"The best investment you can make is an investment in yourself. The more you learn, the more you'll earn." – Warren Buffett
Investing in GIFT City (Gujarat International Finance Tec-City) offers NRIs (Non-Resident Indians) a unique and lucrative opportunity to diversify their portfolios, benefit from India's economic growth, and take advantage of significant tax benefits. This guidance note outlines the current investment trends, available options, key measures taken to attract investors, and the specific benefits for NRIs.
Current Trends in NRI Funds Flowing into India
Rationale: The steady increase in NRI deposits in India underscores the confidence and trust NRIs have in the country's economic stability and growth prospects.
- Confidence in Economic Stability: The consistent inflow of NRI funds highlights their belief in India's robust economic framework.
- Currency Preference: NRIs generally prefer investing in their resident country's currency or USD, which is globally accepted.
- Investment Platform: GIFT IFSC (International Financial Services Centre) offers one of the best platforms for NRIs to leverage these trends and invest with ease.
Investment Options for NRIs in GIFT City
NRIs can invest in GIFT City through a variety of options, each catering to different risk appetites and financial goals, without the need to visit India.
| Investment Options | Description |
|---|---|
| Alternative Investment Funds (AIF) | Outperform traditional indices, offering approximately 6% higher returns |
| Global Equity Market | Access to international growth opportunities |
| Bonds | Stable income with lower risk |
| Term Deposits | Safe investment with assured returns |
| REIT (Real Estate Investment Trust) | Exposure to the real estate market |
| Equity in Startups | Potential for high returns, albeit with higher risk |
Digital Onboarding: Investment processes and KYC are completed online, making it convenient for NRIs.
Fund Source: Investments must come from an offshore bank account or an NRE account in India.
Minimum Investment Requirement
Rationale: A clear minimum investment requirement ensures that investors are serious and the fund corpus is substantial.
- USD 1.5 million: The threshold set by a recent circular ensures significant investment, promoting stable and substantial fund management.
Measures Taken by IFSC to Attract Investors
Rationale: These measures are designed to simplify investment processes, ensure regulatory compliance, and provide tax advantages.
- Minimum Corpus Requirement: Ensures substantial fund size, enhancing fund performance.
- Income Classification: Streamlines tax processes and benefits investors.
- Special Tax Regime for AIF: Encourages investment in structured and managed funds.
- Common Payment Gateway: Facilitates seamless currency transactions from any country.
- AML Compliance: Ensures adherence to international anti-money laundering standards.
Expected Rate of Return
Rationale: The higher expected returns in GIFT City are due to tax incentives and professional fund management under the oversight of IFSCA.
- 100% Tax Deduction: Portfolio managers benefit from a 100% tax deduction on their income for ten years, enabling better fund performance and higher returns for investors.
Tax Filing for NRIs
Rationale: Simplified tax requirements make investing more attractive and less cumbersome for NRIs.
- No PAN Requirement: Simplifies the investment process.
- Taxation Handled by Fund Houses: Ensures compliance and convenience, with TDS deducted at appropriate rates.
Other Benefits for NRIs
Rationale: Additional banking and financial benefits enhance the attractiveness of GIFT City as an investment hub.
- Global Current Account: No minimum balance required, though it does not earn interest.
- Savings Account: Provides interest on deposits.
- Term Deposits: Flexible lock-in period of just 7 days.
- Loans Against Deposits: Access to loans in foreign currency, providing liquidity without affecting investments.
Favorable Taxation
Rationale: Favorable tax rates and exemptions make GIFT City a lucrative investment destination.
| Income Type | Tax Rate |
|---|---|
| Dividend Income | 10% plus surcharge and cess |
| Interest Income (IFSC units) | Not taxable |
| Interest on Long Term Bonds (before 01/07/2023) | 4% |
| Interest on Long Term Bonds (after 01/07/2023) | 9% |
| Transfer of Specified Securities | Not taxable as capital gain |
| Surcharge and Cess | Not applicable for certain specified funds |
Conclusion
GIFT City stands out as a prime investment destination for NRIs, offering advanced infrastructure, strategic location, regulatory benefits, and strong government support. The potential for significant returns is high, making it a wise choice for NRIs looking to diversify their portfolio and tap into India’s growing economic landscape. Exploring investments in GIFT City is not only financially rewarding but also strategically sound.
