GIFT City Funds vs Overseas Platforms for NRIs - Costs, Taxes & Rules

Last year, a software engineer in our Belong WhatsApp community asked a question that stopped the group cold.

"I have $50,000 sitting in my UAE bank account. I want to invest globally. Should I open an Interactive Brokers account, go through a domestic Indian platform, or try this new GIFT City route everyone keeps about?"

Forty-seven messages followed. Half the group said overseas platforms. The other half swore by GIFT City.

Nobody agreed on the tax part. And almost everyone was confused about compliance.

That confusion is exactly why we wrote this piece. At Belong, we've helped thousands of NRIs compare these routes side by side.

The answer is rarely one-size-fits-all. It depends on where you live, what you earn, how much you want to invest, and when you plan to come back to India.

This guide breaks down every factor: costs, taxes, compliance rules, and the grey areas most blogs skip entirely.

By the end, you won't just understand the difference. You'll know which route fits your specific situation.

The Silent Shift Most NRIs Missed

Between 2023 and 2025, GIFT City went from a niche financial zone to India's answer to Singapore and Dubai. Here's what changed:

SEBI allowed 100% NRI ownership of funds domiciled at GIFT IFSC in June 2024, removing the earlier 50% cap (Source: SEBI Circular, June 2024).

IFSCA reduced the minimum AIF investment from $150,000 to $75,000 in February 2025 (Source: IFSCA Circular, February 2025).

Tata Asset Management launched the first retail inbound mutual fund from GIFT City in September 2025. The minimum? Just $500 (Source: Business Standard, September 2025).

The tax holiday for GIFT City entities was extended through March 2030 in Union Budget 2025 (Source: Finance Bill 2025).

From April 2026, mutual funds and ETFs can relocate to GIFT City from offshore jurisdictions without triggering capital gains tax (Source: Finance Bill 2025).

These aren't small updates. They fundamentally changed the math. If you compared GIFT City vs overseas platforms two years ago, that comparison is now outdated.

👉 Tip: Track GIFT City developments in real time using the GIFT Nifty tracker on Belong. Regulatory changes can shift the cost equation overnight.

What Exactly Are "Overseas Platforms" for NRIs?

Before comparing, let's clarify what we mean. When NRIs say "overseas platforms," they typically mean one of three routes:

International brokerages like Interactive Brokers, Saxo Bank, or Charles Schwab.

These let you buy US stocks, global ETFs, and bonds from wherever you live. They're regulated by authorities like the SEC (US), FCA (UK), or MAS (Singapore).

UAE-based platforms like Sarwa, StashAway, or local bank wealth management arms.

These are regulated by the SCA or DFSA and offer access to global markets, usually through ETFs or managed portfolios.

Indian domestic platforms with NRI access like Zerodha, ICICI Direct, or HDFC Securities.

These let you invest in Indian markets via PIS (Portfolio Investment Scheme) or Non-PIS accounts through NRE/NRO routes.

Each route comes with its own fee structure, tax treatment, and compliance burden.

The mistake most NRIs make? Comparing only the brokerage fee while ignoring the total cost of ownership.

GIFT City Funds: A Quick Primer for Those Starting Out

GIFT City, short for Gujarat International Finance Tec-City, houses India's first International Financial Services Centre (IFSC). It sits in Gandhinagar, Gujarat, but for financial purposes, the RBI treats it as foreign territory (Source: RBI, 2018 notification).

The regulator here is not SEBI or RBI directly. It's the IFSCA (International Financial Services Centres Authority), a unified regulator with powers similar to both (Source: IFSCA Act 2019).

What can NRIs invest in through GIFT City?

GIFT City mutual funds denominated in USD, GBP, EUR, and other foreign currencies. These are managed by Indian AMCs like Tata, DSP, and Edelweiss but registered under IFSCA, not SEBI.

Alternative Investment Funds (AIFs) covering private equity, real estate, infrastructure, and structured debt. Over 200 AIFs operate from GIFT City as of mid-2025 (Source: IFSCA Bulletin Q1 2025).

USD fixed deposits through banks like ICICI, HDFC, Axis, and SBI at their IFSC Banking Units (IBUs). Compare current rates on Belong's FD rate explorer.

Direct equity trading on NSE IFSC and India INX in both Indian and global stocks.

Portfolio Management Services (PMS) for customized portfolios.

The key distinction: these investments stay in foreign currency. No forced rupee conversion. No hidden forex markup eating into your returns.

👉 Tip: Explore different types of GIFT City mutual funds before deciding. Not all of them qualify for the same tax treatment.

The Cost Comparison Most Blogs Get Wrong

Here's where the real difference lies. And it's not where you'd expect.

Brokerage and Platform Fees

On the surface, an overseas platform like Interactive Brokers looks cheapest. But that ignores several hidden layers.

The Hidden Cost Layer: What Gets Missed

Currency conversion on entry and exit.

When you invest through Indian domestic platforms, you convert AED/USD to INR going in.

Then INR back to AED/USD coming out. At a 2.5% bank markup each way, that's 5% lost on a round trip (Source: RBI data on bank forex spreads). On ₹10 lakh invested over 5 years, that's easily ₹50,000–₹75,000 gone.

GIFT City eliminates this entirely. You invest in USD. You redeem in USD. Zero conversion.

TDS deduction and refund delay.

Indian mutual funds deduct TDS on redemption. For NRIs, this can be 12.5% on long-term capital gains above ₹1.25 lakh, or even higher on short-term gains (Source: Income Tax Act, Section 195).

You can claim a refund by filing ITR, but that takes 6–12 months.

GIFT City mutual funds have no TDS. The full redemption amount hits your account immediately.

PIS reporting costs.

If you trade Indian stocks through an NRE account, every transaction gets reported to RBI via your PIS bank.

Banks charge ₹500–₹1,500 per year for this, plus per-trade reporting fees. On the GIFT City route? No PIS required.

Exit load differences.

Many Indian equity mutual funds charge 1% exit load for redemptions within 12 months.

GIFT City funds have their own exit load structures, but several newer funds offer more flexible terms.

👉 Tip: Before choosing any platform, calculate the total cost of ownership across 5 years, not just the visible brokerage. Our investment comparison tools can help you run these numbers.

Tax Treatment: Where GIFT City Changes the Game

This is the single biggest differentiator. And also the most misunderstood part.

GIFT City Tax Benefits for NRIs

Under Section 10(4D) of the Income Tax Act, income from the transfer of units in "specified funds" set up under IFSCA regulations is exempt from Indian income tax for non-residents (Source: Income Tax Act, Section 10(4D)).

What this means in practice:

Capital gains on redemption of qualifying GIFT City mutual funds? Exempt in India.

No TDS deducted at source.

No requirement to file Indian ITR if this is your only Indian income.

For Category III AIFs that invest in Indian equity mutual funds (not directly in stocks), distributions to NRI investors are also fully exempt from capital gains tax in India (Source: IFSCA Fund Management Regulations 2022, amended 2025).

Transactions within GIFT City exchanges are exempt from Securities Transaction Tax (STT), Commodities Transaction Tax (CTT), and GST on offshore services (Source: IFSCA official NRI page).

For UAE-based NRIs where there's no local capital gains tax, this creates a genuinely tax-free investment pathway that almost no other route can match.

How Overseas Platforms Are Taxed

Interactive Brokers / Saxo Bank (investing in US stocks):

The US withholds 25% on dividends for Indian passport holders. The India-US DTAA can reduce this to 15% with proper W-8BEN filing. But UAE residents with Indian passports don't benefit from US-UAE DTAA on this (Source: IRS Publication 901).

Capital gains on US stocks are generally not taxed by the US for non-residents. But they're taxable in India based on your residential status under Indian tax law.

Indian domestic platforms (stocks/mutual funds):

Short-term capital gains taxed at 20%. Long-term capital gains above ₹1.25 lakh taxed at 12.5% (Source: Finance Act 2024, applicable from FY 2024-25).

TDS is deducted upfront. You file ITR to claim refunds.

DTAA benefits may reduce double taxation, but you need a Tax Residency Certificate from your country of residence to claim them.

The Tax Comparison Table

👉 Tip: "Tax-free in India" doesn't mean tax-free everywhere. UAE NRIs currently enjoy no capital gains tax locally. But if you're in the UK, US, or Canada, your home country still taxes foreign income. Always check both sides of the DTAA.

What Most Blogs Miss: The Compliance Burden

This is the part where articles usually go quiet. But compliance is what keeps NRIs awake at night.

GIFT City Compliance: Surprisingly Simple

FEMA treats GIFT City as foreign territory. This means:

Your investment falls outside the standard FEMA restrictions that apply to NRE/NRO investments in mainland India.

No PIS account needed. No RBI reporting for each trade.

100% repatriation of principal and returns without the complications of standard repatriation procedures.

KYC is IFSCA-compliant, not SEBI-compliant. Since July 2025, IFSCA allows video KYC, so you can complete onboarding from Dubai without visiting India. You'll need your passport, overseas address proof, and visa/work permit.

If you invest solely through Category I or II AIFs in GIFT City, you don't even need a PAN card (Source: Income Tax Act, Section 206AA exemption for IFSC).

Overseas Platform Compliance: Depends on Where You Are

From the UAE: Relatively straightforward. Interactive Brokers and Saxo Bank both accept UAE residents.

Account opening takes 1–3 days. No FATCA complications since the UAE has its own CRS (Common Reporting Standard) agreement.

The hidden compliance risk: If you hold Indian passport and invest through overseas platforms, your investments may still be reportable to Indian tax authorities under India's CRS obligations.

This doesn't create a tax liability if you're a genuine non-resident. But it does mean your transactions are visible to Indian authorities.

From the US or Canada: This is where it gets painful. FATCA compliance means many Indian platforms refuse US-based NRIs entirely.

And GIFT City mutual funds are likely classified as PFICs (Passive Foreign Investment Companies) under US tax law, triggering complex Form 8621 filings and punitive tax rates on unrealized gains.

For US-based NRIs, PMS structures in GIFT City may work better since you own individual stocks directly, avoiding PFIC classification.

Indian Domestic Platform Compliance

The heaviest compliance burden of the three options:

PIS account required for NRE-linked stock trading, with every trade reported to RBI.

Form 10F and Tax Residency Certificate needed to claim DTAA benefits.

ITR filing required every year if you have capital gains or other Indian income.

15CA/15CB certificates needed for repatriation of sale proceeds.

Lower TDS certificate (Form 13) needed before property sales to avoid excess withholding.

👉 Tip: Compliance isn't just about rules. It's about your time. An NRI using Indian domestic platforms can easily spend 15-20 hours a year on tax filings, documentation, and follow-ups. Factor that cost into your comparison.

The Edge Case Nobody Talks About: Returning to India

Here's a scenario we see constantly at Belong.

An NRI in Dubai plans to return to India in 3-5 years. They're investing today. But what happens to their investments when their residential status changes?

Overseas platform holdings: You can generally keep your Interactive Brokers or Saxo account after returning to India. But your tax treatment changes completely.

Capital gains that were tax-free as an NRI become fully taxable as a resident. Dividend withholding credits may or may not offset Indian tax. And you might face LRS limits ($250,000/year) for new investments.

Indian domestic holdings: NRE accounts convert to resident accounts. NRO accounts continue. Your existing mutual fund folios transfer, but the tax regime changes. No more TDS-and-refund cycles, but also no more DTAA benefits.

GIFT City holdings: This is the interesting one. You can continue holding GIFT City investments even after becoming a resident, though the tax treatment may change for new investments.

The investments made while you were an NRI retain their character. But consult a tax advisor about the implications of the transition.

For NRIs who plan to return, GIFT City offers a unique advantage. Your investments are already in India's jurisdiction. There's no messy cross-border account conversion.

The currency stays in USD. And the RNOR (Resident but Not Ordinarily Resident) period gives you a 2-3 year buffer where foreign income isn't taxed in India.

Read more about the RNOR to resident transition and how it affects your investment income.

Myth vs Reality: Clearing Up Common Misconceptions

Myth: "GIFT City is only for the wealthy. You need $150,000 to start."

Reality: That was true for AIFs until February 2025 when IFSCA cut the minimum to $75,000.

For mutual funds, the Tata India Dynamic Equity Fund starts at just $500. And GIFT City FDs can start at $1,000 depending on the bank.

Myth: "Overseas platforms give you better diversification."

Reality: Through GIFT City, you can now access US stocks (Apple, Tesla, Nvidia) via NSE IFSC and BSE IFSC exchanges, global mutual funds through AMCs, and international bonds. The diversification gap is closing fast.

Myth: "GIFT City FDs aren't insured like bank FDs in India."

Reality: True. GIFT City deposits are not covered under DICGC's ₹5 lakh insurance.

However, the deposits are with the same banks (SBI, ICICI, HDFC, Axis) at their IFSC units, backed by the same bank balance sheets. The regulatory oversight comes from IFSCA, not RBI directly.

Myth: "Tax-free in GIFT City means tax-free everywhere."

Reality: GIFT City exempts your gains from Indian income tax. But your country of residence may still tax them.

UAE NRIs are safe since UAE has no capital gains tax. UK NRIs need to report gains on their Self Assessment. US NRIs face PFIC complications.

A Decision Framework: Which Route Fits You?

Instead of a generic recommendation, use this framework based on your situation:

Choose GIFT City if:

You're a UAE/GCC NRI investing $5,000+ and want tax-free returns with zero currency conversion.

You plan to invest in India with simplified compliance.

You want repatriation without FEMA complications.

You're planning to return to India and want investments that transition smoothly.

Choose an overseas platform if:

You want maximum choice across global markets (70,000+ instruments on some platforms).

You're a frequent trader who benefits from tight spreads and low per-trade costs.

You're comfortable managing your own tax reporting across jurisdictions.

You're US-based and need to avoid PFIC complications with structured products.

Choose Indian domestic platforms if:

You specifically want exposure to Indian small-caps, mid-caps, or thematic funds that aren't yet available in GIFT City.

You already have an established PIS account and active portfolio.

You're comfortable with the TDS-ITR refund cycle and have a CA managing your Indian taxes.

👉 Tip: Many NRIs don't choose just one route. A common strategy is using GIFT City for tax-efficient core holdings and an overseas platform for tactical global bets. The key is understanding the total cost and compliance load of each.

How to Start Investing Through GIFT City: The Practical Steps

Step 1: Open a Global Savings Account at an IFSC Banking Unit. ICICI, HDFC, Axis, and SBI all operate IBUs. You can hold accounts in USD, GBP, EUR, AED, and more.

Step 2: Complete IFSCA-compliant KYC via video call. You'll need your passport, overseas address proof (utility bill or bank statement under 3 months old), and residence visa. The process takes 15-30 minutes.

Step 3: Transfer funds via SWIFT from your overseas bank account to your IBU account. Do not transfer from NRO accounts. Mixing domestic funds complicates your tax status.

Step 4: Choose your investment. Compare GIFT City mutual funds, explore AIFs, or open a USD fixed deposit.

Step 5: Keep records. Even if no ITR is required in India, your country of residence may ask for documentation. Save all transaction confirmations and redemption statements.

The Bottom Line

GIFT City isn't just another investment option. For UAE-based NRIs, it's the first route that combines Indian market access with offshore-grade tax efficiency and foreign currency denomination, all under a single Indian regulator.

Overseas platforms still have their place, especially for traders who need global market breadth or US NRIs navigating PFIC rules. And Indian domestic platforms remain useful for specific Indian market segments.

But for the typical NRI in Dubai or Abu Dhabi looking to invest $5,000 to $500,000 with minimal tax, zero currency risk, and simple compliance? GIFT City now has the strongest value proposition.

The landscape has changed. Make sure your investment strategy has changed with it.

Many NRIs in our community are already comparing these routes with real numbers and sharing their experiences. Join them on our WhatsApp community where thousands of NRIs discuss GIFT City, tax strategies, and investment options every day.

Download the Belong app to compare GIFT City mutual funds, track GIFT Nifty, explore FD rates, and access tools built specifically for NRIs navigating these decisions.