GIFT City For Retail Investors: Opportunities, Benefits & How To Get Started

Over the past few decades, India has made significant progress in the financial space, ranging from equity, bonds, mutual funds (MFS), derivatives, etc. With multiple investments available in this landscape, the need for expansion into the global market was equally important. And to support this decision, India’s first International Financial Services Centre (IFSC) - GIFT City was established in 2015. Since then, this city has been a hub for various global businesses and investors, including Indian retail investors!

Throughout this blog, let us understand what GIFT City actually is, the benefits for retail investors, investment opportunities available, and how you can invest in GIFT City.

What Is GIFT City?

GIFT City, also known as Gujarat International Finance Tec-City, is a well-established international financial hub that was developed in Gandhinagar, Gujarat, in 2015. Spread across 1000 acres of land, this initiative by the Indian government aims to position India in the global space and simultaneously act as a financial hub. So, if you are a non-resident Indian (NRI), foreign resident, or a retail investor residing in India, you can still invest in the GIFT City and avail the benefits available here.

What’s Inside GIFT City For Indian Retail Investors

GIFT City is an abode for multiple entities and businesses. Alongside, there are some key features provided by the city to the investors.

Key features of GIFT City include:

• GIFT IFSC is a hub for a total of 580 operational entities, housing three exchanges, 25 banks (9 foreign banks), 29 insurance companies, 40 fintech companies, and more.
• It is regulated and managed by the International Financial Services Center Authority (IFSCA).
• High-class, smart infrastructure developed with more than 550+ entities residing within.
• Exemptions from capital gains tax during the sale of certain securities on IFSC (for NRIs).
• Business-friendly investment space with various tax benefits, including exemptions to attract global investors, and much more.

Investment Opportunities In GIFT City For Retail Investors

In general, there are multiple investment opportunities available for investors. However, the primary financial products (like Alternative Investment Funds (AIFs), Global Access Platform, and NSE IFSC) offered by the GIFT City for retail investors deal with equities, derivatives, and debt instruments. Any Indian retail investor who wishes to invest can do so via NSE International Exchange (NSE IX), which is a subsidiary of the National Stock Exchange of India (NSE). In these years, NSE IX has created a gateway for investors to interact with US stocks and other foreign markets.

While the NRIs (Non-resident Indians), FPIs (Foreign Portfolio Investors), and FIIs (Foreign Institutional Investors) are the primary participants, there is space for Indian residents (or retail investors) as well. For any retail investor wanting to invest in GIFT City products, they can do so with these options;

Alternative Investment Funds

It primarily pools money from investors and invests the same systematically in both domestic and international markets. This diversification happens in three parts: Category I (investment in early startups, ventures, infrastructure, or SME funds), II (private equity and debt funds), and III (hedge funds and other similar venues).

AIFs happen in two ways (inbound and outbound). While inbound AIFs allow fund managers to pull funds from international investors, outbound AIFs are the reverse. In short, when retail investors invest in foreign markets (e.g., when you put money in US stocks), it is known as Outbound AIFs.

Here, AIFs must have a minimum investment (with a lock-in period of three years), which includes;

• Individual investors - ₹1 crore
• Employees or Directors of AIF, or Fund manager - ₹25 lakhs

NSE IFSC

NSE IFSC provides an opportunity for Indian investors and NRIs to invest in US stocks. These investments are usually in the form of Unsponsored Depository Receipts (UDRs), which include the top 50 US stocks performing in the S&P 500 index. At the same time, you are also eligible for corporate action benefits.

If you want to invest in US stocks, it must happen within the RBI’s LRS (Liberalised Remittance Scheme), which allows a remittance (transfer) of $250,000 each financial year.

Global Access Platform

Resident Indians and NRIs can potentially invest in other markets through the Global Access Platform. The GIFT City investment for retail investors allows investment globally in stocks, futures, ETFs, options, currencies, mutual funds, and bonds from a single integrated account.

With this platform, you have access to 135 markets, 33 countries, 23 currencies, 75+ global portfolios, 30,000+ stocks, and much more. Even here, if you wish to invest globally, LRS allows a maximum amount of $250,000 per year.

Benefits & Tax Incentives In GIFT City Investment For Retail Investors

There are several benefits (including tax incentives) for retail investors wanting to invest in GIFT City. It includes;

Access to the Global market:

With GIFT City, you can invest in many countries, financial instruments, along with US stocks as well.

Liquidity pool:

This integrated marketplace brings in more sellers and buyers in one city. As a result, the liquidity increases and leads to minimal transaction costs.

Zero Taxes:

There is nil Securities Transaction Tax (STT), Commodity Transaction Tax (CTT), and stamp duty applicable.

Robust regulatory ecosystem:

Regulations imposed by IFSCA create a strong level of trust and confidence in the GIFT City ecosystem among the retail investors and NRIs. Likewise, there is similar transparency among the foreign players residing in international markets.

Who Can Invest In GIFT City

Well, anyone can invest in GIFT City, including resident Indians, NRIs, FIIs, FPIs, and foreign investors. It also includes:

Non-Resident Indians (NRIs) and Foreign investors:

Investment through the products provided by the GIFT City, subject to regulations.

Resident Indians (Retail investors):

Even retail investors residing in India can invest in GIFT City (above-mentioned options) via the LRS scheme of a prescribed limit of $250,000 per financial year.

How To Get Started In GIFT City For Retail Investors?

The eligibility criteria for investing in the GIFT City ask for the nationality, whether Resident Indian, NRI, or Foreign Investor. You can open your account with the IFSC-registered broker by filling up the details and start investing in the international markets.

• Open an Account with an NSE IFSC-registered broker
• Meet the eligibility criteria
• Complete the KYC requirements
• Fund your account and start investing in any of these contracts

Conclusion

With the growth of India’s financial landscape, the expansion of GIFT City is also visible. It has brought enormous opportunities for the retail investors, including NRIs, and global investors. Considering the various investment options, right from AIFs, NSE IFSC, to a Global Access Platform, the scope for GIFT City investment for Indian investors has broadened. By balancing its attractive tax and cost incentives against practical considerations, retail investors can strategically leverage GIFT City to grow their portfolios.