Mutual Fund Opportunities in GIFT City for NRIs and OCIs

Mutual Fund Opportunities in GIFT City for NRIs and OCIs:

Introduction

The Global Financial Hub at GIFT City in Gandhinagar, Gujarat, is fast emerging as a preferred investment destination for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs). With the establishment of the International Financial Services Centre (IFSC), GIFT City provides access to offshore mutual funds and alternative investment structures designed specifically to meet the needs of global investors. Among these, GIFT City mutual funds have gained significant attention, offering NRIs a tax-efficient and convenient route to diversify globally.

What Are GIFT City Mutual Funds?

GIFT City mutual funds are offshore funds launched by Asset Management Companies (AMCs) operating in IFSC under the regulation of the International Financial Services Centres Authority (IFSCA). These funds invest across:

• Global equities

• Debt instruments

• Commodities

• Derivatives

• Multi-asset strategies

By being housed within IFSC, they enjoy a globally competitive framework while remaining accessible to NRIs across geographies.

Key Benefits for NRIs

1. Regulatory Convenience

SEBI and IFSCA have simplified norms for NRI participation, ensuring smooth onboarding and investment.

2. Currency Flexibility

Investors can transact in multiple currencies like USD, GBP, SGD, AED, among others, eliminating the need for INR conversions.

3. Tax Advantages

• No Tax Deducted at Source (TDS).

• Dividend income taxed at concessional rates of around 10%.

• Capital gains on IFSC-listed shares and derivatives taxed at 9%.

• Exemption from GST on transactions.

• Applicability of Double Taxation Avoidance Agreements (DTAAs).

4. Access to Premium Investment Products

Apart from mutual funds, GIFT City also allows access to PMS (Portfolio Management Services) and AIFs (Alternative Investment Funds), covering international equities, real estate, and hedge funds.

5. Global Diversification

NRIs can build globally balanced portfolios by accessing opportunities in developed and emerging markets without the friction of local investment restrictions.

Risks and Considerations

While the advantages are notable, investors must also weigh certain risks:

• High Minimum Investment: Many AIFs and PMS require investments upwards of USD 150,000, making them more suitable for HNIs and institutions.

• Currency Exposure: Global investments are inherently subject to exchange rate fluctuations.

• Market Volatility: International assets may carry higher volatility compared to domestic investments.

• Limited Retail Orientation: Current structures are designed more for sophisticated investors than retail participants.

Recent Developments at GIFT City

• The ecosystem now hosts 177 fund management entities and over 270 funds, with total assets under management (AUM) of around USD 23.5 billion, projected to exceed USD 100 billion by 2030.

• Launch of the Aikyam India Discovery Fund, a Category III AIF domiciled in GIFT City, which provides global investors a tax-efficient route to Indian equities.

• SEBI clarified that foreign funds in GIFT City can be fully funded by NRIs, enhancing participation scope.

• RBI expanded the permissible uses of foreign currency accounts in GIFT City, making the hub more versatile for NRIs.

Conclusion

For NRIs and OCIs, GIFT City mutual funds represent a unique opportunity to combine global diversification, tax efficiency, and regulatory convenience. While more suitable for high-net-worth investors due to minimum investment requirements, the platform is expected to evolve further, opening more retail-friendly avenues in the coming years. With robust growth and strong government support, GIFT City is steadily positioning itself as a gateway for NRIs to participate in international financial markets with confidence.

Disclaimer

Mutual fund investments are subject to market risks, including possible loss of principal. Please read all scheme-related documents carefully before investing. Past performance is not indicative of future results. Currency fluctuations, global economic conditions, and regulatory changes may impact investment outcomes. NRIs are also advised to consider tax obligations in their country of residence.