What Are the Benefits of Investing in India Through GIFT City for NRIs?
By Chirag Jain, Director of Research and Client Relations, Northbridge Wealth (ARN-41379). Last updated: September 2026.
An NRI can invest in Indian markets in US dollars through funds set up in GIFT City, India’s International Financial Services Centre, without opening a rupee account or converting currency at the investor level. The main benefits are dollar denomination, an investor-level tax exemption on income from the fund, no Indian tax return where that is your only Indian income, and full repatriability of capital and gains. Against that, the entry tickets are high for most fund types, the product range is narrower than onshore, and the tax is not zero: it is paid inside the fund rather than by you. This post walks through both sides so you can judge the fit.
Key takeaways
- GIFT City funds accept NRI money in US dollars. No NRE or NRO account is needed at the investor level.
- The fund pays tax on Indian securities at concessional rates. Your income from the fund, and any gain on selling its units, is exempt in your hands under Section 10(23FBC).
- Where that is your only Indian income, no Indian tax return is required.
- Capital and gains are fully repatriable, without the USD 1 million annual cap that applies to the NRO route.
- The entry tickets: USD 150,000 for restricted schemes, USD 75,000 for portfolio management, and roughly USD 5,000 to 10,000 for the small number of retail schemes.
- The onshore route still works, and for regular investing it is the only practical one. Equity fund gains there are taxed at 12.5% long-term, only on gains above the ₹1.25 lakh annual exemption, with TDS deducted for NRIs on every redemption.
What is GIFT City, and why should NRIs care?
GIFT City, Gujarat International Finance Tech-City, hosts India’s International Financial Services Centre. It is physically in Gujarat but treated as an offshore jurisdiction for exchange-control purposes, with its own regulator, the IFSCA. Funds there operate under the IFSCA (Fund Management) Regulations, 2025 https://www.ifsca.gov.in/Document/Legal/press-release-notification-of-ifsca-fund-management-regulations-202519022025091920.pdf, not SEBI’s onshore rulebook.
For an NRI, the practical meaning is simple. You can buy Indian market exposure through what is legally an offshore centre, inside India, in dollars, managed by the same large Indian asset managers who run onshore funds.
How can an NRI actually invest through GIFT City?
Three vehicle types matter at the individual level.
Restricted schemes. These are the GIFT City equivalent of AIFs, raised by private placement. The minimum investment per investor is USD 150,000 (USD 250,000 for venture capital schemes). Spouses, or a parent and child, may combine as joint investors to meet the threshold.
Portfolio management services. A separately managed account in which you hold the securities directly. The minimum was cut to USD 75,000 from USD 150,000 in the 2025 regulations.
Retail schemes. The GIFT City version of a mutual fund, open to the general investing public with much lower minimums; the retail funds now available start around USD 5,000. The range is still small, and most of them invest globally rather than in India.
The process resembles investing in an international fund. You complete KYC with the IFSC entity, remit dollars from your overseas bank account, and receive units denominated in USD. There is no PIS permission, no NRE or NRO account, and no rupee conversion at your end.
How are GIFT City investments taxed for NRIs?
This is where the structure earns its keep, and where precision matters, because the common summary, “GIFT City is tax-free”, is wrong.
At the fund level. A GIFT City Category III fund is taxed at the fund level, not passed through to investors. On income from securities other than Indian company shares, and on specified securities traded on IFSC exchanges in foreign currency, the fund is exempt to the extent its units are held by non-residents, under Section 10(4D). On gains from Indian company shares, the fund pays tax at the concessional rates available to specified funds. So if the fund buys Indian equities on your behalf, tax on those gains is paid, inside the fund, before it reaches you. Separately, the fund management entity itself gets a 100% deduction on its business income for 10 of its first 15 years under Section 80LA, which shapes fee economics rather than your tax directly.
At your level. Any income you receive from a specified fund, and any gain on transferring its units, is exempt in your hands under Section 10(23FBC). No TDS is deducted from you, because there is nothing to deduct.
Filing. A non-resident whose only Indian income is exempt income of this kind is not required to file an Indian return. The Income Tax Department’s own guide to non-resident taxation sets out the conditions https://www.incometaxindia.gov.in/documents/20117/42998/Taxation-of-Non-Resident_2026-03-19_04-28-57_6dbd99_en.pdf. If you have other Indian income, rent for instance, the usual rules apply to that.
Portfolio management is different. For an IFSC PMS account, the exemption under Section 10(4G) covers income that accrues outside India, broadly foreign securities. Gains on Indian securities held in a PMS account remain taxable in the ordinary way.
Two honest qualifications. Your country of residence may tax this income anyway; the Indian exemption is only half the picture, and the DTAA between India and your country decides the rest. And these provisions have been amended in most Budgets since 2020, so confirm the current position before committing money.
How does GIFT City compare with the NRE/NRO route?
The onshore route means an NRE or NRO account, NRI KYC with each AMC, rupee-denominated units, and TDS on every redemption. For equity funds held over 12 months, long-term gains are taxed at 12.5%, only on gains above the ₹1.25 lakh annual exemption, with surcharge and cess on top; short-term gains are taxed at 20%. The AMC deducts TDS before crediting your proceeds, and you file an Indian return to recover anything deducted above your final liability. The full onshore rules are in our guide to capital gains tax on mutual funds. https://northbridgewealth.in/capital-gains-tax-mutual-funds-india-2026/ NRO repatriation is capped at USD 1 million per financial year; NRE is freely repatriable.
| Aspect | Onshore NRE/NRO route | GIFT City IFSC route |
|---|---|---|
| Currency | Rupees | US dollars |
| Accounts needed | NRE or NRO account | Overseas bank account only |
| Typical minimum | ₹100 to ₹500 per SIP | USD 150,000 restricted schemes; USD 75,000 PMS; retail from about USD 5,000 |
| Where tax is paid | By you, on redemption | Inside the fund, at concessional rates; you are exempt |
| TDS on you | Yes, every redemption | No |
| Indian tax return | Usually, to recover excess TDS | Not required where this is your only Indian income |
| Repatriation | NRE free; NRO capped at USD 1 million a year | Fully repatriable |
| Product range | Full onshore menu, SIPs | Narrow; mostly global funds at retail, India-focused at USD 150,000 |
A worked example, using our house assumption of 10% annual returns, illustrative throughout. An NRI invests USD 100,000. Onshore, at an assumed ₹95 to the dollar, that is ₹95,00,000 into an equity fund. After three years at 10% a year it is worth ₹1,26,44,500, a gain of ₹31,44,500. Long-term equity tax at 12.5% applies above the ₹1.25 lakh exemption: 12.5% of ₹30,19,500, which is ₹3,77,438 before surcharge and cess. TDS is deducted by the AMC on the gain, and the return you file settles the difference. Through GIFT City, the same USD 100,000 sits in a dollar fund. Tax on any Indian equity gains is paid inside the fund at concessional rates; your income from the fund is exempt, nothing is deducted from you, and no Indian return is filed. Whether the fund-level tax works out lower than the onshore investor-level tax depends on the fund’s holdings and the rates in force. What is certain is the administrative difference: no TDS on you, no refund to chase, no Indian filing, and returns reported in the currency you live in.
The misconception we correct most often: NRIs assume the NRE route is tax-free because the NRE account is tax-free. NRE deposit interest is exempt, yes. But mutual fund gains funded from that account are fully taxable, and TDS is deducted at redemption regardless of which account the money came from.
What are the catches nobody mentions?
The minimums shut out most of the portfolio. USD 150,000 into a single restricted scheme is a meaningful concentration even for an affluent investor, and the retail schemes that would solve that mostly invest outside India. The product menu is thin and track records are short, because the centre itself is young. Fees differ, and some structures carry costs an onshore direct-plan comparison would not. Liquidity terms vary scheme by scheme; read them. And the regulations are actively evolving, which cuts both ways: benefits have expanded almost every year, but the ground can shift.
For most NRI clients we see, the sensible frame is not either-or. The onshore route keeps flexibility and small tickets for regular investing, and how it is arranged for tax across fund types is covered in our guide to how affluent families structure investments for tax efficiency. https://northbridgewealth.in/hni-tax-efficiency-india/ A GIFT City allocation makes sense once the amounts justify the minimums and the tax position in your country of residence has been checked. Our broader approach to cross-border investing is on our Invest Global page. https://investglobal.co.in/?srsltid=AfmBOorKuSUUrKjwpcGjF0RgWe03L_LnUYOWgj4JIq0W6x7q9hd8_wGB
How we help with this
Northbridge Wealth is a registered mutual fund and SIF distributor, drawing on 26 years in Indian markets, and we distribute GIFT City IFSC products alongside the onshore range. We help NRI clients understand how the two routes work together, assess whether an IFSC allocation fits their broader portfolio and tax position, choose products aligned to their goals, and handle the execution and servicing that follows, in one place.
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Frequently asked questions
Do I need an NRE or NRO account to invest through GIFT City? No. You remit US dollars directly from your overseas bank account to the IFSC fund. Rupee accounts are only needed for the onshore route.
Is GIFT City investing tax-free for NRIs? Not quite. The fund pays tax on Indian securities at concessional rates, and is exempt on most other income attributable to non-resident investors. Your income from the fund and any gain on its units is exempt in your hands under Section 10(23FBC), so nothing is deducted from you and no Indian return is needed where that is your only Indian income.
Can NRIs based in the US or Canada invest in GIFT City funds? Acceptance is decided fund by fund, and US persons in particular face home-country reporting rules that apply regardless of where the fund sits. Confirm both with the fund before investing. [VERIFY at publish]
What is the minimum investment? USD 150,000 per investor for restricted schemes (USD 250,000 for venture capital schemes), USD 75,000 for portfolio management, and around USD 5,000 to 10,000 for retail schemes, of which few exist and most invest globally.
Will I pay tax in my country of residence on GIFT City gains? Possibly. The Indian exemption does not bind your home tax authority. The India DTAA with your country of residence, and its local rules, decide the final position. Take advice where you live.
Can I repatriate everything? Yes. IFSC investments are fully repatriable, since the money never entered the domestic rupee system at your level. The NRO route is capped at USD 1 million per financial year.
Is the onshore mutual fund route now a bad idea for NRIs? No. It offers the full product menu, small ticket sizes, and SIP discipline. Its costs are TDS on every redemption, equity long-term gains at 12.5% above the ₹1.25 lakh annual exemption, and an Indian filing to recover excess deductions.
Disclaimer: Northbridge Wealth (Suskan Finmaart Private Limited) is an AMFI-registered Mutual Fund Distributor (ARN-41379). This article is for information only and is not investment, tax, or legal advice. Tax rates and rules are as understood at the time of writing and may change; treatment depends on your individual circumstances, including your country of residence. Please verify current rules and consult a tax professional before acting. Mutual fund and market investments are subject to market risks; read all scheme-related documents carefully. Please consider your own situation before investing. All figures are illustrative calculations based on stated assumptions and are not projections, forecasts, or guarantees of returns.
