Imagine you are starting a journey. No matter where your destination lies, you need the right path to get there. In the same way, stepping into the global investment market also requires the right route. One such path is GIFT City Funds.
In this blog, you will find clear answers to your questions about GIFT City Funds – what they are, their benefits, and how to invest in them. So, shall we begin?
What Are GIFT City Funds?
GIFT City Funds are mutual funds launched from the Gujarat International Finance Tec-City (GIFT City). The International Financial Services Centre Authority (IFSCA) regulates these funds.
These funds operate as offshore-structured funds. This means GIFT City Funds allow non-resident Indians (NRIs) and Overseas Citizens of India (OCIs) to invest globally. For example, investors can put money into equities, bonds, and other assets. Moreover, they can transact in multiple currencies. As a result, investors get seamless access to international markets.
Features and Benefits of GIFT City Funds
What are the features and benefits of this unique path? What makes this path worth taking? Let’s see.
- Global Exposure: You will get access to international equity and bond markets. Additionally, professional fund managers handle the investments. This way, you can benefit from global opportunities without managing them directly.
- Currency Flexibility: You can transact in multiple currencies, such as USD or EUR. This reduces the hassle of currency conversion. As a result, cross-border investments become easier and smoother.
- Robust Regulation: These funds operate under IFSCA rules. This ensures strong investor protection. Moreover, the regulations align with global best practices, giving you greater confidence as an investor.
- Streamlined Investing: These funds make repatriation easy and without restrictions. As a result, NRIs can invest smoothly without worrying about rupee conversion hassles.
- Tax Advantages: These funds are free from TDS and exempt from GST. Moreover, they offer favorable capital gains treatment, which can enhance overall returns.
Who Can Invest and How Much?
Who can take this path and reach their ideal investment destination?
- Eligible Investors: NRIs, OCIs, and foreign investors can participate in GIFT City funds. Additionally, certain high-net-worth individuals and institutions may also qualify.
- Minimum Investment: The entry point is usually around USD 150,000. So it is ideal for investors with sizable portfolios.
How Can You Invest?
Once you have decided to take this path, the next step is choosing the right entry point. How can you invest?
You can invest in GIFT City funds in two main ways.
1) Direct via AMC
First, you can board directly through the asset management company’s (AMC) International Financial Services Centre (IFSC) branch. Many AMCs allow you to complete the process online, making it convenient and paperless.
2) Through Banks or Advisors
Second, you can travel with an experienced guide. For that, you approach NRI-focused banks or licensed financial advisors. These intermediaries not only provide access to the funds but also guide you on compliance, documentation, and portfolio selection. This will ensure a smooth journey from start to finish.
Moreover, they can help you choose the right fund based on your goals, risk tolerance, and currency preferences. This flexibility ensures that, whether you are an expert or prefer assistance, you can easily enter the global investment market through GIFT City.
Risks to Consider
Every journey has its hurdles, and investing in GIFT City Funds is no different. So, what risks should you watch out for on this investment path?
High Entry Barrier
The minimum investment amount for many GIFT City funds is relatively high – starting around USD 150,000. This can limit access for smaller investors and make these funds more suitable for those with larger portfolios.
Liquidity Constraints
Unlike regular mutual funds with daily redemption options, some GIFT City Funds may allow withdrawals only at specific intervals. This reduces flexibility. This means investors must plan their exits in advance to avoid cash flow issues.
Market and Currency Risks
Since GIFT City funds invest in international markets, their performance can swing with global economic conditions. Additionally, changes in exchange rates can directly affect your returns, either boosting or worsening them.
Tax Incentives for NRIs and OCIs in GIFT City Funds
Every smart investment journey offers its rewards. For NRIs and OCIs, the path comes with unique tax incentives and benefits.
1) No Tax Deductions on Returns
- No TDS on income from GIFT City Funds.
- No GST on transactions, allowing investors to retain more earnings.
2) Concessional Tax Rates on Bonds
- 4% tax on bonds listed before July 1, 2023.
- 9% tax on bonds listed after July 1, 2023.
- Ideal for fixed-income investors seeking better post-tax returns.
3) Capital Gains Exemptions
- Transfers of specific listed securities by NRIs or Category III AIFs in IFSC are not treated as taxable events.
- This means no capital gains tax on such transfers.
4) Tax-Free Interest and Derivative Income
- Interest earned from lending to IFSC units is 100% tax-free.
- Income from non-deliverable forward contracts and OTC derivatives with IFSC banking units is also exempt.
5) Exempt Income Managed by Fund Managers
- Income from financial securities managed by IFSC-based fund managers is tax-free.
- Applies if income accrues outside India and is not classified as Indian-sourced income.
6) No Additional Indirect Taxes
- No Securities Transaction Tax (STT).
- No Commodities Transaction Tax (CTT).
- No Stamp Duty on IFSC exchange transactions.
Final Thoughts: Find Your Path, Reap Your Profit
GIFT City Funds give NRIs and OCIs a path to global investments and more profits. It is one of India’s most investor-friendly investment opportunities. With these funds, you can invest globally and enjoy meaningful tax advantages. But always assess market risks before making your decisions. Explore your options today and start your trip to unlimited profit.
