GIFT City, home to India's first International Financial Services Centre (IFSC), gives Non-Resident Indians a way to invest in foreign currency from an Indian jurisdiction, under a separate regulator and a separate set of tax rules.
If you're an NRI, you've faced the usual challenges when investing in India. Complex FEMA regulations, high tax burdens, repatriation complications, and mutual fund restrictions have pushed many NRIs to route investments through offshore hubs.
GIFT City changes this. Located in Gujarat between Ahmedabad and Gandhinagar, this financial hub offers tax-efficient access to both Indian and global markets. You can hold accounts and investments in foreign currency, and several Indian tax concessions apply specifically to non-residents investing through the IFSC.
This guide covers the investment options open to NRIs, the regulatory minimums under IFSCA's Fund Management Regulations 2025, the step-by-step process, and the home-country tax issues to weigh before you invest, including PFIC rules for US residents.
Understanding GIFT City and Its Significance for NRIs
What Is GIFT City (IFSC)?
GIFT City stands for Gujarat International Finance Tec-City. It houses India's first International Financial Services Centre (GIFT IFSC). Financial services in the IFSC are regulated by the International Financial Services Centres Authority (IFSCA), set up under the IFSCA Act, 2019.
Under RBI's Foreign Exchange Management (International Financial Services Centre) Regulations, 2015, a financial institution or branch set up in the IFSC is treated as a person resident outside India. IFSC entities deal in foreign currency, so your money does not have to be converted into rupees. Both Indian and foreign banks operate IFSC Banking Units (IBUs) there.
How GIFT City Differs from Traditional Indian Investments
Traditional NRI investment options in India are generally made in rupees through NRE or NRO accounts, attract Securities Transaction Tax on equity trades, and are subject to repatriation limits on NRO balances. Investments in the IFSC stay in foreign currencies such as USD, EUR or GBP, which avoids repeated conversion.
Securities Transaction Tax does not apply to transactions on a recognised stock exchange in the IFSC where the consideration is paid in foreign currency.
Why NRIs Are Choosing GIFT City
Finance Act 2025 extended to 31 March 2030 the deadline by which IFSC units and relocated funds must commence operations to claim several IFSC tax concessions. Separately, a SEBI circular of June 2024 allows NRIs, OCIs and resident Indian individuals together to contribute up to 100% of the corpus of SEBI-registered FPIs based in an IFSC, subject to conditions, up from below 50% earlier.
Entry thresholds have also come down in places. IFSCA's Fund Management Regulations 2025, announced on 19 February 2025, cut the minimum investment for portfolio management services from USD 150,000 to USD 75,000 and the minimum corpus of a scheme from USD 5 million to USD 3 million. The investor minimums for AIF-type schemes were not cut: USD 150,000 for restricted schemes and USD 250,000 for venture capital schemes. Retail schemes have no regulatory minimum per investor, so each fund sets its own.
Finance Act 2025 also brought IFSC retail schemes and ETFs within the tax-neutral relocation regime under section 47(viiad), so investors in an offshore fund that relocates into one of them are not taxed on the swap of units, provided the conditions are met and the relocation happens by 31 March 2030.
For NRIs living in countries that do not tax their investment income, the Indian exemptions available to non-residents in the IFSC can keep the overall tax cost low, though not every type of IFSC income is exempt in India.
Investment Options Available in GIFT City
GIFT City Mutual Funds and Feeder Funds
Asset management companies offer mutual funds denominated in foreign currencies. Feeder funds invest in corresponding mainland India schemes, giving you Indian equity exposure with IFSC tax benefits.
Under IFSCA's Fund Management Regulations 2025, retail schemes have no regulatory minimum investment per investor, so each scheme sets its own minimum in its offer document. A close-ended retail scheme must have a tenure of at least three years.
These funds are regulated by IFSCA. If you live in the US, being able to invest is not the same as being tax-efficient: pooled IFSC funds are likely to be PFICs for US tax purposes, as explained in the home-country tax section below.
Alternative Investment Funds (AIFs)
AIF-type funds in the IFSC are launched as venture capital schemes or restricted (non-retail) schemes under IFSCA's Fund Management Regulations 2025. A restricted scheme is filed as a Category I, II or III AIF depending on its strategy, with Category III covering diverse or complex trading strategies, including derivatives. Schemes can be set up as a company, LLP or trust.
The minimum investment is USD 150,000 for a restricted scheme and USD 250,000 for a venture capital scheme, and accredited investors are exempt from these thresholds. The USD 75,000 figure often quoted applies to portfolio management services, not AIFs. A venture capital scheme must be close-ended with a tenure of at least three years, and a close-ended restricted scheme must have a tenure of at least one year. Certain income of a Category III fund in the IFSC, to the extent attributable to units held by non-residents, is exempt in the fund's hands under section 10(4D) of the Income-tax Act, 1961.
Offshore Banking and Foreign Currency Deposits
IFSCA's Banking Regulations allow an individual to open a current, savings or term deposit account in specified foreign currencies with an IFSC Banking Unit. Cash transactions are not permitted in these accounts. Interest rates, tenures and minimum balances are set by each bank, so compare offers directly.
Interest on a deposit with an IBU (an Offshore Banking Unit in tax law) is exempt in India for non-residents and for residents who are not ordinarily resident (RNOR), under section 10(15)(viii) of the Income-tax Act, 1961, carried into the Income-tax Act, 2025 as Schedule IV, serial 8. Once you become ordinarily resident, the exemption no longer applies.
Global Equities and Trading Options
NSE IFSC and India INX are the stock exchanges in GIFT IFSC. Trades on them settled in foreign currency do not attract Securities Transaction Tax.
For non-residents, transfers of bonds, Global Depository Receipts, rupee-denominated bonds of Indian companies and derivatives on an IFSC stock exchange, where the consideration is paid in foreign currency, are not treated as taxable transfers for capital gains under section 47(viiab) of the Income-tax Act, 1961.
REITs and Real Estate
IFSCA's Fund Management Regulations 2025 provide for Investment Trusts (REITs and InvITs) in the IFSC, which give real estate or infrastructure exposure without owning property directly. Privately placed Investment Trusts require USD 150,000 or more per investor, unless you are an accredited investor.
Physical property in GIFT City is a regular Indian real estate purchase, so it falls under the general FEMA rules for NRIs buying property rather than the IFSC investment regime. Check RERA registration and the developer's track record before investing, and follow the FEMA rules for NRIs.
Tax Benefits That Make GIFT City Attractive
Income Tax Exemptions
Businesses set up as IFSC units get a 100% deduction on eligible business income for 20 consecutive years out of 25, up from 10 out of 15, and that business income is taxed at 15% after the deduction period. This applies from 1 April 2026 under section 147 of the Income-tax Act, 2025. It benefits the fund managers and banks operating in GIFT City; your own tax as an investor depends on the specific exemptions below. For investors, Finance Act 2025 brought IFSC retail schemes and ETFs within the specified fund definition used for the section 10(4D) exemption, alongside Category III AIFs, for income attributable to units held by non-residents.
For several IFSC concessions, including fund relocations, units must commence operations by 31 March 2030, the date set by Finance Act 2025.
No Securities Transaction Tax on IFSC Exchange Trades
Transactions on a recognised stock exchange in the IFSC where the consideration is paid in foreign currency do not attract Securities Transaction Tax. For active traders, this removes a cost that applies to equity trades on mainland Indian exchanges.
Dividend and Interest Income Advantages
Dividends paid to non-residents by a company that is an IFSC unit are taxed at 10% under section 115A, compared with the general 20% rate for non-residents. Interest on IBU deposits is exempt for non-residents and RNORs, as explained above. Dividends are therefore not tax-free in India, even if your country of residence does not tax them.
Section 10(4E) exempts a non-resident's income from transferring non-deliverable forward contracts, offshore derivative instruments or over-the-counter derivatives entered into with an IFSC Banking Unit, subject to prescribed conditions, and Finance Act 2025 extended it to contracts entered into with FPIs that are IFSC units. Derivatives traded on an IFSC stock exchange are covered by section 47(viiab) instead. Outside these cases, derivative income is not automatically tax-free.
Finance Act 2025 Changes for IFSC Investors
Finance Act 2025 made three changes that matter to investors. IFSC retail schemes and ETFs now count as resultant funds under section 47(viiad), so an offshore fund relocating into one is a tax-neutral transaction for its investors if the conditions are met. The sunset date for relocations and for several IFSC unit concessions moved to 31 March 2030. And the section 10(4E) derivatives exemption was extended as described above.
The same Finance Act removed the premium cap for life insurance policies issued by an IFSC insurance office, so the sum received under such a policy is exempt regardless of the premium paid. For a fuller breakdown of how each type of GIFT City income is taxed, read our guide to GIFT City tax benefits for NRIs.
How NRIs Can Invest in GIFT City (Step-by-Step Process)
Step 1: Verify Eligibility and Choose Investment Type
Confirm your NRI, OCI, or PIO status. Resident Indians can also invest in GIFT City, but only within the Liberalised Remittance Scheme limit of USD 250,000 per financial year. That limit applies to residents, not to NRIs investing their overseas money.
Decide your investment avenue based on goals. Retail schemes set their own minimums. AIF-type restricted schemes need USD 150,000 and venture capital schemes USD 250,000, unless you are an accredited investor. Portfolio management services need USD 75,000. Foreign currency deposits offer fixed income, and Investment Trusts provide real estate or infrastructure exposure.
Step 2: Complete KYC and Documentation
Each bank or fund manager runs its own KYC. Expect to submit your passport, PAN card (where required), overseas address proof, and visa or work permit. Ask whether remote or video KYC is available before you start.
Step 3: Open Foreign Currency Account
Select an IFSC Banking Unit and open a savings, current or term deposit account in your preferred foreign currency. Timelines depend on the bank and on how complete your documents are.
Minimum balances and fixed deposit amounts are set by each bank, so confirm them before you transfer funds.
Step 4: Fund Your Account and Select Investments
Transfer funds from overseas via SWIFT, or from your NRE or NRO accounts, where NRO balances are subject to repatriation limits.
Once funded, invest directly with fund houses for mutual funds, approach fund managers for AIFs, or open demat accounts for equity trading.
Step 5: Understand Repatriation and Tax Reporting
Money you hold with IFSC entities is in foreign currency and sits outside the NRO framework, so the NRO repatriation limit does not apply to it. Keep investment confirmations and bank statements for tax filing in your country of residence.
For NRI repatriation of funds, proper documentation is essential. Understanding DTAA benefits helps determine which country has taxing rights.
Required Documents and Minimum Investment Requirements
Essential Documents
Your checklist typically includes a valid passport, PAN card, recent overseas address proof (such as a utility bill or bank statement), and a residence visa or permit showing your NRI status. Exact requirements vary by bank.
If your bank offers video KYC, keep the original documents ready to show on camera.
Minimum Investment Table
| Investment Product | Minimum Investment | Lock-in Period | Best For |
|---|---|---|---|
| GIFT City Retail Schemes (Mutual Funds) | Set by each scheme | None for open-ended; 3-year minimum tenure if close-ended | Retail investors |
| AIF-type Schemes | USD 150,000 (restricted); USD 250,000 (venture capital) | Minimum tenure 1 year (close-ended restricted); 3 years (venture capital) | HNIs |
| Portfolio Management Services | USD 75,000 | Per agreement | HNIs wanting a managed portfolio |
| Foreign Currency Deposits | Set by each bank | Set by each bank | Conservative investors |
| Global Equities Trading | No minimum | None | Active traders |
| Investment Trusts (REITs/InvITs) | USD 150,000 or more if privately placed | Depends on structure | Real estate exposure |
| Physical Real Estate | Varies by property | Long term | Long term investors |
Accredited investors are exempt from the AIF-type and portfolio management minimums above. For retail schemes, check the minimum in each scheme's offer document.
2025 Regulatory Updates and Changes
Finance Act 2025 and Finance Act 2026
Finance Act 2025 extended the sunset date for commencing IFSC operations, and for fund relocations, to 31 March 2030, and brought IFSC retail schemes and ETFs into the tax-neutral relocation regime. Finance Act 2026 then lengthened the IFSC unit tax holiday to 20 consecutive years out of 25 from 1 April 2026. Both changes support the supply of IFSC funds; the tax position of your own investment is covered in the tax section above.
SEBI's 100% NRI Ownership Rule
SEBI's June 2024 circular allows NRIs, OCIs and resident Indian individuals together to contribute up to 100% of the corpus of SEBI-registered FPIs based in an IFSC, up from below 50% in aggregate (and below 25% for any single individual) earlier, provided the FPI meets the disclosure or structural conditions SEBI sets.
These funds can invest in Indian capital markets, providing a regulated avenue for NRIs to pool family wealth through professionally managed structures. Family offices particularly benefit from this flexibility.
Enhanced Access and Reduced Barriers
IFSCA's Fund Management Regulations 2025 reduced the minimum scheme corpus from USD 5 million to USD 3 million. Open-ended schemes can start investing once they have USD 1 million and must reach USD 3 million within 12 months.
For individual investors, the change that matters is portfolio management services: the minimum fell from USD 150,000 to USD 75,000. The investor minimums for restricted schemes (USD 150,000) and venture capital schemes (USD 250,000) were not reduced. IFSCA also dropped the need for its prior approval when fund managers appoint Key Managerial Personnel.
Understanding Tax Implications in Your Home Country
USA-based NRIs
For US tax purposes, a foreign corporation is a PFIC (Passive Foreign Investment Company) if 75% or more of its gross income is passive or at least 50% of its assets produce passive income, a test most pooled GIFT City funds are likely to meet. You must generally file Form 8621 each year for each PFIC. Without an election, gains and excess distributions are taxed under the section 1291 rules with an interest charge, while a mark-to-market election taxes unrealized gains each year. This can outweigh the Indian tax benefits. Our comparison of PMS, GIFT City funds and FCNR deposits for PFIC exposure covers the alternatives.
FBAR reporting applies if the aggregate value of your foreign financial accounts exceeded $10,000 at any time during the calendar year. Consult a US-India tax advisor before investing. Some US-based NRIs prefer direct equity or US-based India ETFs despite lower tax efficiency.
UAE and GCC-based NRIs
If you live in a Gulf country that does not tax your personal investment income, the Indian side is what matters. Some GIFT City income is exempt in India for non-residents, such as interest on IBU deposits, but dividends from IFSC units are taxed at 10% and not every gain is exempt. Check each income type before assuming a zero overall tax cost.
Holding investments in USD can suit NRIs whose earnings and spending are in USD or USD-linked currencies.
Singapore and Other Tax Residents
Countries such as Singapore, Malaysia and Thailand have their own rules on whether foreign-sourced income is taxed and when, for example on remittance. Those rules change, so confirm the current position for your country with a local tax adviser before investing.
DTAA Benefits
Where an IFSC exemption applies, there is no Indian tax to relieve. Where Indian tax does apply, such as on dividends, the Double Taxation Avoidance Agreement between India and your country of residence may give a lower rate in India or a credit at home.
To claim treaty relief in India, you need a Tax Residency Certificate (TRC) from the tax authorities of your country of residence.
Risks and Challenges to Consider
High Minimum Investment Barriers
AIF-type restricted schemes need at least USD 150,000 per investor and venture capital schemes USD 250,000, unless you are an accredited investor. Spreading money across several such funds multiplies that commitment.
Retail schemes, bank deposits and exchange-traded products are the lower-threshold entry points.
Policy and Regulatory Uncertainty
The IFSC regulatory framework is still evolving. IFSCA replaced its 2022 fund management regulations with a new set in 2025, and the IFSC tax concessions were amended in both Finance Act 2025 and Finance Act 2026. Several concessions are tied to a 31 March 2030 sunset date for commencing operations, and there is no guarantee of what follows.
Currency Fluctuation Risks
GIFT City investments in USD benefit dollar-earning NRIs but create currency risk for others. For example, an NRI earning in AUD takes on AUD-USD exchange risk.
Rupee depreciation protection works both ways. If you're returning to India as a resident and dollar weakens significantly, your rupee returns diminish. Hedging currency risk adds costs.
Liquidity and Market Volatility
Close-ended AIF-type schemes tie up capital for their tenure: at least three years for venture capital schemes and at least one year for close-ended restricted schemes, with possible extensions. Open-ended schemes may charge exit loads, so read the offer document.
Real estate is inherently illiquid, taking months to sell. Global equities and derivatives carry high volatility. Only invest capital you can afford to lose in high-risk products.
Balance your portfolio between liquid (mutual funds, trading) and illiquid (AIFs, real estate) investments based on your needs and emergency fund requirements.
Conclusion
GIFT City gives NRIs a way to invest in foreign currency through an Indian jurisdiction regulated by IFSCA. The Indian tax benefits are real but specific: interest on IBU deposits is exempt for non-residents and RNORs, Securities Transaction Tax does not apply to foreign-currency trades on IFSC exchanges, certain gains on IFSC exchange trades and specified derivatives are exempt, and dividends from IFSC units are taxed at 10%. Minimums depend on the product: USD 75,000 for portfolio management services, USD 150,000 for restricted schemes, USD 250,000 for venture capital schemes, and scheme-specific amounts for retail funds.
Approach with realistic expectations. High minimums, evolving regulations, currency risks, and market volatility require careful consideration. GIFT City works best as part of a diversified portfolio. Assess whether it aligns with your goals, risk tolerance, and tax situation. Consider starting small through mutual funds or deposits before committing larger capital.
Frequently asked questions
Can US-based NRIs invest in GIFT City funds without PFIC complications?
Usually not. A pooled GIFT City fund is likely to be a PFIC for US tax purposes if it meets the IRS income test (75% or more passive income) or asset test (at least 50% passive assets), which most investment funds do. You would generally file Form 8621 each year, and unless you make a QEF or mark-to-market election, gains are taxed under the excess distribution rules with an interest charge. The fund's US tax classification depends on its structure, so confirm it with a US tax adviser before investing. Deposits with an IFSC Banking Unit are not PFIC holdings. Our PFIC tax rules guide explains the regimes in detail.
What is the minimum investment in GIFT City for NRIs?
It depends on the product. Under IFSCA's Fund Management Regulations 2025, restricted (AIF-type) schemes require at least USD 150,000 per investor, venture capital schemes USD 250,000, and portfolio management services USD 75,000, and accredited investors are exempt from these minimums. Retail schemes have no regulatory minimum, so each scheme sets its own, and IFSC Banking Units set their own deposit minimums. The cut to USD 75,000 announced in February 2025 applies to portfolio management services, not to AIFs.
Can I repatriate my GIFT City investment returns freely to any country?
Money held with IFSC entities is in foreign currency, and under FEMA a financial institution set up in the IFSC is treated as a person resident outside India, so the NRO repatriation limit does not apply to it. Maintain proper documentation including investment confirmations, bank statements, and sale proceeds records. For investments funded from NRE or NRO accounts, repatriation rules differ. NRE funds are fully repatriable, while remittances from NRO balances are capped at USD 1 million per financial year. Direct investments from overseas into GIFT City do not pass through these accounts, though your residence country's rules still apply.
What happens to my GIFT City investments if I return to India as a resident?
Your existing GIFT City investments continue after you become resident, but the tax treatment changes. Many IFSC exemptions apply only to non-residents. While you are resident but not ordinarily resident (RNOR), interest on IBU deposits stays exempt. Once you become ordinarily resident, your worldwide income, including GIFT City returns, is taxable in India under the normal rules. Your securities, accounts, and holdings continue without needing to be sold. Inform your IFSC bank about your changed residency status for KYC and tax reporting. Review whether to realise gains while you are still non-resident, and plan your return to India holistically including GIFT City portfolio implications.
How to invest in gift city from USA?
NRIs in the USA can invest in GIFT City by opening a foreign-currency account with an IFSC Banking Unit in GIFT City. Ask the bank whether KYC can be completed remotely. You will typically need your passport, US address proof and standard NRI documents. After the account is opened, you can transfer money directly from your US bank through a SWIFT transfer. Since the account is in USD or another foreign currency, you do not need to convert your funds to INR immediately.
Once your account is funded, you can start investing in USD fixed deposits, IFSC mutual funds, global ETFs, bonds or trade through exchanges like NSE IFSC and India INX. Some NRIs also explore GIFT City based AIFs or real estate, depending on their investment goals. Check with each provider which steps can be completed remotely.
Remember that GIFT City's tax benefits are Indian. As a US tax resident you must still report your worldwide income to the IRS, and pooled GIFT City funds are likely to be PFICs, which can make them tax-inefficient for you. IBU deposits avoid the PFIC issue but still count toward FBAR and other foreign account reporting where thresholds are met.