GIFT City & the IFSC

GIFT City — Gujarat International Finance Tec-City — is a planned financial district in Gandhinagar, Gujarat that houses India's first International Financial Services Centre (IFSC). In plain terms, it is a financial zone on Indian soil that is treated as offshore: business is transacted in foreign currency (mainly US dollars) and runs under its own dedicated regulator. It opens two doors with one well-regulated gateway — letting resident Indians invest out into global markets, and letting NRIs and foreign investors invest in to India.

The International Financial Services Centres Authority (IFSCA), established in 2020, is the single, unified regulator for the IFSC — combining the roles that RBI, SEBI, IRDAI and PFRDA play in the rest of India. Funds are launched and run under the IFSCA (Fund Management) Regulations, 2025, which replaced the earlier 2020 framework and modernised how schemes are set up, governed and distributed.

• Global diversification in hard currency — own the world's largest companies, priced and settled in US dollars.
• Stays on Indian rails — IFSCA-regulated, Indian KYC, rupee funding under LRS; no foreign bank or brokerage account to maintain.
• Institutional structure — feeder / fund-of-funds format, professional management and transparent daily NAV.
• Tax-efficient platform — unit- and transaction-level reliefs keep the structure lean (see below).
• For NRIs — a clean, USD-denominated way to invest into India with straightforward repatriation.

It helps to separate three levels — the fund, the transaction, and the investor. One condition runs through every non-resident relief below: the trade must be settled in freely-convertible foreign currency (USD / EUR / GBP).

• Fund / unit level — IFSC units (including fund managers) get a tax holiday under Section 80LA: 100% of eligible income for any 10 consecutive years out of 15. The Union Budget 2026-27 extended this to 20 consecutive years out of 25, with post-holiday income taxed at a concessional 15%.
• Transaction level — no STT, CTT or stamp duty on trades done on IFSC exchanges, and no GST on IFSC financial services.

For non-residents (NRIs & foreign investors) — the detail that matters:

• Capital gains — effectively nil. Under Section 47(viiab), a non-resident's transfer of specified securities on an IFSC exchange — bonds, GDRs, foreign-currency-denominated bonds, derivatives and units of IFSC funds — is not treated as a transfer, so no capital-gains tax arises. There is no holding-period condition: the relief applies whether you hold for one month or five years.
• Income from IFSC funds — exempt. Under Section 10(4D), a non-resident's income from the transfer of units of an IFSC fund, and the fund's own income from specified securities, is exempt — again regardless of holding period. This is what lets an NRI access Indian strategies through a GIFT City fund with minimal India tax leakage.
• Dividends — a flat 10%. Dividend from IFSC units is taxed at 10% under Section 115A — before any lower rate your home-country tax treaty (DTAA) allows, claimed with a Tax Residency Certificate.
• Interest — exempt / concessional. Interest paid to non-residents on monies lent to, or bonds issued by, IFSC units is exempt or taxed at a concessional rate.
• Net effect for an NRI investing into India via GIFT City — most capital gains on specified securities are tax-free in India, only a light 10% (or treaty-rate) tax on dividends, USD settlement and clean repatriation — a materially lighter footprint than the traditional FPI or NRO / PIS route.

• Resident investors (outbound feeders) — the GIFT City wrapper gives efficient access, but your own gains remain taxable in India under the normal rules for the underlying assets. GIFT City is not a personal tax exemption for residents.

• Currency risk — returns are in USD; the rupee's movement affects your final INR outcome, both ways.
• LRS cap & TCS — USD 250,000 per person per year; TCS applies on remittances beyond ₹10 lakh.
• Suitability — global / feeder products fit a diversifying satellite allocation, not the core; size them accordingly.
• Liquidity — feeder and fund-of-funds structures may settle a little slower than domestic mutual funds.
• Documentation — KYC, the LRS declaration (Form A2) and source-of-funds requirements apply.