GIFT City is emerging as a new financial hub in India and is slowly becoming a gateway for global investing. From international mutual funds to alternative investment products, investors here get access to a range of global investment products. This is making it increasingly relevant for individual investors, not just financial institutions and HNIs.
To short – GIFT City is India’s international financial hub (an IFSC located in Gujarat) which enables Indian investors to gain access to US stocks, global funds, and other foreign investment products via India-based platforms that are regulated by the IFSCA—thus providing an alternative way of investing overseas directly.
In this article, we will understand what GIFT City is, how GIFT City operates, how investments are made through GIFT City, and most importantly, why a regular Indian investor should even care. Let’s start.
What is GIFT City?
GIFT City full form is Gujarat International Finance Tec-City. It is India’s first International Financial Services Centre (IFSC), located near Gandhinagar, Gujarat.
Why was GIFT City Created?
India’s traditional financial system is largely designed around domestic transactions. When businesses in India had to access the global market to raise capital, they had to work with financial centres and institutions located outside India.
This made cross-border transactions complex and involved additional intermediaries. GIFT City was created to address this gap and bring more international financial activity within India. Just as Dubai and Singapore have their own international financial hubs.
For example, if an Indian company wants to raise capital through dollar-denominated bonds, earlier they had to approach foreign banks. Now, they can do so by working with banks operating in GIFT City.
Similarly, GIFT IFSC can provide Indian investors with access to certain global investment products through an India-based financial ecosystem.
How Does GIFT City Work?
GIFT IFSC provides a framework for banking, investment, fund management, insurance, and other financial services, all geared to international transactions. The broader aim is to bring more global financial activity to India and make it easier for businesses, institutions, and investors to access international markets from within the country.
These activities are regulated by the International Financial Services Centres Authority (IFSCA), which oversees financial services operating within the IFSC.
What is GIFT IFSCA?
International Financial Services Centres Authority (IFSCA) is the unified regulator for financial services in GIFT IFSC. It regulates all the financial activities and services operating in the IFSC.
In simple words, GIFT City is the financial hub, while IFSCA is the regulator that sets and oversees the rules for financial activities within the IFSC.
What Can Retail Investors Invest in Through GIFT City?
GIFT City provides access to a range of investment opportunities beyond the Indian stock market, including:
- Investing in US stocks and global equities
- Investing in international mutual funds
- Access to global ETFs and other securities
- Investing in alternative investment funds (AIFs) and other professionally managed products
Note: AIFs in GIFT City usually require a much higher minimum investment than mutual funds. For example, restricted AIF schemes need about $150,000, and Portfolio Management Services (PMS) require $75,000, as set by IFSCA’s Fund Management Regulations 2025.
An investor who has already invested in Indian stocks and mutual funds can use GIFT City to geographically diversify outside India.
How Can Retail Investors Invest Through GIFT City?
To access investment products available in GIFT City, investors need to choose eligible brokers or investment platforms operating in GIFT IFSC. The right route depends on what you want to invest in.
Invest in US Stocks Directly Through LRS
Users can invest directly in US stocks on trading platforms registered with GIFT IFSC. The process typically involves opening an account with the platform, completing KYC, sending funds under LRS, and then using those funds to buy eligible US securities.
Technically, when you’re investing in US stocks from GIFT City, you are buying UDRs (Unsponsored Depository Receipts). They are not the US shares themselves. Each UDR represents a fractional or whole interest in an underlying US-listed stock, held in custody by a depository. Currently, HDFC Bank’s GIFT City branch acts as custodian, with CDSL IFSC as registrar. This structure allows investors’ UDRs to sit in their demat account with CDSL IFSC.
Quick definition: A UDR (Unsponsored Depository Receipt) is a certificate issued in India that represents ownership of a US-listed share, which is held in custody for you. This allows you to get economic exposure to a US stock without directly owning the US share.
Invest in International Mutual Funds Through GIFT City
Many asset management companies are launching international mutual funds from GIFT City. Depending on the investment strategy, the fund can focus on US stocks, global companies, or a particular investment theme.
If you are looking to geographically diversify your investment portfolio, international mutual funds may be the most suitable option. On Vested Finance, you can invest in international mutual funds like the DSP Global Equity Fund offered through GIFT City.
Before investing, look at the fund’s investment mandate, geographical exposure, top holdings, costs, minimum investment, and tax treatment.
How Much Can You Invest Through GIFT City?
Investments in foreign securities through GIFT City are facilitated through the RBI’s Liberalised Remittance Scheme framework. This allows an individual to remit up to $250,000 per financial year for permitted transactions.
The actual amount you can invest will also depend on minimum investment, eligibility requirements, and applicable LRS rules for the specific product. So before investing, you need to check both the LRS limit and the minimum investment amount at the product level.
If your LRS-remitted funds earn income, such as a dividend, and you do not reinvest it, RBI rules usually require you to bring that income back to India within 180 days of receiving it.
Taxation on Investments Made Through GIFT City
The taxation structure differs between investing directly in US stocks and investing through funds based in GIFT City.
Directly Investing in US Stocks
In India, foreign-listed equity securities are treated as unlisted securities for capital gains taxation. As a result, the holding period and tax rates differ from those applicable to listed Indian equities.
- Held for 24 months or less: Gains are treated as short-term capital gains and taxed at your income slab rate.
- Held for 24 months or more: Gains are treated as long-term capital gains and taxed at 12.5%.
On dividend income from US stocks, the US withholds tax at a flat 25% for Indian residents under the India-US tax treaty. So, a $100 dividend would leave you with $75 after US withholding tax. For investments through GIFT City, there can also be an additional custodian service fee after deducting the withholding tax.
This tax story doesn’t end here, though. The net dividend you receive is still added to your taxable income under “Income from Other Sources” and taxed again at your applicable slab rate. To avoid paying tax twice on the same income, you can claim a Foreign Tax Credit for the US withholding by filing Form 67 along with your ITR.
Indian resident investors are required each year to declare their UDRs and GIFT City fund units as foreign assets in Schedule FA of their ITR, even if they have sold them.
GIFT City Funds Tax Rate
GIFT City funds have a unique taxation structure. The entire tax liability is discharged at the fund level at the highest applicable rates. So, there is no capital gains tax for investors on redemption, and no TDS is deducted, as the tax is managed at the fund level. The current tax rate on GIFT City funds:
- Held for 24 months or less: Gains are treated as short-term capital gains and taxed at 42.74%.
- Held for 24 months or more: Gains are treated as long-term capital gains and taxed at 14.95%.
The fund pays this tax within its NAV on a daily basis. Tax on unrealised gains is provisioned at the 14.95% long-term rate, with an additional adjustment at the time of exit for any short-term gains. Investors do not pay these taxes separately. The NAV they see is already net of the tax provision, so the tax is effectively built into the fund’s NAV.
If there is any dividend income from GIFT City Funds, they are taxed at 35.88%.
4 GIFT City Benefits to Investors
For investors, the relevance of GIFT City lies in the investment opportunities and access to global markets it offers.
1.Easier Access to Global Markets
Earlier, access to international investment products was not that simple. You needed specialised brokerage accounts, overseas remittance, and additional documentation. GIFT IFSC has changed that. Access to global markets has become much easier.
2.Access to a Wider Range of Investment Products
Through GIFT IFSC, you can invest in a wider range of global financial products including international funds, ETFs and alternative investments. This gives investors more options to build a geographically diversified portfolio.
3.Another Route for International Investing
GIFT City is not a replacement for direct overseas investing, but another route to access global markets. Since GIFT IFSC operates under the regulatory framework of IFSCA, investors can access global investment products while remaining within an India-based financial ecosystem.
4.Lower Friction for Certain International Investments
GIFT IFSC has been designed specifically for international financial transactions. For an Indian investor looking to invest in global markets, GIFT IFSC potentially simplifies the process. Investors may not need to open a separate overseas brokerage account or make an overseas remittance.
However, there are limitations too. Not all financial products in GIFT IFSC have low minimum investment requirements. For example, international mutual funds may require a minimum investment of $5,000.
Moreover, while the ecosystem is growing rapidly, it is still relatively young. The range of products, depth, and liquidity may not yet match those available in established global financial markets.
GIFT City for Investors: Is It Worth Considering?
GIFT City is making global investing more accessible from India, but it is not a shortcut to better returns or a way to automatically lower taxes. Its real value lies in giving investors another route to international exposure, with access to products that may otherwise require a more complex overseas setup.
But the choice should not be between “GIFT City” and “overseas investing”. It should be about which route works better for what you want to invest in. If you want to pick individual US stocks, direct investing through LRS can offer more flexibility. If you prefer a fund-based approach, GIFT IFSC can provide access to professionally managed international products.
So, before investing, look at the investment itself: its cost, tax treatment, liquidity and underlying assets, rather than choosing it simply because it is available through GIFT City.
Frequently Asked Questions
What is GIFT IFSC and GIFT City?
GIFT City is the financial and business hub located in Gujarat, while GIFT IFSC is the International Financial Services Centre within GIFT City. GIFT IFSC is designed for all international financial activities.
Is GIFT City tax-free?
No, GIFT City is not completely tax-free for investors. Certain financial activities and products in GIFT IFSC may receive specific tax benefits. But the actual tax treatment depends on the investment and the type of income or gain.
Is GIFT City safe for investors?
GIFT IFSC operates under the regulatory framework of IFSCA, which oversees financial activities within the IFSC.
How can I invest in GIFT City?
Retail investors can invest through eligible funds, investment products, and financial platforms operating in GIFT IFSC.
Is GIFT City better than investing directly in US stocks?
Neither option is automatically better. If you want to choose individual US stocks and ETFs, direct investing through an eligible overseas platform under the LRS framework can give you more control. If you prefer a professionally managed portfolio, an international fund through GIFT IFSC may be more suitable.
In which exchange do you trade? The NSE IX and India INX.
Nearly all retail transactions in GIFT City are conducted on one of two exchanges: the NSE International Exchange (NSE IX), which is a subsidiary of the NSE and lists unit deposit receipts for some of the top US stocks (such as Apple, Amazon, and Tesla) together with GIFT Nifty derivatives, and India INX, BSE’s IFSC exchange that provides index and currency derivatives. Transactions carried out on these exchanges are exempt from the securities transaction tax (STT), the commodities transaction tax, and stamp duty — a difference from the situation with transactions on Indian domestic exchanges.
Do I need to report GIFT City investments in Schedule FA?
Yes. UDRs and GIFT City fund units count as foreign assets, so you need to report them in Schedule FA every year you own them, even if you do not sell.
Can NRIs invest through GIFT City?
Yes. GIFT City is open to NRIs and foreign investors, who can use NRE or NRO accounts, AIFs, PMS, and IFSC exchanges to invest. These investors often face fewer restrictions than resident Indians under LRS. This guide mainly covers the resident Indian investor route.
What are the risks of investing through GIFT City?
The typical investment risks, such as market, currency, and product-specific risks, apply here just as they do outside GIFT City. Since the ecosystem is still new, some products and exchanges may have less liquidity compared to established global markets.
