GIFT City Tax Exemptions for Foreign Investors, NRIs & Companies

Last Updated on: 11th April 2025, 06:10 pm

What is GIFT City?

Gujarat International Finance Tec-City (GIFT City) is India’s first International Financial Services Centre (IFSC), strategically developed to position India as a global financial hub. Located in Gandhinagar, Gujarat, GIFT City operates as a foreign jurisdiction within India, offering global-standard infrastructure, tax-neutral status, and seamless regulatory support.

Approved under the Special Economic Zone (SEZ) framework and governed by the International Financial Services Centres Authority (IFSCA), GIFT City is tailored for international investors, Non-Resident Indians (NRIs), and global financial institutions looking to access Indian and international markets efficiently.

It hosts leading exchanges like NSE IFSC and India INX, enabling offshore investors to trade in global equities, derivatives, and debt instruments in multiple currencies. Investors benefit from a range of tax exemptions, relaxed regulations, and zero transaction levies—making it a preferred destination for cross-border financial activities.

Whether you’re an NRI exploring India-centric opportunities or a foreign company seeking to expand in Asia, GIFT City India delivers a compelling mix of investment access, tax incentives, and global connectivity.

Why Foreign Investors Are Choosing GIFT City

GIFT City (Gujarat International Finance Tec-City) is fast becoming a top destination for international investors, thanks to its liberal policies, tax-efficient environment, and world-class financial infrastructure. Positioned as India’s answer to Dubai and Singapore, GIFT City offers several advantages that attract foreign investors, multinational banks, asset managers, and NRIs.

100% Foreign Ownership Allowed

Foreign investors can set up wholly-owned subsidiaries or branches in GIFT City with no requirement for local Indian ownership. This is a major draw for global businesses seeking direct access to India’s growing financial market while maintaining complete control over their operations.

Regulated by IFSCA – A Single Unified Authority

The International Financial Services Centres Authority (IFSCA) is the sole regulator for all financial services in GIFT City. This reduces regulatory overlap, streamlines licensing, and provides clarity across sectors such as banking, capital markets, insurance, and asset management. The ease of doing business and regulatory transparency are key attractions for foreign players.

Seamless Access to Global Markets

GIFT City allows investments across a wide spectrum of international financial instruments, including:

• Global equities (e.g., US stocks)
• Debt instruments (e.g., Masala Bonds, Green Bonds)
• Currency and commodity derivatives
• Exchange-traded funds (ETFs)

Exchanges like India INX through its Global access platform and NSE IFSC offer trading in over 135 international stocks, and the ability to invest in multi-currency assets, including USD, EUR, JPY, and more.

Powerful Tax Incentives & Financial Efficiency

One of the biggest reasons foreign investors choose GIFT City is the comprehensive tax benefits:

• Capital Gains Tax: Exempt for non resident investors
• Interest Income: Completely tax-free if earned by non-resident from IFSC entities
• Dividend withholding tax: Capped at 10% for NRIs, compared to up to 20% in mainland India
• Corporate Tax Holiday: 100% tax exemption for 10 out of 15 years for IFSC units
• No Securities Transaction Tax (STT) and other charges on trades

These incentives significantly reduce the cost of capital and improve post-tax returns for both individuals and corporate investors.

Growing Institutional Participation

According to recent data (2024), GIFT City hosts over 766 registered entities, including Deutsche Bank, Barclays, MUFG, and several leading Indian banks. The daily trading volumes on India INX and NSE IFSC have seen exponential growth, indicating increased global interest and institutional confidence.

GIFT City India offers foreign investors a unique mix of liberal ownership rules, global market access, tax efficiency, and regulatory ease—making it a compelling hub for cross-border finance and offshore investments.

GIFT City Tax Benefits: Overview

GIFT City (Gujarat International Finance Tec-City) stands out as a tax-efficient destination for global investors, thanks to a range of strategic tax exemptions and incentives offered under Indian tax laws. These benefits make it an attractive alternative to traditional financial hubs like Singapore or Dubai, especially for NRIs and foreign entities seeking better post-tax returns and minimal compliance burden.

Key Tax Incentives in GIFT City

• Zero Tax on Certain Interest Income: Interest earned by NRIs or foreign investors from IFSC entities is fully exempt from tax in India. This is particularly beneficial for global treasury centres / Finance companies for ECB lending to Indian entities.
• Reduced Dividend Tax (10%) for NRIs: Dividends received from companies or funds operating in GIFT City are taxed at a flat 10% rate for NRIs—lower than the standard 20%+ cess and surcharge applicable in mainland India.
• No Securities Transaction Tax (STT): Trades executed on GIFT City exchanges (India INX, NSE IFSC) are not subject to STT and other incidental charges, reducing transaction costs and improving overall returns for investors.
  

These benefits collectively enhance investment efficiency, making GIFT City a cost-effective and globally competitive option for cross-border financial transactions.

Tax Benefits for Foreign Investors, NRIs, and Companies in GIFT City

GIFT City offers a highly attractive tax regime for foreign investors, Non-Resident Indians (NRIs), and international companies, making it one of the most efficient financial zones in India for cross-border investments. These tax incentives not only improve after-tax returns but also simplify compliance and lower transaction costs.

Tax Benefits for Foreign Investors & NRIs in GIFT City

NRIs investing through GIFT City enjoy multiple tax advantages over traditional investment routes in India:

• Dividend Income Tax:
  Dividends received from IFSC-based entities are taxed at a flat 10%, compared to up to 20% in mainland India.
• Capital Gains:
  Exempt for non-resident investors on certain specific securities subject to additional conditions
• Interest Income:
  Completely tax-free if the interest is earned by NRI from IFSC entity.
• Zero Stamp Duty & STT:
  All trades executed on IFSC exchanges are exempt from stamp duty and Securities Transaction Tax, reducing overall investment costs.
  

Tax Benefits Snapshot for NR investors: GIFT City vs Mainland India (Investor-Focused)

Income Type	Tax Rate in GIFT City	Tax Rate in India
Dividends	10%	Up to 20%
Capital Gains	0% in some cases	12.5% – 30%
Interest Income	0%	Up to 30%
Stamp Duty	0%	0.005% – 0.015%

These tax breaks make GIFT City a preferred investment destination for NRIs and foreign companies looking to maximize returns while maintaining regulatory clarity.

Tax Benefits for Foreign Companies in GIFT City

Foreign companies and financial institutions setting up operations in GIFT City IFSC enjoy a suite of powerful tax incentives that are designed to lower operating costs, boost profitability, and encourage long-term investment. These benefits position GIFT City as a leading offshore destination in Asia, competing with hubs like Singapore and Dubai.

100% Corporate Tax Holiday for 10 Years

One of the most attractive incentives is the 100% tax holiday for any 10 consecutive years out of the first 15 years of operation in GIFT City. This exemption applies to IFSC-registered units, including foreign banks, insurers, fund managers, and fintech companies.

• No corporate income tax during the selected tax-free period.
• Offers significant cost savings and competitive positioning for global operations.
  

GST Exemptions for Specified Services

Services rendered to or by IFSC entities are exempt from Goods and Services Tax (GST). This further reduces the tax burden and encourages service exports from GIFT City.

Capital Gains Tax Exemption

Non resident investors are eligible for full exemption on capital gains arising from the transfer of specified securities, such as:

• IFSC-listed bonds
• Derivatives
• Foreign currency-denominated instruments

This exemption helps global investors optimize their returns while staying tax-efficient.

Regulatory & Operational Ease in GIFT City

GIFT City offers unmatched regulatory and operational simplicity for foreign investors and companies, making it an attractive destination for global financial institutions. The unique legal and regulatory framework ensures smoother operations, minimal bureaucracy, and easier compliance for both NRIs and foreign entities.

Single Regulator (IFSCA) for All Financial Products

GIFT City is governed by a single regulatory body, the International Financial Services Centres Authority (IFSCA). This streamlined regulatory approach ensures clear guidelines, quicker approvals, and reduced complexities for entities operating in sectors such as banking, capital markets, insurance, and asset management. With one governing body for all financial products, investors and companies experience:

• Unified Compliance: Simplifies operational processes.
• Faster Approvals: Reduced delays in starting and running businesses.
  

Operates as a Foreign Jurisdiction within India

While located in India, GIFT City operates as a special economic zone (SEZ), treating its businesses and financial transactions similarly to those in global financial hubs like Singapore and Dubai. This means that foreign entities can benefit from tax neutrality and access to global markets without facing the usual Indian regulatory constraints.

No FEMA Restrictions for Entities in GIFT City

Foreign Exchange Management Act (FEMA) restrictions, which usually govern the flow of funds in and out of India, do not apply within GIFT City. This gives foreign investors greater freedom to:

• Move capital freely across borders
• Invest in foreign currency-denominated instruments without restrictions

This unique feature enhances GIFT City’s appeal as a cross-border investment hub.

Key Investment Instruments in GIFT City

GIFT City offers a wide array of investment opportunities, catering to both global investors and NRIs who are looking to diversify their portfolios. The range of financial instruments available in this International Financial Services Centre (IFSC) allows investors to access both Indian and global markets with tax-efficient benefits.

Global Equities & ETFs

GIFT City provides easy access to global equities and Exchange Traded Funds (ETFs) listed on international exchanges such as India INX and NSE IFSC. Investors can trade in some of the world’s leading stocks and ETFs, providing diversification across global markets without leaving India’s shores. This is an excellent opportunity for NRIs and foreign investors to take advantage of global growth trends.

Debt Instruments (Masala Bonds, Green Bonds)

Debt instruments, especially Masala Bonds (rupee-denominated bonds) and Green Bonds, are becoming popular among investors in GIFT City. These bonds are issued in foreign currencies, allowing for diversification in fixed-income portfolios.

• Masala Bonds offer foreign investors the opportunity to invest in the Indian bond market while mitigating currency risk, as the bonds are issued in Indian rupees.
• Green Bonds focus on financing sustainable projects, attracting eco-conscious investors looking to back environmentally friendly initiatives.
  

These instruments provide steady income streams with relatively lower risk compared to equities, making them ideal for conservative investors.

Derivatives (FX, Commodities, Equity)

GIFT City also facilitates trading in derivatives such as foreign exchange (FX) contracts, commodity futures, and equity derivatives. These products provide investors with opportunities to:

• Hedge against currency fluctuations, commodity price volatility, or market risks.
• Leverage positions for greater returns, though at higher risk.
  

By offering multi-currency derivatives and cross-border investment options, GIFT City enables both institutional and retail investors to manage risk more efficiently in a globalized financial ecosystem.

Sovereign Securities

For those seeking safe and low-risk investments, sovereign securities issued by the Indian government are also available in GIFT City. These government bonds are a reliable investment option for risk-averse investors, offering fixed returns and government-backed security.

Alternative Investment Funds (AIFs) in IFSC

GIFT City’s regulatory framework also allows the creation of Alternative Investment Funds (AIFs), which include hedge funds, private equity funds, and venture capital funds. AIFs in GIFT City are particularly attractive to foreign investors as they provide:

• Access to high-growth sectors like technology and infrastructure.
• The opportunity to invest in niche markets with potentially higher returns.
  

AIFs offer a way for sophisticated investors to gain exposure to markets that are typically harder to access or have high barriers to entry.

Final Thoughts: Is GIFT City Worth It for Foreign Investors?

GIFT City offers a unique combination of tax benefits, regulatory ease, and global market access, making it an attractive destination for foreign investors and NRIs. With incentives like 100% tax holidays, zero stamp duty, low capital gains tax, and simplified compliance, GIFT City provides a cost-effective platform for international businesses and individuals seeking to invest in India. The ability to operate under a single regulator (IFSCA), combined with access to global equities, bonds, and derivatives, further enhances its appeal. For foreign investors looking for a tax-efficient, globally connected financial hub, GIFT City presents a compelling option that blends the best of Indian and international finance.