LRS") of RBI. That limit is capped at $2,50,000 per financial year.
GIFT City also allows international investors, including Foreign Institutional Investors (FIIs), to participate Indian securities markets.
Opportunities
Indians and NRIs can diversify their investment portfolio through the GIFT City, maximising the Indian IFSC's globally aligned regulatory ecosystem and efficient tax strategies. Equity shares, bonds, debentures, debenture stock and other marketable securities are some of the instruments that can be traded or invested in GIFT City, apart from derivatives, units under any mutual fund scheme, or other pooled investment options.
You can also invest in exchange-traded funds, open-ended schemes, close-ended schemes, investment trusts and government securities. All these instruments are available in foreign currencies other than Indian rupees in the GIFT City. NRI investors can expect a convenient model for KYC, remittance/repatriation and taxation.
Tax Implications
Most foreign investors may find it difficult to navigate India's complex tax web while investing in Indian equities. The GIFT City facilitates a seamless investment for them, emerging as a tax haven.
The securities listed on a recognised stock exchange located in IFSC for non-residents that are exempted from capital gains tax include: foreign currency-denominated equity share of a company, foreign currency-denominated bond, bullion depository receipt, unit of investment trust, unit of a scheme and unit of an Exchange Traded Fund launched under IFSCA FME Regulations, 2022.
An exemption is also given from requiring a PAN to non-residents who qualify as non-residents based on certain conditions. Further, the stamp duty is exempted, while no commodities transaction and securities transaction taxes are charged.
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