7 Ways NRIs Can Invest in USD Legally

Last month, an NRI in our WhatsApp community posted a screenshot.

His NRE fixed deposit earned 7.2% in rupees.

Sounds great.

But when he converted the maturity amount back to dirhams, the rupee had fallen 4.3% during the same period.

His real return? Barely 2.8%.

This is the silent tax nobody talks about. Rupee depreciation.

At Belong, we hear this from NRIs every single day. You earn in dollars or dirhams. You save in dollars or dirhams. But the moment you invest in India, your money gets converted to rupees.

And you're suddenly betting on a currency you have zero control over.

The good news? You don't have to. There are now seven legal, regulated ways to keep your investments in USD while still accessing India's growth story.

Some of these are brand new. Some have been around for years but are poorly understood. And a few offer something rare: tax-free returns in dollars.

This guide covers every option, the tax rules behind each, the risks most blogs skip, and which one fits your specific situation.

Whether you're in Dubai, Abu Dhabi, London or New York, this is the only article you'll need on this topic.

Why USD Investing Matters More Than Ever for NRIs

Before we get into the seven options, here's why this conversation is urgent in 2025.

The Indian rupee has depreciated roughly 40% against the US dollar over the past decade. In 2015, one dollar bought about ₹63. Today, it buys over ₹85 (Source: RBI Reference Rate).

That's not a small shift. It changes the entire math of your investments.

If you earned 8% annually on a rupee investment but the rupee fell 3% each year against the dollar, your effective dollar return dropped to around 5%. After tax (30% TDS on NRO interest), you could end up with 2-3% in real terms. That's less than a basic US savings account.

This is why NRIs in the UAE and Gulf countries are increasingly asking one question: Can I invest in USD and still benefit from India's financial system?

The answer is yes. And the options have multiplied thanks to GIFT City, India's International Financial Services Centre in Gujarat.

👉 Tip: Currency risk isn't just an inconvenience. Over 10-15 years, it can eat up half your returns. Every NRI should have at least some USD-denominated investments as a hedge.

1. GIFT City USD Fixed Deposits

This is the breakout product of the last two years. And for good reason.

Banks operating inside GIFT City (also called IFSC Banking Units or IBUs) accept fixed deposits in US dollars from NRIs. These are not regular NRE or NRO FDs. They sit in a special economic zone governed by the International Financial Services Centres Authority (IFSCA).

How it works: You wire USD from your UAE or overseas bank account directly to a GIFT City bank. The money stays in dollars throughout. You earn interest in dollars. At maturity, you get your principal and interest back in dollars.

Current rates: USD FDs at GIFT City banks currently offer between 4% and 5.5% annually, depending on the bank and tenure (Source: Axis Bank GIFT City, ICICI Bank GIFT City). Compare this to US bank savings accounts offering 4-4.5%. The difference? GIFT City FD interest is tax-free in India.

Tax treatment: Interest earned on GIFT City FDs is exempt from Indian income tax under IFSCA regulations. No TDS is deducted. For NRIs living in zero-tax jurisdictions like the UAE, this means effectively zero tax on your returns.

Minimum investment: Varies by bank. Axis Bank GIFT City starts at USD 1,100. ICICI Bank requires a minimum of 1,000 foreign currency units.

Repatriation: Fully repatriable. Both principal and interest can be sent back to your overseas account without any RBI approvals or caps.

This is the closest thing to a "no-brainer" option for UAE-based NRIs who want safety, dollar protection and tax-free returns.

You can compare live GIFT City FD rates across banks on Belong's NRI FD Rate Comparison Tool.

👉 Tip: GIFT City FDs are not covered under RBI's deposit insurance (DICGC). But they are held with major Indian banks like SBI, ICICI, Axis and HDFC operating under IFSCA regulation. The counterparty risk is similar to any major Indian bank.

2. FCNR (Foreign Currency Non-Resident) Deposits

FCNR deposits have been around far longer than GIFT City. They are the traditional way NRIs invest in foreign currency through Indian banks.

How it works: You open an FCNR account with any major Indian bank (SBI, HDFC, ICICI, Axis, etc.). You deposit foreign currency, and the bank holds it in that currency for a fixed tenure of 1 to 5 years. Interest is paid in the same foreign currency.

Current rates: FCNR USD deposit rates range from about 3% to 5.45% across banks, depending on tenure and the bank (Source: Bank websites as compiled by Belong's FCNR guide). Higher-rate banks like DCB Bank and South Indian Bank offer up to 4.25-5.15% for specific tenures. Larger banks like SBI and ICICI tend to be slightly lower.

Tax treatment: Interest on FCNR deposits is completely tax-free in India under Section 10(15)(iv)(fa) of the Income Tax Act. No TDS is deducted.

Safety: FCNR deposits up to ₹5 lakh (approximately USD 5,900) per depositor per bank are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). This is an edge over GIFT City FDs, which are not DICGC-covered.

Repatriation: Fully repatriable. Principal and interest can be sent abroad without restrictions.

Tenure: Fixed at 1 to 5 years. No premature withdrawal penalty after one year at most banks, though you'll get a reduced rate.

FCNR is a solid choice for NRIs who want the safety net of DICGC insurance and prefer dealing with a domestic Indian bank branch they already know. Read our detailed comparison of NRE vs FCNR fixed deposits to understand which works better for your situation.

3. GIFT City Mutual Funds (USD-Denominated)

This is where things get exciting for NRIs who want growth, not just safety.

Mutual fund houses are now setting up Fund Management Entities (FMEs) inside GIFT City. These funds accept investments in USD and invest in Indian equities, debt or a mix of both. You get exposure to India's market without converting to rupees.

How it works: You invest in USD. The fund manager invests in Indian stocks or bonds. Your NAV is tracked in USD. When you redeem, you receive USD.

The first retail inbound mutual fund for NRIs from GIFT City launched in collaboration with Tata AMC: the Tata India Dynamic Equity Fund (Source: Belong). More funds are being launched as IFSCA continues to ease regulations.

Tax treatment: Capital gains earned through GIFT City mutual funds are exempt from Indian income tax, based on the current IFSCA framework. This is a massive advantage compared to regular Indian mutual funds, where NRIs face 12.5% long-term capital gains tax on equity gains above ₹1.25 lakh (Source: Income Tax Act, Section 112A).

Minimum investment: Typically USD 5,000 or more, making these more suited for mid-to-high net worth NRIs.

Repatriation: Fully repatriable since the investment originates in foreign currency.

Explore available GIFT City mutual funds on Belong or learn more about how GIFT City mutual funds compare to regular Indian mutual funds.

👉 Tip: GIFT City mutual funds are still a relatively new product category. The number of funds and AMCs is growing, but the options are fewer than what you'd find in regular Indian mutual funds. Start with a small allocation and increase as the ecosystem matures.

4. GIFT City Alternative Investment Funds (AIFs)

AIFs are the institutional-grade option. If mutual funds are the retail route, AIFs are for NRIs with a higher risk appetite and bigger ticket sizes.

How it works: Alternative Investment Funds registered in GIFT City pool money from investors and deploy it into equities, private credit, real estate, venture capital or structured products. Investments and returns are in USD.

Categories:

Category I AIFs invest in startups, social ventures, infrastructure and SMEs. Category II covers private equity, debt funds and fund-of-funds. Category III handles hedge funds and strategies involving derivatives.

Tax treatment: Income earned by Category III AIFs located in GIFT City IFSC is eligible for significant tax exemptions. Listed securities transactions are not considered taxable transfers. Income from derivatives is tax-free. No GST, no Securities Transaction Tax (STT), and no stamp duty on transactions within GIFT City (Source: IFSCA).

Minimum investment: Typically USD 150,000 or higher, as per IFSCA regulations for AIFs.

Who is this for? NRIs with investable surplus of USD 150,000+ who want exposure to private markets, structured credit or hedge fund strategies, without rupee risk.

This is the fast-growing frontier of NRI investing. Explore options through Belong's GIFT City AIF explorer or read our deep guide on AIFs, REITs and bonds for NRIs.

5. USD ETFs and Global Securities via GIFT City Exchanges

GIFT City has two operational exchanges: India International Exchange (India INX) and NSE International Exchange (NSE IFSC). Both allow trading in USD-denominated products.

What you can trade:

Global equity indices, commodity derivatives, currency futures and options, global ETFs and bonds listed on the GIFT City exchange. NRIs can trade without the restrictions that apply to domestic Indian exchanges.

How it works: You open a trading and demat account with a broker registered in GIFT City. Fund your account in USD. Trade global securities or India-linked products denominated in USD.

Tax treatment: Trading profits on listed securities in GIFT City IFSC enjoy tax exemptions. There's no STT, no stamp duty, and capital gains on listed securities transferred on IFSC exchanges are not treated as taxable transfers under the current IFSCA/Income Tax framework (Source: IFSCA).

Who is this for? NRIs who want to actively trade or invest in global markets from a single platform that also connects to India. This is especially useful for those who track the GIFT Nifty and want to take positions in India-linked derivatives.

Learn more about the full range of GIFT City investment products including FDs, mutual funds and ETFs.

👉 Tip: GIFT City exchanges also list derivative contracts linked to Nifty 50. If you're used to trading on DFM or Nasdaq Dubai, the interface and product structure will feel familiar. The key difference: your capital stays in USD.

6. UAE-Based USD Investments (National Bonds, Sukuk, USD Money Market Funds)

Not everything has to route through India. If you're in the UAE, you already live in a USD-pegged economy. That creates some unique local opportunities.

UAE National Bonds: Government-backed investment certificates in the UAE. Returns have historically ranged from 4% to 5.8% depending on the tier. They're Sharia-compliant and liquid. The AED is pegged to the USD at 3.6725 AED per dollar, so currency risk is effectively zero (Source: UAE Central Bank).

USD Sukuk and Bonds: Several UAE and GCC entities issue dollar-denominated sukuk (Islamic bonds). These pay periodic returns and return principal at maturity. Investment-grade sukuk from entities like Emirates NBD, Majid Al Futtaim or government-linked issuers offer 4-6% yields.

USD Money Market Funds: Available through most UAE banks and wealth management platforms. These invest in short-term dollar debt instruments and offer liquidity with moderate returns (3-4%).

Tax treatment: The UAE has no personal income tax. Returns are entirely tax-free locally. If you're investing UAE earnings (not India-sourced income), there's no Indian tax liability either.

Who is this for? NRIs who want to keep some capital deployed locally in the UAE for liquidity, emergency reserves or short-term goals, while staying in USD.

This complements your India-linked USD investments. Many NRIs in our community follow a split strategy: a portion in GIFT City for long-term, tax-free growth, and a portion in UAE instruments for near-term needs.

Read our guide on the best investment options in the UAE for NRIs for a full breakdown.

7. US Stock Market and Global ETFs (via International Brokerages)

The most direct way to invest in USD: buy US stocks and global ETFs.

How it works: NRIs in the UAE (and most other countries) can open accounts with international brokerages like Interactive Brokers, Saxo Bank or local UAE platforms like Sarwa. You invest in USD, hold US-listed stocks and ETFs and earn returns in USD.

Popular choices among NRIs: S\&P 500 index ETFs (like SPY or VOO), Nasdaq 100 ETFs (QQQ), global bond ETFs and sector-specific funds.

Tax treatment for UAE-based NRIs: The US imposes a 30% withholding tax on dividends paid to non-US persons. However, there's no US capital gains tax for non-residents.

Since the UAE has no personal income tax, your net tax is only on dividends. India does not tax overseas investment income of NRIs as long as the income is earned and received outside India.

FEMA compliance: Under India's Foreign Exchange Management Act, NRIs can freely invest their overseas earnings in markets outside India. There's no RBI approval required.

But if you use India-sourced funds (like rental income), those are subject to LRS (Liberalised Remittance Scheme) limits.

Who is this for? NRIs who want pure dollar exposure to the world's largest and most liquid stock market. This works well for long-term wealth building outside India.

👉 Tip: If you're combining US stock investing with India investments, track your total global portfolio allocation. Many NRIs over-allocate to India because of emotional bias. A 60-40 or 70-30 split between international and India investments often makes more sense for long-term wealth preservation.

What Most Blogs Miss: The Return-to-India Factor

Every USD investment decision carries a hidden question. Will you eventually return to India?

If yes, your USD investments need an exit strategy. Here's what changes:

When you become a resident Indian again, your FCNR deposits can continue till maturity but can't be renewed. GIFT City accounts remain accessible since GIFT City operates outside India's domestic financial perimeter.

Your RNOR (Resident but Not Ordinarily Resident) status gives you a 2-3 year tax buffer after returning. During this period, income earned outside India is not taxable. This is your window to restructure investments.

GIFT City is particularly valuable for returning NRIs. Your USD FDs and mutual funds in GIFT City can continue as is. The tax-free status still applies under current IFSCA rules, even as your domestic Indian investments become subject to regular taxation.

Read our detailed guide on what happens to your investments when you return to India.

Quick Comparison: All 7 Options at a Glance

The Mistake That Costs NRIs the Most

Here's something we see constantly at Belong. NRIs put all their savings into NRE rupee FDs because those are "tax-free." And they are, technically. NRE FD interest is exempt from Indian tax under Section 10(4)(ii) of the Income Tax Act.

But the returns are in rupees. Over a 5-year FD, the rupee can depreciate 15-20% against the dollar. Your 7% annual return suddenly becomes 3-4% in real dollar terms.

The smarter approach? Split your money. Keep some in NRE FDs for rupee goals (children's education in India, property EMIs, parents' expenses). And park the rest in USD-denominated instruments for goals denominated in dollars or dirhams.

This isn't about choosing one over the other. It's about matching the currency of your investment to the currency of your goal.

Read our full guide on safe investment options for NRIs for more on building a balanced portfolio.

👉 Tip: A simple rule of thumb: if the money is for a goal in India (property, wedding, retirement in India), invest in rupees. If the goal is outside India (children's overseas education, emergency fund in UAE, global retirement), invest in USD.

How to Avoid Double Taxation on USD Investments

One fear that holds NRIs back: paying tax twice. Once in India. Once in their country of residence.

For UAE-based NRIs, this is mostly a non-issue. The UAE has no personal income tax. And thanks to the India-UAE Double Taxation Avoidance Agreement (DTAA), there are clear rules to prevent double taxation on cross-border income.

For NRIs in the US, UK or other tax jurisdictions, the situation is more nuanced. You may need to claim Foreign Tax Credits in your resident country for taxes paid in India. DTAA provisions vary by country.

Key steps:

Obtain a Tax Residency Certificate (TRC) from your country of residence. Submit Form 10F to Indian institutions to claim DTAA benefits. File your Indian ITR even if TDS has been deducted.

Keep all SWIFT confirmations, bank statements and investment records for at least 7 years, as RBI and Income Tax can request proof of source of funds retrospectively.

The Bottom Line

The era of "invest in India = invest in rupees" is ending. GIFT City has opened a parallel financial highway where NRIs can invest in USD, earn tax-free returns, and access India's growth without currency anxiety.

You don't need to pick just one option from this list. Most smart NRI portfolios combine two or three: a GIFT City USD FD for the safe base, a GIFT City mutual fund for growth, and perhaps some US ETFs for global diversification.

The key is starting. Every month you keep 100% of your savings in rupee instruments while earning in dollars, you're taking a bet on the rupee that you might not even realize.

Thousands of NRIs across Dubai, Abu Dhabi, London and beyond are already making this shift. Many of them discuss strategies, share experiences and ask questions in our WhatsApp community every day. If you have a question about any of the seven options in this guide, that's where you'll get honest, real-world answers.

And if you want to compare GIFT City FD rates, explore mutual fund options or simply check your NRI residential status, the Belong app is built for exactly this. Download it and start exploring.

Disclaimer: This article is for informational purposes only and does not constitute financial or tax advice. Investment decisions should be made after consulting with qualified financial advisors. Past performance and current rates are subject to change. All regulatory information is based on rules as of 2025 and may be updated by relevant authorities.