Every year, more Non-Resident Indians look at India’s growth story and wonder how to participate in it without wading through unfamiliar paperwork, tax filings, or banking hurdles back home. Ashutosh Financial Services has long believed that good investment decisions start with good information, which is why the firm regularly brings together practitioners and experts to walk NRIs through opportunities that are often talked about but rarely explained in plain terms. The webinar held on 11th May 2024, titled “GIFT CITY: An Emerging NRI Investment Opportunity,” was organised in that same spirit, aimed squarely at NRIs who wanted to understand what GIFT City actually offers them.
The session was led by Daxesh Kothari and CA Rajit Kothari, and included a panel discussion featuring Manas Kumar of HDFC Asset Management Company, Ashish Mohnot of HDFC AMC International (IFSC) Limited, Vaibhav Shah of Mirae Asset Investment Managers India, and Ritesh Pathak of Motilal Oswal Asset Management Company. Given how many NRIs hold assets scattered across multiple countries and want simpler, more tax-efficient ways to invest in India, a session combining technical explanation with practitioner experience was particularly relevant for this audience.
The discussion began with the fundamentals of GIFT City itself. Gujarat International Finance Tec-City, located in Gandhinagar, has been notified as India’s first International Financial Services Centre, or IFSC. What makes this zone distinctive is its legal treatment: a unit operating within the IFSC is considered a person resident outside India under the Foreign Exchange Management Act, conducts business in foreign currency, and is not subject to India’s usual FEMA regulations. At the same time, other Indian laws, including the Income Tax Act, the Companies Act, and various trust and contract laws, continue to apply. This dual status is what allows GIFT City to function almost like an offshore financial hub while remaining firmly within India’s legal and regulatory framework. The speakers also clarified that GIFT City’s business platform is structured specifically for financial services such as asset management, banking, capital markets, insurance, and aircraft leasing, rather than manufacturing or trading activities, and that oversight sits with the International Financial Services Centre Authority, which draws its powers from India’s existing financial regulators: SEBI, RBI, PFRDA, and IRDA.
To help attendees understand why GIFT City matters for cross-border investing, the session touched on two basic principles of international taxation. Under the residence rule, a country can tax an individual on their worldwide income simply because they live or are domiciled there. Under the source rule, taxation happens in the country where the income is actually generated, regardless of where the investor resides. Because these two principles can overlap and lead to the same income being taxed twice, countries sign Double Taxation Avoidance Agreements, or DTAAs, to prevent this and to encourage cross-border investment. India currently has DTAAs with more than 94 countries, including the US, the UK, the UAE, Canada, Australia, Singapore, and several African nations, which matters directly to NRIs deciding where and how to invest.
The core of the session explained two practical routes through which NRIs can access Indian markets via GIFT City, both structured as Category III Alternative Investment Funds. The first route allows investment in units of Indian mutual funds through USD-denominated contributions, with no Indian tax at either the fund or investor level under Section 10(4) of the Income Tax Act, and a minimum investment of USD 150,000. The second route allows exposure to Indian equity shares or derivative strategies, where derivative income is similarly tax-exempt, while capital gains from equity shares attract 10% long-term or 15% short-term tax, with the same USD 150,000 minimum. Both routes were described as removing common friction points for NRIs, since they eliminate the need for a demat or bank account in India, involve simplified onboarding, and settle everything in US dollars.
The speakers were also candid about who these structures actually suit. They work best for NRIs based in jurisdictions that either don’t tax foreign investment income or face compliance challenges under domestic law, and for those who would rather avoid the ongoing burden of filing Indian tax returns and managing local accounts. Investors seeking derivative exposure specifically were pointed toward the second route, since it offers structured access to strategies not otherwise available through simpler routes.
Sessions like this reflect a simple idea: financial decisions made with clarity tend to hold up better than those made in a hurry or on hearsay. Ashutosh Financial Services will continue hosting conversations of this kind, aimed at helping NRIs make sense of evolving opportunities like GIFT City with the depth and accuracy the subject deserves.
