8 Things to Know Before Choosing USD Investments

"I have $30,000 sitting in my Emirates NBD account. Someone told me to put it in a GIFT City FD. Should I?"

We get this exact question at Belong at least five times a day. The short answer is: it depends.

Not on the interest rate. Not on what your colleague in office did. It depends on eight things most NRIs haven't checked yet.

USD-denominated investments have become the most talked-about topic in our WhatsApp community of NRIs.

GIFT City FDs, FCNR deposits, dollar mutual funds, AIFs, UAE bank deposits. The options have multiplied faster than the information available about them.

And here's what worries us. NRIs are making $30,000 and $50,000 decisions based on a WhatsApp forward or a single headline about "tax-free returns."

They're not wrong to be excited. The products are genuinely good. But choosing the wrong one, or the right one at the wrong time, or without understanding the fine print, can cost you more than the interest you earn.

This article is the checklist we wish every NRI would read before moving a single dollar.

Not theory. Not a sales pitch.

Eight practical things that determine whether a USD investment works for you or works against you.

Thing 1: "USD Investment" Means Very Different Products

This is the single biggest source of confusion. When someone says "invest in USD," they could mean six completely different products. Each has its own rules, risks and returns.

GIFT City USD Fixed Deposits sit with IFSC Banking Units (IBUs) of major Indian banks like SBI, ICICI, HDFC and Axis. Your money stays in USD throughout. Interest is tax-free in India.

Fully repatriable. No Forms 15CA/15CB needed. Minimum starts from approximately USD 1,100 at Axis Bank (Source: Axis Bank GIFT City).

Current rates: 4-6% depending on bank and tenure. Compare live rates on Belong's NRI FD Rate Comparison Tool.

FCNR (Foreign Currency Non-Resident) Deposits sit with regular Indian bank branches.

You deposit in USD (or other foreign currencies). Interest is tax-free in India under Section 10(15)(iv)(fa) of the Income Tax Act.

Fully repatriable. But there's a catch: if you break an FCNR deposit before one year, you earn zero interest (Source: RBI Master Direction on Interest Rates). Read our guide on high FCNR deposit rates.

GIFT City Mutual Funds are managed by Fund Management Entities (FMEs) operating under IFSCA regulations. You invest USD. The fund deploys capital into Indian or global equities, debt or hybrid strategies.

Returns are market-linked, not guaranteed. Capital gains are tax-free in India for non-residents under Section 10(4D). Minimum investment can be as low as USD 500 for retail schemes. Explore options on Belong's GIFT City Mutual Funds page.

GIFT City AIFs (Alternative Investment Funds) are for NRIs with larger portfolios. These invest in private equity, venture capital, structured credit or real estate strategies.

Minimum investment: USD 75,000 (reduced from USD 150,000 in February 2025, Source: IFSCA Circular, Feb 2025). Lock-in periods of 3-5 years are standard.

Tax-free for non-residents on qualifying structures. Explore via Belong's GIFT City AIF page.

UAE Bank USD Deposits sit with your local bank in the UAE. Regulated by the UAE Central Bank. Currently offering 3-4% on USD term deposits.

No Indian tax implications since the money never enters India. Simple and familiar, but typically lower returns than GIFT City alternatives.

Read our comparison of best fixed deposit rates in the UAE.

US Stocks and ETFs give direct exposure to global companies. Available through international brokerages.

Returns are market-linked. Dividends may be subject to US withholding tax (typically 25% for Indian passport holders).

Capital gains depend on your country of residence's tax rules. Not technically "India-linked" but part of the USD investment universe for NRIs.

Sources: IFSCA, RBI, Axis Bank GIFT City

👉 Tip: Before comparing rates, make sure you're comparing the same product type. A 7% NRE FD and a 5% GIFT City FD look similar on paper, but one is in rupees (with currency risk) and the other is in dollars (without currency risk). They're fundamentally different instruments. Use Belong's NRI FD comparison tool to see them side by side with the currency context.

Thing 2: Your Country of Residence Changes Everything

This is the thing NRIs discover too late.

The same USD investment can be tax-free for one NRI and heavily taxed for another. The difference? Where you live.

UAE-based NRIs enjoy the most favourable position.

The UAE has no personal income tax. India exempts GIFT City investment income for non-residents. The India-UAE DTAA prevents double taxation on any income that does attract Indian tax (like NRO FD interest).

Result: most USD investments are effectively zero-tax from both sides.

UK-based NRIs face a different reality. Since the UK abolished the non-domicile regime in April 2025, UK tax residents pay tax on worldwide income. GIFT City returns that are tax-free in India may still be taxable in the UK.

You need to check whether the specific income type qualifies for relief under the India-UK DTAA.

Without careful planning, your "tax-free" GIFT City FD interest could attract UK income tax at 20-45%.

US-based NRIs have the most complex situation.

The US taxes worldwide income regardless of source. Most GIFT City mutual funds are classified as PFICs (Passive Foreign Investment Companies) under US tax law.

This triggers punitive taxation on unrealised gains and requires annual Form 8621 filing. GIFT City FDs are not pooled investment vehicles, so they avoid PFIC classification. But the FD interest is still taxable as ordinary income in the US.

The India-US DTAA allows foreign tax credits, but since GIFT City income is tax-free in India, there's nothing to credit.

A real scenario from our community: Faisal, an engineer in Abu Dhabi, invested USD 50,000 in a GIFT City FD earning 5.5%. His annual interest: USD 2,750.

Tax paid: zero. His friend Rohan, a consultant in London with the same investment, owed approximately GBP 800 in UK tax on the same interest because the UK taxes worldwide income.

Same product, same return, different country, vastly different outcome.

👉 Tip: Before investing, get a written opinion from a tax advisor familiar with both Indian tax law and your country of residence's tax treatment of foreign investment income. The cost of one consultation is far less than an unexpected tax bill. For Indian tax questions, many NRIs in our WhatsApp community recommend filing through Belong's ITR filing service for NRI-specific expertise.

Thing 3: Deposit Insurance Works Differently Than You Think

This is the thing nobody mentions in the marketing material. And it matters more than most NRIs realise.

Domestic Indian bank deposits

(NRE, NRO, regular FDs) are covered by DICGC (Deposit Insurance and Credit Guarantee Corporation) up to ₹5 lakh per depositor per bank.

If your bank fails, you get your money back up to that limit. Source: DICGC/RBI

GIFT City deposits are NOT covered by DICGC.

This is confirmed by multiple sources and is a direct consequence of GIFT City operating as an international financial centre outside the domestic banking framework.

There is no separate deposit insurance scheme for IFSC Banking Units as of early 2026.

Before that scares you, here's the context.

Your GIFT City deposit sits with an IBU of a major Indian bank. The IBU is a branch, not a separate entity.

It's backed by the parent bank's entire balance sheet. SBI's GIFT City IBU has the backing of the State Bank of India. ICICI's IBU has the backing of ICICI Bank.

These are among the largest, most well-capitalised banks in Asia.

IFSCA mandates strict capital adequacy requirements for all IBUs. The parent banks are also regulated by RBI, which imposes additional capital and liquidity standards.

The risk of an SBI or ICICI failing is extremely low, but it's not zero. And if it did happen, your GIFT City deposit wouldn't have the same ₹5 lakh safety net that a domestic deposit has.

What this means practically: For deposits up to ₹5 lakh (approximately USD 5,500), a domestic NRE FD has an edge because of DICGC coverage.

For larger deposits, neither domestic nor GIFT City deposits are fully insured, so the relevant question becomes: how strong is the bank? Read our honest assessment of GIFT City pros and cons.

FCNR deposits, by contrast, sit with the domestic branch of the bank and ARE covered by DICGC up to ₹5 lakh (calculated at the prevailing exchange rate).

This is one advantage FCNR has over GIFT City FDs that's rarely discussed.

UAE bank deposits are covered by the UAE's deposit protection scheme, which insures up to AED 350,000 per depositor per bank (approximately USD 95,000).

For moderate deposit amounts, a UAE bank deposit actually offers better insurance coverage than either GIFT City or FCNR.

Sources: DICGC/RBI, IFSCA, UAE Central Bank

👉 Tip: Don't let the absence of deposit insurance be a dealbreaker for GIFT City FDs. But don't ignore it either. A practical approach: spread larger amounts across multiple banks (SBI, ICICI, Axis) rather than concentrating everything with one IBU. This mirrors what sophisticated depositors do in every market. Check rates across banks on Belong.

Thing 4: The Real Cost of Moving Money In and Out

This is the thing that turns a 5% return into a 4.3% return if you're not careful. Every USD investment requires moving money internationally. And every international transfer has costs, some visible, some hidden.

Sending USD to GIFT City from the UAE:

The good news: ICICI Bank's GIFT City IBU charges no fee on inward SWIFT transfers (Source: ICICI Bank GIFT City). Most GIFT City banks absorb inward transfer costs.

The costs come from your sending bank. UAE banks typically charge AED 50-100 (USD 14-27) per outward SWIFT transfer. Some banks charge a percentage-based fee on top. Intermediary (correspondent) banks may deduct USD 15-25 from the transfer amount unless you choose "OUR" charges (meaning you pay all fees upfront).

A typical UAE-to-GIFT City transfer of USD 10,000 costs approximately USD 25-60 in total fees. On a one-year FD at 5%, your interest is USD 500. The transfer cost eats 5-12% of your first year's return.

Sending USD from India (NRE account) to GIFT City:

NRIs can transfer from NRE accounts to GIFT City. This involves currency conversion from INR to USD if your NRE account is in rupees, which means you pay the bank's exchange rate spread.

Typical spread: 0.25-1% depending on the bank and amount. On ₹10 lakh, that's ₹2,500 to ₹10,000 lost to conversion. Read our guide on NRI banking hidden fees for a full breakdown.

Repatriation costs (getting money out):

GIFT City FDs: USD out to your overseas bank via SWIFT. The GIFT City bank may charge a small outward transfer fee (typically USD 10-25).

Your receiving bank may charge an inward SWIFT fee (varies by bank).

FCNR deposits: Similar to GIFT City. Foreign currency returns in the same currency. Minimal conversion costs.

TCS (Tax Collected at Source) trap for transfers from India:

If you're transferring money from a resident Indian account to GIFT City under the Liberalised Remittance Scheme (LRS), TCS of 20% applies on remittances exceeding ₹10 lakh per financial year (Source: Income Tax Act, Section 206C(1G)).

This is not an extra tax. It's an advance tax collection you can claim back when filing your ITR. But it ties up 20% of your remittance amount until you file and get the refund, which can take 6-12 months.

NRIs transferring from NRE accounts are NOT subject to TCS since these are already foreign earnings being moved, not fresh remittances under LRS.

👉 Tip: To minimise transfer costs, send larger amounts less frequently rather than small amounts often. A single USD 30,000 transfer costs roughly the same in SWIFT fees as a USD 5,000 transfer. For UAE-to-GIFT City transfers, ask your bank about their cheapest remittance channel. Some banks offer preferential SWIFT rates for NRI customers.

Thing 5: "Tax-Free" Doesn't Always Mean What You Think

This is the thing we spend the most time explaining in our community. And getting it wrong can cost you tens of thousands of dollars.

There are two very different types of "tax-free" in GIFT City.

Tax exemption means the income is permanently excluded from tax. It doesn't matter when you receive it or what your status is at the time. The tax is simply not applicable.

GIFT City FD interest for non-residents falls in this category. So do capital gains on specified GIFT City mutual funds under Section 10(4D) of the Income Tax Act.

Tax deferral means you don't pay tax now, but you might pay later. If your residential status changes, or if the investment doesn't qualify under the specific exemption, the deferred tax becomes due.

The critical scenario: You invest USD 100,000 in a GIFT City mutual fund as an NRI.

The fund grows to USD 160,000 over five years. As an NRI, your capital gains are tax-free in India under Section 10(4D).

But then you return to India and become a Resident. If you redeem after becoming Resident, you may lose the non-resident exemption on gains that accrued after your status change. The exact treatment depends on the fund structure and the timing of your redemption.

This distinction between exemption and deferral isn't academic. We've worked with NRIs at Belong who assumed their GIFT City mutual fund gains were permanently tax-free, then returned to India and faced an unexpected tax bill.

The 2030 sunset clause adds another layer. The current GIFT City tax holiday runs until March 2030 (Source: Union Budget 2025).

For business units, this means a 100% income tax exemption for any 10 consecutive years within a 15-year block under Section 80LA.

For investors, the relevant exemptions (Section 10(4D) for fund income, Section 10(4E) for interest) don't have the same sunset clause structure.

They're tied to your non-resident status and the qualifying nature of the investment, not to a specific deadline. But if the government changes the rules in a future budget, investments made today could be taxed differently tomorrow.

The general expectation is that existing investments would be grandfathered under old rules. But that's an expectation, not a guarantee.

👉 Tip: For large investments (above USD 50,000), get a written tax opinion specifically covering your residential status, the exact product, and what happens if you return to India during the investment period. This is not the same as asking a bank relationship manager "is it tax-free?" The answer to that question is always "yes" because they're answering for today, not for your future. Check our guide on tax exemptions and deductions for NRIs for the full picture.

Thing 6: Liquidity Varies Wildly Across Products

This is the thing that creates panic when you need money urgently. Not all USD investments let you access your money on the same timeline or at the same cost.

GIFT City FDs: Premature withdrawal is allowed at most banks. Axis Bank charges a penalty of just 0.15% (15 basis points) below the applicable rate (Source: Axis Bank GIFT City FAQs).

ICICI's GIFT City IBU charges 0.50% penalty (Source: ICICI Bank GIFT City). Processing time: 4-5 working days. This is reasonable liquidity for a fixed deposit product.

FCNR Deposits: Here's the catch nobody mentions upfront. If you break an FCNR deposit before completing one year, you earn zero interest. Not reduced interest. Zero.

The RBI mandates that FCNR deposits must have a minimum maturity of one year to earn any interest (Source: RBI Master Directions). After one year, premature withdrawal is allowed with a penalty, typically 0.5-1% below the contracted rate.

GIFT City Mutual Funds: Open-ended funds allow redemption at any time. Redemption proceeds typically arrive in 3-5 business days. No lock-in for retail schemes. But exit loads may apply for early redemption (usually 1% if redeemed within one year, depending on the fund). Check the specific fund's offering document.

GIFT City AIFs: This is where liquidity is most restricted. Most AIFs have lock-in periods of 3-5 years.

Some have 7-year terms. Premature exit is either not allowed or involves significant penalties.

Only invest money you genuinely won't need for the stated lock-in duration. Read our guide on AIFs, REITs and bonds for NRIs.

UAE Bank Deposits: Usually allow premature closure with a penalty. Terms vary by bank. Penalties are typically lower than Indian products. Processing is faster since it's your local bank.

A real scenario: Sameer invested USD 50,000 in an FCNR deposit at 5.2% for three years. Eight months later, his company offered him a position in London and he needed the money for a flat deposit.

He broke the FCNR. Interest earned: zero. He lost eight months of potential earnings and paid SWIFT fees twice (to deposit and to withdraw).

Had he chosen a GIFT City FD with a one-year tenure instead, he would have earned partial interest minus a small penalty.

👉 Tip: Match the product's liquidity profile to your actual needs. If you might need the money within a year, avoid FCNR deposits entirely. GIFT City FDs with shorter tenures (3-6 months) or a UAE bank deposit give you much better flexibility. Keep at least 3-6 months of expenses in a fully liquid account before locking money into any fixed-tenure product. Read our guide on emergency fund planning for NRIs.

Thing 7: The Product Range Is Still Growing

This is the thing that excites us at Belong, but also requires managing expectations.

GIFT City's investment ecosystem is young. IFSCA was established only in 2020. Compare that to Singapore's MAS (60+ years of track record) or Dubai's DFSA (20+ years).

As of early 2026, here's where the product range stands.

Fixed deposits: Well-established. Multiple banks (SBI, ICICI, HDFC, Axis, RBL, and others) offer competitive USD FD rates. This is the most mature product category.

Mutual funds: Growing rapidly. The Tata India Dynamic Equity Fund, launched in September 2025, was the first retail inbound mutual fund from GIFT City.

DSP Global Equity Fund and Edelweiss Greater China Equity Fund are among the options available through GIFT City structures. More AMCs are entering.

But the total number of available funds (roughly 20-30) is a fraction of the 1,500+ schemes available in mainland India (Source: AMFI). Explore current options on Belong's mutual funds page.

AIFs: Several Category III AIFs operating in GIFT City. Options include private equity, structured credit and equity-linked strategies.

The minimum dropped to USD 75,000 in 2025, making it more accessible. But the choice is still limited compared to mainland India's AIF ecosystem.

Exchange-traded products: Both India INX and NSE IFSC offer trading in GIFT Nifty (India's benchmark futures in USD), global ETFs, currency derivatives and bonds.

This is the most diverse product segment but requires a demat and trading account with a GIFT City broker.

Insurance: Life insurance products denominated in USD became available with tax-exempt proceeds from April 2025. Still nascent.

What's coming: From April 2026, mutual funds and ETFs can relocate to GIFT City from offshore jurisdictions (Singapore, Mauritius) without triggering capital gains tax.

This "tax-neutral relocation" is expected to significantly expand the range of funds available to NRIs.

What this means for you: If you want a simple, safe, well-established USD investment today, GIFT City FDs and FCNR deposits are mature products.

If you want diversified equity exposure in USD, the options are growing but still limited. Don't force your portfolio into products that don't exist yet.

Mix GIFT City products with other USD instruments (UAE deposits, international ETFs) to build a properly diversified portfolio.

Read our comprehensive guide on GIFT City: India's international financial hub for the full ecosystem overview.

👉 Tip: Start with the products that are well-established (GIFT City FDs, FCNR deposits) while the mutual fund and AIF ecosystem matures. As more fund houses enter GIFT City and the product range expands, you can gradually allocate to market-linked products. There's no rush to go all-in on a single product category. Track what's available through Belong's GIFT City tools.

Thing 8: Match the Product to Your Life, Not Just the Rate

This is the thing that separates a good investment decision from a clever one. The best USD product for you depends entirely on where your life is headed.

If you're staying in the UAE long-term (5+ years):

GIFT City USD FDs and mutual funds are your primary tools. You want the bulk of your USD allocation in products that earn well, stay tax-free and repatriate easily.

A mix of GIFT City FDs for stability and GIFT City mutual funds for growth gives you both safety and upside. Keep some money in your UAE bank for immediate liquidity.

If you're planning to return to India within 3 years:

Be careful with long-tenure GIFT City products. When you become Resident Indian, your non-resident exemptions on new income may change.

FCNR deposits (up to 5-year tenure) can continue until maturity even after you return, which is an advantage. GIFT City FDs also continue, but check the exact tax treatment with your advisor. Start building rupee assets alongside your USD portfolio.

Read our guide on creating a safe financial base before returning.

Your RNOR status after return gives you 2-3 years where foreign income isn't taxed in India.

Use this window to restructure your GIFT City investments strategically.

If you're moving to the UK:

Start thinking about UK tax implications now, not after the move. USD investments that are tax-free in the UAE may become taxable in the UK. You might want to lock in longer-tenure GIFT City FDs before you move, so the interest accrues while you're still a UAE tax resident.

After moving, new investments need careful structuring under the India-UK DTAA. Read our GIFT City checklist for UK NRIs.

If you're undecided about your future country:

Default to flexibility. Avoid long lock-ins (skip AIFs for now). Prefer products with easy premature withdrawal (GIFT City FDs over FCNR). Keep a balanced mix of USD and INR. This asset allocation approach gives you maximum optionality regardless of where life takes you.

If you have a specific goal in dollars (child's education abroad, property in the US or UK, building an emergency fund):

Match the investment tenure to the goal's timeline. Education in 5 years? Ladder GIFT City FDs across 1, 2, 3 and 5-year tenures. Emergency fund? Keep it in a UAE savings account or a short-tenure GIFT City FD, not an AIF. Read our comparison of laddering FDs vs lump sum deposits.

👉 Tip: Write down your top three financial goals and the currency each goal is denominated in. If the goal is in USD (overseas education, international retirement, emergency fund abroad), that portion belongs in USD products. If the goal is in INR (Indian property, family support, eventual return), that portion belongs in INR products. This simple exercise prevents the most common mistake: choosing investments based on rates rather than goals. Run through your goals using our investment planning framework.

The Checklist: Run Through Before You Invest

Before you commit any dollars, verify these eight points.

1. Product clarity: Can you explain exactly what you're investing in? GIFT City FD, FCNR, mutual fund, AIF, or UAE deposit?

2. Country-specific tax: Have you confirmed the tax treatment in both India AND your country of residence?

3. Insurance and protection: Do you understand what happens to your money if the institution fails?

4. Total cost: Have you calculated SWIFT fees, conversion spreads, and any TCS impact?

5. Tax structure: Is the "tax-free" benefit an exemption (permanent) or a deferral (conditional)?

6. Liquidity terms: What happens if you need the money before maturity? What's the penalty?

7. Product maturity: Is this a well-established product or a new offering with limited track record?

8. Life plan alignment: Does this product fit where you are today AND where you might be in 3-5 years?

If you can answer all eight confidently, you're ready. If any feels uncertain, that's the conversation you need to have before investing.

The Decision Isn't Just Financial

After 12+ years of advising NRIs, the one thing we've learned at Belong is this: the right USD investment for you isn't the one with the highest rate.

It's the one that lets you sleep at night knowing your money is where it should be, doing what it should be doing, protected the way it should be protected.

These eight checkpoints exist because we've seen NRIs make each of these mistakes.

The NRI who didn't know FCNR pays zero interest on early withdrawal. The one who assumed "tax-free" meant forever, in every country.

The one who concentrated USD 200,000 in a single bank without understanding the insurance gap.

None of them were careless. They were simply acting on incomplete information. This article is our attempt to make the information complete.

Thousands of NRIs in our WhatsApp community discuss these exact decisions every day. They share their bank experiences, compare transfer costs, flag regulatory changes and help each other avoid mistakes.

If you're at the start of your USD investment journey, that's the best place to ask the questions this article might have raised.

And when you're ready to act, the Belong app makes the process simple. Compare GIFT City FD rates across banks. Explore GIFT City mutual funds and AIFs.

Track the GIFT Nifty in real time. Complete your KYC digitally from the UAE. The eight checkpoints come first. The investment follows.

Disclaimer: This article is for informational purposes only and does not constitute financial, tax or legal advice. Investment decisions should be made after consulting qualified financial advisors. Regulatory frameworks, tax laws and interest rates are subject to change. Past performance and current rates do not guarantee future results. All data cited is from published sources as of early 2026.