The Gujarat International Finance Tech (GIFT) city is a state-of-the-art business hub established to attract investments from Indians living abroad.GIFT City’s International Financial Services Centre (IFSC) offers various benefits to NRIs as transactions are carried out in foreign currencies, eliminating the hassle of currency conversion. The goal is to create a welcoming place where India-centric trading that’s moved to Dubai, Mauritius or Singapore can return home.
GIFT City also provides unique opportunities not only for NRIsbut also for Foreign Investors to diversify their portfolios and capitalise on India’s growing economy. It offers several benefits, such as tax exemptions, ease of doing business, world-class infrastructure, and more, ensuring a seamless investment experience for NRIs. The GIFT City promises to offer a wide range of services like capital market transactions, banking services, offshore asset management, and other financial transactions.
Challenges faced by NRI Investors in India
Investing in India can be rewarding for NRIs, but it also comes with several challenges. These include:
1. Tax burden
When investing in India, NRIs often face a significant tax burden on various returns, such as interest income, dividends, and capital gains. This can reduce their overall investment returns, making it crucial to understand tax implications before investing.
2. Repatriation of funds
Another challenge NRIs face when investing in India is repatriating funds back to their home countries. This can be a complicated and time-consuming process, with extensive documentation and regulatory requirements, which might hold back NRIs from investing in India.
3. Limited investments
When it comes to investing in the Indian market, NRIs need to follow strict regulations that can restrict their options. For example, some rules limit the combined holdings of NRIs and Overseas Citizens of India (OCIs) in global funds to below 50%. This can limit diversification opportunities, making it difficult for NRIs to maximise their returns.
Investment Opportunities in GIFT City for NRIs
GIFT City helps NRIs overcome investment challenges in India and explore various investment avenues. These include:
1. Offshore banking and deposits
GIFT City comprises several financial institutions that provide seamless offshore banking services, including foreign currency term deposits. NRIs can use these services to invest in multiple currencies, diversify their portfolios, and earn competitive interest rates. Moreover, GIFT City’s offshore banking framework offers easy fund transfers and higher interest rates than traditional banking options.
2. Global equities and bonds
Through GIFT City’s IFSC exchange, NRIs and OCIs can invest in international markets through global equities and bonds. This allows them to explore diversification opportunities beyond the Indian market and leverage the growth potential of global companies. By investing in global equities and bonds, NRIs can optimise their portfolios and enhance returns.
3. Alternative investment funds (AIFs)
GIFT City allows NRIs to invest in a host of AIFs with exposure to different asset classes, including equities, debt, private equity, real estate, and venture capital investments. These are ideal for investors looking to invest in niche markets for potentially higher returns. NRIs can select from a variety of AIFs according to their investment horizon and risk tolerance.
4. Real estate investment trusts (REITs)
The IFSC exchange in Gift City has listed REITs for NRIs looking to invest in the Indian real estate market. They provide a cost-effective way to invest in real estate without significant capital investment. NRIs can simply purchase units of a REIT to diversify their portfolios across commercial properties, residential developments, and retail spaces.
5. Taxation
Taxation plays a major role in business and GIFT City has some amazing text benefits for the investors. Reducing and eliminating taxes is a great way to attack investors. It is A free trade zone with various tax incentives enabling flow of finance, financial products and services across borders.
Apart from the benefits mentioned above, There are many other benefits like
- No stamp duty for transactions carried out in the IFSC
- Exempt from Securities Transaction Tax for trades done on IFSC exchanges
- Exempt from Commodities Transaction Tax for transactions conducted on IFSC exchanges
- Proximity to large Indian market and an enabling ecosystem
- Tax holidays or exemptions for expatriates working in IFSC for a specified duration
and much more.
The data mentioned above may change as per government policies and related authorities. Please revert the relevant portal for latest information on the topic.
To sum up
Investing in India presents unique opportunities for NRIs. However, it also comes with significant challenges, such as complex tax regulations, repatriation issues, and limitations on investment options. GIFT City helps NRIs overcome these obstacles and invest across different instruments to diversify their portfolios, minimise risk, and maximise returns.
If you’re new to investing in the Indian market and looking for professional guidance, consider Tata Capital Wealth. Our experts review your investment horizon, goals, and risk appetite to help you create a well-balanced portfolio that aligns with your needs.
14 November 2024
4 mins read
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