GIFT City Investments for NRIs (2026): How to Invest in USD With Zero TDS & No Currency Risk

What GIFT City is

Gujarat International Finance Tec-City, better known as GIFT City, near Gandhinagar is home to India's only International Financial Services Centre (IFSC). For foreign exchange purposes, units in the IFSC are treated as if they are outside India. Business is conducted in foreign currencies such as US dollars, and a single regulator, the International Financial Services Centres Authority (IFSCA), oversees banks, funds, insurers and stock exchanges there.

For NRIs this creates something unusual: a way to invest in Indian companies and Indian fund managers in dollars, without converting money into rupees, and in many cases without paying any Indian tax. Global banks such as Citi, HSBC and Standard Chartered, and large Indian banks such as SBI, HDFC Bank, ICICI Bank and Axis Bank, run IFSC Banking Units (IBUs) there.

Investment options in GIFT City

Product availability expands every quarter. Several large Indian AMCs now run GIFT City feeder funds that invest in their flagship Indian equity schemes, which gives NRIs a dollar route into familiar portfolios.

Tax benefits for non-residents

The Income Tax Act grants IFSC units and their investors a set of exemptions designed to compete with Singapore and Dubai. For non-residents, the key benefits are:

• Capital gains on transfer of units of specified IFSC funds are exempt for non-residents.
• Income distributed by specified IFSC funds to non-residents is exempt, so no TDS is deducted.
• Interest on deposits with IFSC Banking Units is generally exempt for non-residents.
• No Securities Transaction Tax or Commodities Transaction Tax on specified IFSC exchange trades.
• No requirement to file an Indian tax return if your only Indian income is exempt IFSC income.

Why US and Canadian NRIs use GIFT City

US and Canadian NRIs face two problems with ordinary Indian investments. First, many Indian AMCs refuse investments from US and Canadian residents because of FATCA reporting burdens. Second, every rupee investment carries currency risk on the way back. GIFT City funds solve the second problem completely, since they are dollar products, and some are open to US and Canadian investors.

The tax picture in the US is still complicated. A GIFT City fund is a foreign corporation or trust for US tax purposes and is very likely a Passive Foreign Investment Company (PFIC). PFIC rules can apply punitive tax and interest charges unless the fund provides the statements needed for a Qualified Electing Fund (QEF) election, which a small number of GIFT City funds have started doing.

• Ask whether the fund provides a PFIC Annual Information Statement for QEF elections.
• File Form 8621 for each PFIC each year, plus FBAR and Form 8938 where thresholds are met.
• Canadians should check foreign property reporting on Form T1135 and the offshore investment fund rules.
• UK residents should check whether the fund has UK reporting fund status; otherwise gains may be taxed as income.
• UAE and Singapore residents generally face no home tax, making GIFT City especially efficient.

How to invest step by step

1. Choose a product and confirm it accepts investors from your country.
2. Complete the fund's KYC: passport, overseas address proof, tax residency self-certification, and PAN if requested (many IFSC products accept investors without PAN).
3. Open an IFSC bank account or investor account if the product requires it; video KYC is common.
4. Wire USD from your overseas bank directly to the fund or IFSC account.
5. Receive a unit statement and track it on the fund's portal.
6. On redemption, proceeds return in USD to your overseas or IFSC account.

You do not need an NRE or NRO account for any of these steps, and the money never touches the Indian rupee.

Risks and limitations

GIFT City is a strong option for dollar savers and long-term equity investors, but it is not a shortcut around home-country tax. Treat it as one part of a diversified plan.