India’s IFSC & IFSCA for Global Wealth: A HNI GuideGIFT City Investment: Your Gateway to Global Wealth for High Net Worth Individuals

In the dynamic landscape of global finance, High Net Worth Individuals (HNIs) in India are constantly seeking sophisticated avenues for wealth diversification and tax-efficient investment strategies. Gujarat International Finance Tec-City (GIFT City) has rapidly emerged as India’s premier International Financial Services Centre (IFSC), offering a compelling proposition for those looking to expand their financial horizons beyond traditional domestic markets. At EquiZen, we understand these evolving needs and are dedicated to guiding our discerning clientele through the intricate yet rewarding world of GIFT City investments.

This comprehensive guide delves into why GIFT City is becoming an indispensable part of a global investment portfolio, outlining the unique advantages, diverse opportunities, and practical steps for HNIs to leverage this transformative financial hub.

GIFT City is more than just a financial hub; it’s a strategically designed “offshore” financial center located within India, yet operating under a distinct regulatory framework. Governed by the International Financial Services Centres Authority (IFSCA), GIFT City offers an ecosystem that mirrors leading global financial centers like Singapore and Dubai. Its primary objective is to repatriate financial services and transactions that Indian entities and investors previously conducted overseas, facilitating them in foreign currencies, predominantly the US Dollar.

This unique positioning provides a stable and secure environment for international investments, attracting global capital and fostering a business-friendly ecosystem. The city aims to build a  world-class infrastructure, including advanced utility systems and a single-window clearance mechanism, designed to ensure ease of doing business and a high quality of life for its residents.

For High Net Worth Individuals, GIFT City presents a confluence of strategic advantages that align perfectly with complex wealth management objectives:

Unparalleled Tax Efficiency

One of the most compelling draws of GIFT City is its highly favorable tax regime. Investors can benefit from:

• Exemption from Securities Transaction Tax (STT) and Commodities Transaction Tax (CTT).
• No stamp duty on trades.
• Capital gains tax exemption for non-residents on specified securities traded on IFSC exchanges.
• Concessional tax rates on dividend income and interest income from certain long-term or rupee-denominated bonds.
• Benefits from Double Taxation Avoidance Agreements (DTAA), further optimising tax outcomes for investors from DTAA-enabled countries.

For non-resident investors in Category I or II Alternative Investment Funds (AIFs) located in an IFSC, there’s an exemption from filing tax returns and obtaining a PAN under specific conditions, simplifying administrative obligations.

Global Diversification and Currency Alignment

GIFT City enables seamless access to global markets, allowing HNIs to diversify their portfolios beyond Indian shores. Transactions are primarily denominated in foreign currencies, particularly the US Dollar, which significantly reduces currency risk for international investors. This is crucial for those planning for international education, overseas travel, or retirement, as it helps align currency exposure with real-world goals.

Streamlined Regulatory Framework

The IFSCA acts as a unified regulator, combining the powers of various domestic financial regulators within the IFSC.This single-window clearance system ensures a faster, more efficient, and transparent regulatory process, enhancing investor protection and market integrity.

Extended Trading Hours

Exchanges in GIFT City operate for up to 22 hours a day, overlapping with major trading sessions in Asia, Europe, and the US. This extended window provides greater flexibility for global investors to react to market movements and execute trades.

GIFT City offers a broad spectrum of investment opportunities tailored for sophisticated investors:

Offshore Banking and Deposits:

HNIs can open Global Savings Accounts in various foreign currencies (USD, GBP, EUR, CAD, AED, AUD, SGD, HKD) and earn competitive interest rates. Interest earned on offshore deposits is exempt from Indian taxes under the IFSC framework, offering flexibility with shorter tenures compared to traditional FCNR deposits.

Global Equities and Bonds:

Access global equities listed on NSE IFSC via Unsponsored Depository Receipts (UDRs) of major US companies like Apple, Amazon, Google, and Tesla. Indian companies can also directly list their shares in USD on GIFT City exchanges, providing a straightforward way for global investors and NRIs to invest.

Alternative Investment Funds (AIFs):

These privately financed investment vehicles pool capital from individual investors, offering exposure to diverse asset classes including equities, debt securities, private equity, real estate, and venture capital. AIFs are categorized into:

• Category I: Invests in startups, early-stage ventures, social venture funds, SME funds, and infrastructure funds.
• Category II: Includes private equity funds and debt funds.
• Category III: Encompasses hedge funds and funds that trade for short-term gains.

Note: AIFs typically require a minimum investment of USD 150,000 or above, with a lock-in period of three years, making them suitable for HNIs with sizable investable assets.

Portfolio Management Services (PMS):

NRIs can leverage PMS for tailored investment in debt, stock, fixed income, money market instruments, and other securities through designated fund managers. Income earned through such investments (if made in securities outside India) can be tax-exempt.

Real Estate Investment Trusts (REITs):

The GIFT City IFSC exchange also lists REITs, providing accessible and cost-effective entry into the Indian real estate market.

Investing in GIFT City requires a clear understanding of its distinct operational framework. It’s crucial to recognize that GIFT City (IFSC) and the domestic Indian market operate under separate regulatory ecosystems. Therefore, your standard domestic trading apps or accounts cannot be used for IFSC transactions.

The process to invest in GIFT City involves a few key steps:

1. Choose an IFSC-Registered Broker: You must select a brokerage firm specifically licensed to operate in GIFT City. Many leading Indian financial institutions have dedicated subsidiaries for this purpose.
2. Open a Specific GIFT City Account: A new Trading and Demat account, separate from any domestic accounts, must be opened for IFSC transactions. This is a distinct digital onboarding process.
3. Access the Designated Trading Platform: You will need to use a platform specifically designated for GIFT City, typically a dedicated web-based trading terminal or a specialized mobile app offered by your IFSC broker.
4. Fund Your Account: Accounts can be funded in USD. Resident Indians investing in US stock UDRs will do so through the Liberalised Remittance Scheme (LRS), which allows individuals to remit up to USD 250,000 per financial year.

At EquiZen, we simplify this journey. Our expert advisors provide personalized guidance, ensuring a seamless and compliant investment experience. We understand that HNIs prioritize white-glove service, expert support, and secure asset holding. Our commitment to professional support, ease of transaction, and robust custodial services ensures that your complex international investments are managed with utmost care and precision.

While GIFT City offers significant advantages, it’s essential to be aware of certain considerations:

• High Minimum Investment: As noted, many investment products, particularly AIFs, have high minimum investment thresholds, making them accessible primarily to individuals with substantial investable assets.
• Liquidity: Some newer products or less mature segments within GIFT City may initially have lower liquidity compared to established global exchanges.
• Market and Currency Risks: Like any capital market, investments in GIFT City are subject to market fluctuations. For resident Indians using LRS, there is also currency risk if the USD weakens against the INR.

EquiZen provides a balanced perspective, transparently discussing both the compelling benefits and inherent risks, empowering you to make informed decisions that align with your risk appetite and financial goals.

GIFT City is not just changing how and where Indians invest; it’s redefining the contours of global wealth management. For HNIs in the Indian market, it offers a direct bridge to international markets with reduced complexity and enhanced transparency.

At EquiZen, we are more than just wealth managers; we are your strategic partners in navigating this exciting new frontier. Our deep expertise, personalized advisory approach, and commitment to your financial well-being ensure that you can confidently leverage GIFT City to achieve your global diversification objectives, optimize tax outcomes, and secure your financial legacy.

Ready to explore the world of opportunities in GIFT City? Connect with EquiZen today for a personalized consultation.