You've probably heard two names thrown around in NRI investment circles: RBI and IFSCA.
One governs your NRE/NRO accounts and mutual fund investments. The other oversees that tax-free USD fixed deposit your colleague keeps mentioning from GIFT City.
But here's where it gets confusing. Both operate in India. Both claim to regulate NRI investments. And both have different rules for the same things.
At Belong, we've spent years helping NRIs in the UAE navigate this exact confusion. Our WhatsApp community discusses this topic almost daily.
The question isn't which regulator is "better."
It's understanding which one applies to your specific investment and why it matters for your returns and compliance.
This guide breaks down exactly who governs what, so you can stop second-guessing your investment decisions.
The Fundamental Difference: Two Jurisdictions, One Country
Think of it like this. India has two distinct financial zones operating under different rules.
Mainland India operates under the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority (IRDAI), and Pension Fund Regulatory and Development Authority (PFRDA).
GIFT City IFSC operates under a single unified regulator: the International Financial Services Centres Authority (IFSCA).
The IFSCA was established on April 27, 2020, under the International Financial Services Centres Authority Act, 2019. Before this, even GIFT City operations were regulated by multiple domestic regulators.
Now, IFSCA has absorbed the powers of RBI, SEBI, IRDAI, and PFRDA within the IFSC jurisdiction.
This distinction is crucial. Your NRE fixed deposit in Mumbai follows RBI rules. Your USD fixed deposit in GIFT City follows IFSCA rules. Same country, completely different regulatory frameworks.
👉 Tip: Before investing, always check whether the product operates under RBI/SEBI or IFSCA. This determines your tax treatment, repatriation rules, and compliance requirements.
What Does RBI Actually Regulate for NRIs?
The Reserve Bank of India governs most of what you think of as "traditional" NRI banking and investments.
NRI Account Types Under RBI
RBI regulations under the Foreign Exchange Management Act (FEMA) determine how you can hold money in India:
Account Type | Currency | Repatriation | Tax on Interest |
|---|---|---|---|
NRE (Non-Resident External) | INR | Fully repatriable | Tax-free |
NRO (Non-Resident Ordinary) | INR | USD 1 million/year | Taxable at 30% + cess |
FCNR (Foreign Currency Non-Resident) | Foreign currency | Fully repatriable | Tax-free |
The RBI also mandates that NRIs cannot hold regular resident savings accounts. When you become an NRI, your existing account must be redesignated as NRO, or you must open a fresh NRE/NRO account.
Stock Market Investments Under RBI/SEBI
To invest in Indian equities, you need a Portfolio Investment Scheme (PIS) account through an RBI-authorised bank.
Key restrictions:
- Individual NRIs can invest up to 5% of a company's paid-up capital
- Aggregate NRI investment capped at 10% (can be raised to 24% with company approval)
- Every trade is reported to RBI
- Only one PIS account allowed per NRI
As of 2025, RBI has simplified the process. You no longer need separate NRE and NRO PIS accounts. A single NRE PIS-enabled account handles both repatriable and non-repatriable investments.
Property and Repatriation Under RBI
The RBI governs how much you can repatriate from India. Current limits include:
- Up to USD 1 million annually from NRO accounts (after paying applicable taxes)
- Up to USD 2 million annually from property sales without prior RBI approval (as of 2025)
👉 Tip: Keep detailed records of all transfers. RBI compliance audits are rare but thorough when they happen. Use Belong's Compliance Compass to track your obligations.
What Does IFSCA Regulate in GIFT City?
The International Financial Services Centres Authority is a unified regulator with a fundamentally different mandate: to make India competitive with Singapore, Dubai, and Mauritius as a global financial hub.
IFSCA's Scope
IFSCA regulates everything within GIFT City IFSC:
- Banking units (IBUs) offering foreign currency accounts
- Stock exchanges (NSE IFSC and India INX)
- Insurance companies
- Fund management entities (mutual funds, AIFs)
- Finance companies
- Fintech entities
The key difference?
IFSCA operates with a "light-touch" approach designed for international investors. It's not replacing RBI for domestic operations. It's creating an alternative jurisdiction within India.
Products Governed by IFSCA
Product | IFSCA Regulation | Key Benefit |
|---|---|---|
USD Fixed Deposits | IFSCA Banking Regulations, 2020 | Tax-free interest under IFSC framework |
GIFT City Mutual Funds | IFSCA Fund Management Regulations, 2025 | Zero capital gains tax under Section 10(4D) |
AIFs in IFSC | IFSCA Fund Management Regulations | Minimum investment reduced to USD 75,000 |
Trading on NSE IFSC/India INX | IFSCA Capital Market Regulations | No STT, no capital gains tax on many products |
Why IFSCA Created a Separate Framework
Before 2020, NRIs investing in GIFT City dealt with multiple regulators. Want to open a bank account? RBI rules. Buy a mutual fund? SEBI rules. Get insurance? IRDAI rules.
This created compliance nightmares. IFSCA consolidated these powers for IFSC operations, reducing overlap and streamlining licensing.
According to the IFSCA official website, over 700 entities are now registered in GIFT City across banking, insurance, capital markets, and fund management.
The Critical Tax Differences
This is where understanding the regulatory split becomes financially important.
Under RBI/SEBI (Mainland India)
- NRE FD interest: Tax-free
- NRO FD interest: Taxable at 30% + surcharge
- Mutual fund gains: TDS of 10-30% depending on fund type and holding period
- Equity trades: Securities Transaction Tax (STT) applies
- Long-term capital gains on equity: 12.5% (post Budget 2025)
Under IFSCA (GIFT City)
- USD FD interest: Tax-free under IFSC framework
- Mutual fund gains: Zero capital gains tax under Section 10(4D)
- Equity trades on IFSC exchanges: No STT, no capital gains tax on specified securities
- Derivatives: Income from non-deliverable forward contracts exempt under Section 10(4E)
The Finance Bill 2025 expanded these exemptions to include transactions with Foreign Portfolio Investors operating in GIFT City.
👉 Tip: "Tax-free in India" doesn't mean tax-free globally. If you're a US NRI, PFIC rules may apply to pooled funds. UK NRIs should consider remittance basis taxation. Always check both jurisdictions. Use Belong's NRI Tax Filing Service if you're unsure.
Repatriation Rules: RBI vs IFSCA
Repatriation is often the biggest concern for NRIs. You want to know: can I get my money back when I need it?
Under RBI
- NRE accounts: Fully repatriable (principal and interest)
- FCNR accounts: Fully repatriable
- NRO accounts: Up to USD 1 million per financial year after paying taxes
- Property sale proceeds: Up to USD 2 million annually (2025 rules)
The catch? NRO repatriation requires Form 15CA/15CB filing, a certificate from a Chartered Accountant, and proper tax clearance.
Under IFSCA
GIFT City operates in foreign currency. Your USD deposits stay in USD. When you want to repatriate, there's no currency conversion to navigate.
Repatriation from GIFT City IBU accounts is governed by IFSCA guidelines, which allow full repatriation through NRE or FCNR accounts under RBI and IFSC frameworks.
The key advantage? Since GIFT City is treated as a "non-resident zone" under FEMA, your money never technically entered India's domestic economy. Repatriation is simpler.
Account Types: What Can You Open Where?
RBI-Regulated Accounts
Account | Purpose | Who Can Open |
|---|---|---|
NRE Savings/FD | Foreign income in INR | NRIs, OCIs |
NRO Savings/FD | Indian income in INR | NRIs, OCIs |
FCNR (B) | Foreign currency deposits | NRIs |
PIS Account | Stock trading (repatriable) | NRIs with NRE account |
IFSCA-Regulated Accounts
Account | Purpose | Who Can Open |
|---|---|---|
Global Savings Account | Foreign currency savings | NRIs, Foreign nationals |
IBU Term Deposit | USD/GBP/EUR fixed deposits | NRIs, OCIs |
Trading Account (NSE IFSC) | Equity/derivatives trading | NRIs, Foreign nationals |
Demat Account (IFSC) | Holding securities | NRIs, Foreign nationals |
You cannot use your existing NRE account for GIFT City investments. You need a separate IBU account opened with a bank's GIFT City branch (like ICICI Bank IBU, HDFC Bank IBU, or Axis Bank IBU).
Compare NRI fixed deposit rates across NRE, NRO, FCNR, and GIFT City options using Belong's comparison tool.
👉 Tip: Many banks now offer doorstep KYC for UAE residents. IFSCA implemented video KYC in July 2025, allowing remote account opening without visiting India.
When RBI and IFSCA Overlap
Despite being separate jurisdictions, there are connection points.
Funds Flow Between Jurisdictions
When you send money from your UAE bank to a GIFT City IBU account, RBI's Liberalised Remittance Scheme (LRS) doesn't apply because you're not remitting to domestic India. You're sending money to an IFSC unit operating in foreign currency.
But if an entity in GIFT City wants to invest in domestic Indian markets, they need to follow SEBI's FPI (Foreign Portfolio Investor) regulations and RBI's foreign investment rules.
Coordination Between Regulators
IBUs (IFSC Banking Units) must follow RBI directives for specific functions. For example, when opening a Special Non-Resident Rupee Account, IFSCA Banking Regulations require compliance with RBI guidelines.
The IFSCA Banking Handbook explicitly states that banking units must comply with their parent bank's home regulator unless otherwise specified by IFSCA.
How This Affects Your Investment Choices
Let's make this practical.
Choose RBI-Regulated Products When:
- You have Indian-source income (rent, dividends, pension)
- You want to invest in Indian equity directly through PIS
- You prefer INR-denominated deposits
- You plan to use funds for Indian expenses
- You're investing in domestic mutual funds through SIP or lump sum
Choose IFSCA-Regulated Products When:
- You want USD-denominated returns (protection against rupee depreciation)
- You want tax-free capital gains on mutual funds
- You want to avoid TDS deduction on redemptions
- You prefer no currency conversion hassle
- You're planning long-term wealth building with tax efficiency
A Balanced Approach
Most NRIs we work with at Belong maintain both:
- NRE/NRO accounts for Indian income and expenses
- GIFT City accounts for USD savings and tax-efficient investing
This isn't about choosing one over the other. It's about using each system for what it does best.
Explore GIFT City mutual funds like the Tata India Dynamic Equity Fund or DSP Global Equity Fund for tax-efficient exposure to Indian equities.
Deposit Insurance: An Important Caveat
Here's something that often gets overlooked.
RBI-Regulated Deposits
NRE, NRO, and FCNR deposits at domestic Indian banks are covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to Rs 5 lakh per depositor per bank.
GIFT City Deposits
GIFT City fixed deposits are NOT covered under India's DICGC insurance scheme. IFSCA operates under a different framework. This doesn't mean your money is unsafe. Banks operating in GIFT City maintain capital adequacy requirements often stricter than domestic norms. But the deposit insurance safety net doesn't apply.
👉 Tip: When choosing GIFT City deposits, stick to IBUs of established banks like SBI, ICICI, HDFC, or Axis. Their parent banks' balance sheet strength provides implicit security.
Recent Regulatory Updates (2025)
Both regulators have made significant changes in 2025.
RBI Updates
- Simplified PIS account management: One NRE PIS account covers both repatriable and non-repatriable investments
- Property repatriation limit increased to USD 2 million annually
- Updated FEMA regulations for cross-border rupee transactions (January 2025)
- Stricter KYC requirements effective August 2025
IFSCA Updates
- Fund Management Regulations 2025 replacing 2020 framework
- Minimum corpus for AIFs reduced from USD 5 million to USD 3 million
- Open-ended funds can start with USD 1 million (scaling to USD 3 million in 12 months)
- Individual investor minimum for AIFs reduced to USD 75,000
- Video KYC approved for NRI account opening (July 2025)
- New Global In-House Centres Regulations 2025 for GICs
Track the latest updates on GIFT City benefits for NRIs.
Practical Steps: Getting Started
If You Want to Invest Under RBI/SEBI Framework
- Open NRE/NRO account if you don't have one (best NRI accounts compared)
- Complete KYC with PAN, passport, and address proof
- For equity: Apply for PIS through your bank
- For mutual funds: Complete KYC through a KRA
- Link your accounts and start investing
If You Want to Invest Under IFSCA Framework
- Choose an IBU bank (banks in GIFT City)
- Open a foreign currency account (IBU Global Savings or Term Deposit)
- For trading: Open demat and trading account with an IFSCA-registered broker
- For mutual funds: Invest through registered fund management entities
- For AIFs: Meet minimum investment requirements and complete FEMA declarations
Use Belong's Residential Status Calculator to confirm your NRI status before opening accounts.
Common Mistakes to Avoid
Mistake 1: Assuming All Indian Investments Follow Same Rules
A mutual fund bought through your NRO account follows SEBI regulations. A mutual fund bought through GIFT City follows IFSCA regulations. The tax treatment is completely different.
Mistake 2: Ignoring Your Home Country Tax
IFSCA can make your investment tax-free in India. But the US taxes global income. The UK has complex remittance rules. Always consider both jurisdictions.
Mistake 3: Using Wrong Accounts
Some NRIs try to use NRE accounts for GIFT City investments or vice versa. These are separate systems requiring separate accounts.
Mistake 4: Not Understanding Repatriation Before Investing
Know how you'll get your money back before you put it in. NRO repatriation has limits. NRE and GIFT City don't. Plan accordingly.
Mistake 5: Overlooking Compliance Requirements
Both RBI and IFSCA have compliance requirements. Missing them can freeze accounts or trigger penalties.
How Belong Helps You Navigate Both Systems
Understanding regulations is one thing. Acting on them is another.
At Belong, we've built tools and services to help NRIs invest confidently in both regulatory environments:
- NRI FD Comparison Tool: Compare rates across NRE, NRO, FCNR, and GIFT City deposits
- GIFT City Mutual Funds: Explore tax-free investment options
- Residential Status Calculator: Determine your tax status
- Compliance Compass: Track your regulatory obligations
- NRI Tax Filing: Professional help with Indian and overseas taxes
Conclusion
RBI governs your traditional NRI banking: NRE/NRO accounts, domestic mutual funds, and equity investments through PIS. IFSCA governs GIFT City: USD deposits, tax-free mutual funds, and trading on IFSC exchanges.
They're not competitors. They're different tools for different purposes.
The smart approach? Use both strategically. Keep NRE/NRO for Indian income and rupee needs. Use GIFT City for USD savings and tax-efficient wealth building.
If you're still unsure which path fits your situation, join our WhatsApp community where thousands of NRIs discuss these exact questions daily.
Ready to take the next step?
Join Belong's NRI WhatsApp Community for real-time discussions on NRI investments.
Download the Belong App to explore GIFT City investment options and compare FD rates.
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