6 Common Myths About Investing in USD as an NRI

Every Tuesday evening, our WhatsApp community lights up with the same debate.

Someone shares their NRE FD returns. Someone else points out the rupee fell again.

And then someone says it: "But USD investments don't give good returns."

That one sentence has probably cost NRIs more money than any bad stock pick or wrong mutual fund choice.

At Belong, we've spent the past year talking to thousands of NRIs across Dubai, Abu Dhabi, Sharjah and beyond. And we've noticed something.

The NRIs who avoid USD investments aren't doing it because they've analysed the numbers. They're avoiding it because of myths. Stories they heard from a colleague.

Half-truths from a WhatsApp forward. Outdated advice from a relationship manager who still pushes NRE FDs because that's what he knows.

These myths are expensive. They keep NRIs locked into rupee-only portfolios while the currency quietly erodes their wealth year after year.

This article takes the six most stubborn myths we encounter and dismantles them with data, regulation and real examples.

If even one of these myths has been sitting in the back of your mind, you owe it to your portfolio to read through.

Myth 1: "USD Investments Always Give Lower Returns Than INR"

This is the myth that does the most damage. And on the surface, it seems obviously true.

An NRE fixed deposit pays 7-7.5% interest. A GIFT City USD FD pays 4-5.5%. An Indian equity mutual fund has delivered 12-15% CAGR over the long term. A US S\&P 500 ETF has delivered about 10-11%.

Case closed? Not even close.

The number everyone forgets: currency depreciation.

The Indian rupee has depreciated roughly 38% against the US dollar over the past decade. From ₹62.78 per dollar in March 2015 to ₹87.12 per dollar in March 2025 (Source: FundsIndia Wealth Conversations, Feb 2025).

That works out to roughly 3.4% depreciation per year.

Since 1991, the trend has been even steeper. The rupee has lost approximately 4.5% annually against the dollar on average (Source: Kotak Mutual Fund/Bloomberg, Dec 2025).

Now redo the math. Your 7.5% NRE FD minus 3.4% annual depreciation gives you about 4.1% in real dollar terms. A GIFT City USD FD paying 5% with zero currency risk suddenly looks better, not worse.

For equities, the gap is even more revealing. The MSCI India Index delivered 9.5% in rupee terms over the past 10 years. In dollar terms? Just 5.4% (Source: Outlook Money, Nov 2024). That 4.1% gap is currency depreciation silently doing its work.

The reality: When you measure returns in the currency you actually earn and spend, USD investments often match or beat INR investments on a risk-adjusted basis. The "higher" rupee returns are partly an illusion created by ignoring the falling rupee.

Compare live rates yourself on Belong's NRI FD Rate Comparison Tool and run the numbers in your earning currency.

👉 Tip: Whenever someone quotes you a return on an Indian investment, ask one question: "What's the return in dollars?" If they can't answer, they haven't done the full math. Neither should you invest without doing it.

Myth 2: "GIFT City Is New and Risky. My Money Isn't Safe There."

This is the fear we hear most often from cautious, first-time investors. And it's completely understandable. GIFT City sounds new. It sounds unfamiliar. And NRIs have been burned before by things that sounded too good to be true.

So let's separate the facts from the fear.

Who regulates GIFT City?

GIFT City's financial services are regulated by the International Financial Services Centres Authority (IFSCA), a statutory body established by the Indian Parliament through the IFSCA Act, 2019.

IFSCA is chaired by a former SEBI chairman and has the same legal authority as RBI, SEBI and IRDAI within GIFT City's jurisdiction. This isn't some informal free zone. It's a sovereign, parliament-backed regulatory body.

Which banks operate there?

The banks offering USD fixed deposits in GIFT City aren't startups or fintech experiments.

They are IFSC Banking Units (IBUs) of the same institutions NRIs already use: State Bank of India, ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, HSBC and others (Source: ICICI Bank GIFT City, Axis Bank GIFT City, HSBC GIFT City, SBI GIFT City).

When you deposit USD 10,000 in a GIFT City FD with SBI, your money is with the State Bank of India.

The same bank that holds deposits for millions of Indians. The only difference? This particular branch operates under IFSCA rules instead of RBI rules, which is why your interest is tax-free.

What about deposit insurance?

This is the one genuine difference. GIFT City FDs are not covered by DICGC (Deposit Insurance and Credit Guarantee Corporation) insurance. FCNR deposits at domestic branches are covered up to ₹5 lakh per depositor per bank.

However, DICGC coverage of ₹5 lakh is roughly USD 5,600. For most NRIs making deposits of USD 10,000 or more, the insurance covers only a fraction anyway.

The real safety net is the creditworthiness of the bank itself, and you're dealing with the same top-tier Indian banks in both cases.

The reality: GIFT City is as "risky" as banking with SBI, ICICI or HDFC. The regulatory framework is robust.

The banks are the same ones you already trust. The tax-free treatment exists because the Indian government specifically designed GIFT City to attract international capital. It's a feature, not a bug.

Read our detailed explainer on how GIFT City works and why it's safe for NRIs and the pros and cons of GIFT City for a balanced assessment.

👉 Tip: If you're still uncertain, start small. Open a GIFT City USD FD with USD 1,100 (the minimum at Axis Bank) or USD 1,000 (minimum at ICICI Bank). See how it works. Experience the process. Then scale up once you're comfortable.

Myth 3: "USD Investments Are Only for Rich NRIs"

This myth persists because of how USD investing worked five years ago. The only real options were FCNR deposits (requiring minimum USD 1,000), US stock brokerages (with minimum balances and account charges) or offshore wealth management products (designed for HNIs with USD 100,000+).

That's no longer the case. Here's what's actually available today and how much you need to get started.

Sources: Axis Bank GIFT City, ICICI Bank GIFT City

USD 1,000 is roughly AED 3,670. That's less than many NRIs spend on a single weekend trip. The entry barrier to USD investing has all but disappeared.

Even GIFT City mutual funds, which were initially positioned as HNI products, are becoming more accessible. The Tata India Dynamic Equity Fund, the first retail inbound mutual fund for NRIs from GIFT City (Source: Belong), has brought market-linked USD investing to a much wider audience.

The reality: USD investing is no longer an HNI privilege. An NRI earning AED 8,000 per month can comfortably start a USD FD in GIFT City with one month's savings. The products exist at every ticket size.

Explore the full range of options on Belong's platform and see what fits your budget.

Myth 4: "I'll Get Taxed Twice on USD Investments"

This is the myth that paralyses NRIs into inaction.

The fear of double taxation, of paying tax in India and then again in the UAE (or UK, or US), stops many NRIs from even researching USD investment options.

Let's break this down by scenario, because the answer depends entirely on where you live and what you invest in.

Scenario 1: UAE-based NRI investing in GIFT City USD FD

Interest earned on GIFT City FDs is exempt from Indian income tax under the IFSCA framework. No TDS is deducted. The UAE has no personal income tax. Net tax paid: zero on both sides.

This is the cleanest double-zero tax scenario possible. Your returns compound without any leakage.

For NRIs in other Gulf countries with zero income tax (Saudi Arabia, Qatar, Oman, Kuwait, Bahrain), the same applies.

Scenario 2: UAE-based NRI investing in FCNR deposits

Interest on FCNR deposits is tax-free in India under Section 10(15)(iv)(fa) of the Income Tax Act (Source: Income Tax Act). No TDS is deducted. UAE has no personal income tax. Net tax: zero again.

Scenario 3: UAE-based NRI investing in regular Indian mutual funds (INR)

Capital gains are taxed in India. Long-term capital gains on equity funds are taxed at 12.5% above ₹1.25 lakh per year.

Short-term gains are taxed at 20%. TDS is deducted at source for NRIs. But since the UAE has no income tax, there's no second layer of tax. You pay only in India.

Scenario 4: UK-based NRI investing in GIFT City

GIFT City investment income is tax-free in India. But the UK taxes worldwide income of its tax residents.

So UK NRIs would need to declare GIFT City returns on their UK tax return and pay UK tax. However, they can claim credit for any tax paid in India (which is zero), effectively paying only UK tax. The India-UK DTAA prevents double taxation but doesn't eliminate the UK's right to tax.

Scenario 5: US-based NRI investing in USD

The US taxes worldwide income. Any returns from GIFT City or FCNR deposits would be taxable in the US. India's DTAA with the US allows credit for Indian taxes paid.

Since GIFT City income is tax-free in India, you'd pay US tax only. US NRIs also face PFIC rules on Indian mutual funds, which can create complex tax situations.

The reality: For UAE and Gulf-based NRIs, double taxation on USD investments is essentially a non-issue. GIFT City products are tax-free in India, and the UAE charges no income tax. The India-UAE DTAA provides an additional safety net.

For NRIs in the UK and US, the DTAA framework prevents true double taxation, though you'll likely pay tax in your country of residence.

The key tool: obtain a Tax Residency Certificate (TRC) from your country and submit Form 10F to Indian institutions.

Read our detailed guide on how to avoid double taxation as an NRI for a complete walkthrough of each country scenario.

👉 Tip: Many NRIs don't file their Indian Income Tax Return because they think there's nothing to file. That's a mistake. Even if your Indian income is below the taxable threshold, filing ITR helps you claim TDS refunds and creates a clean compliance trail that makes future repatriation smoother. Learn how to file ITR as an NRI.

What Actually Happens When You Don't Hedge Against the Rupee

This section isn't a myth. It's the cost of believing in all the myths above.

We'll use a real-world example that mirrors hundreds of portfolios we've reviewed at Belong.

The profile: Ravi, a 38-year-old IT manager in Dubai earning AED 25,000 per month. He's been saving AED 5,000 monthly since 2015 and investing it entirely in Indian mutual funds and NRE FDs.

Total invested (2015-2025): AED 600,000 (approximately USD 163,000 at AED 3.6725/USD)

What happened in rupee terms: His portfolio grew to approximately ₹1.85 crore. A mix of equity funds delivering 12% CAGR and NRE FDs at 7%. Looks fantastic on paper.

What happened in dollar terms: When Ravi converted that ₹1.85 crore to AED using the 2025 exchange rate (₹87/USD), his portfolio was worth approximately AED 780,000.

His real AED return: About 30% total over 10 years. That's roughly 2.7% annualised.

What if he'd split 50-50? If Ravi had invested AED 300,000 in Indian equities (rupee) and AED 300,000 in GIFT City USD FDs at 5% tax-free, his combined portfolio would have been worth approximately AED 880,000. That's AED 100,000 more, just from splitting his currency exposure.

This isn't about being anti-India. It's about being anti-concentration in a single depreciating currency.

The rupee's long-term depreciation trend is structural. India runs a persistent current account deficit. Oil imports are dollar-denominated.

The RBI has stated it doesn't target specific exchange rate levels. Planning your financial future on the hope that the rupee will stop falling contradicts 30 years of evidence.

Read our guide on common financial mistakes NRIs make in Dubai for more patterns like Ravi's.

Myth 5: "You Can't Access India's Growth Through USD Investments"

This is the myth that made sense three years ago but is completely outdated in 2025.

Before GIFT City's investment ecosystem matured, your choices were limited.

Want India exposure? Convert to rupees. Want to stay in USD? Stick with US markets. There was no bridge.

That bridge now exists.

GIFT City Mutual Funds: Fund Management Entities (FMEs) operating in GIFT City accept USD investments and deploy that capital into Indian equities, debt and hybrid strategies.

Your investment is in dollars. Your NAV is tracked in dollars. Your redemption is in dollars. But the underlying portfolio is invested in India.

The Tata India Dynamic Equity Fund is one example. It gives NRIs exposure to a diversified Indian equity portfolio while keeping the entire investment cycle in USD.

More funds are launching as the ecosystem grows. Explore options through Belong's GIFT City Mutual Funds page.

GIFT City AIFs: For higher-ticket investors, Alternative Investment Funds in GIFT City offer USD-denominated access to Indian private equity, venture capital, real estate and structured credit.

These funds invest in India's growth sectors while keeping your capital in dollars.

GIFT City Exchange Products: The GIFT Nifty (formerly SGX Nifty) lets you trade India-linked index futures in USD. ETFs and bonds listed on India INX and NSE IFSC offer additional India-linked exposure. All denominated in dollars.

The reality: GIFT City has created an entire parallel investment universe where you can access Indian equities, debt, alternatives and derivatives, all without touching the rupee. This is the first time in history that NRIs can stay in USD and still participate in India's economic growth.

This is exactly what was missing for decades. And it's why we built Belong around GIFT City products.

For a detailed comparison of how these products stack up against traditional options, read our guide on GIFT City investments vs traditional NRE/NRO investments.

👉 Tip: Think of GIFT City as India's window to the world. Just as Singapore and Dubai built financial centres to attract global capital, India built GIFT City to bring NRI and international money home without the friction of currency conversion, complex taxation and repatriation hassles.

Myth 6: "The Process Is Too Complicated. I'll Do It Later."

"Later" is the most expensive word in an NRI's financial vocabulary.

Every month you delay moving even a small portion of your savings into USD investments, you're making two implicit bets.

One, that the rupee won't fall further (it has fallen every single year for the past decade). Two, that the process will somehow get easier if you wait (it won't; you'll just be busier).

Here's what the actual process looks like for the most common USD investment options.

Opening a GIFT City USD FD through Belong:

Step 1: Download the Belong app.

Step 2: Complete KYC digitally. For UAE-based NRIs, Belong offers doorstep document pickup.

Step 3: Choose a bank and tenure.

Step 4: Wire USD from your UAE bank to the GIFT City bank account.

Step 5: Your FD is booked. Interest accrues in USD. At maturity, USD returns to your overseas account.

Total time: Most NRIs complete the process within a few days. No visit to India required.

Opening an FCNR deposit:

Step 1: Open an NRE account with a bank that has a presence in the UAE (SBI, ICICI, HDFC, Axis all have UAE branches).

Step 2: Complete NRI KYC.

Step 3: Transfer foreign currency to your NRE account.

Step 4: Request FCNR FD booking through net banking or the branch.

Step 5: FD is booked in foreign currency. Returns at maturity in the same currency.

Investing in GIFT City Mutual Funds through Belong:

Step 1: Complete KYC on the Belong app.

Step 2: Browse available GIFT City mutual funds.

Step 3: Invest in USD.

Step 4: Track NAV in USD. Redeem in USD whenever you want.

The reality: The process is simpler than opening a UAE bank account. It's simpler than applying for a credit card. The only thing making it "complicated" is the assumption that it must be complicated.

The NRIs who actually go through it consistently tell us the same thing: "Why didn't I do this earlier?"

Read our step-by-step guide on how to open a GIFT City account for a complete walkthrough with screenshots and timelines.

The One Myth We Didn't List: "I'll Convert to USD When the Rupee Is Strong"

We didn't include this as a formal myth because it's not really a myth. It's a trap.

NRIs tell themselves they'll move money to USD "when the rupee recovers." But the rupee doesn't recover.

Not in any sustained, meaningful way. Over the past 30 years, the rupee has depreciated 3-5% annually against the dollar with only brief, temporary periods of stability (Source: FundsIndia Wealth Conversations, Feb 2025).

Waiting for "the right time" to start USD investing is like waiting for Indian real estate prices to drop before buying.

Theoretically possible. Practically, you'll be waiting forever while the opportunity cost compounds against you.

The right time to start was five years ago. The next best time is today.

Even a small, automatic monthly allocation to a USD instrument creates a natural hedge that grows over time. Think of it as an SIP, but in dollars instead of rupees.

How to Start: A Practical Framework

Instead of overthinking, use this simple allocation guide based on where you see yourself in 10 years.

If you plan to stay abroad permanently:

Keep 60-70% of your portfolio in USD-denominated instruments.

Use GIFT City FDs for stability, GIFT City mutual funds for growth, and FCNR deposits for liquidity. Keep 30-40% in rupee instruments for India-linked goals (parents' expenses, property, family support).

If you plan to return to India within 5-7 years:

Split roughly 50-50 between USD and INR investments. The USD portion protects you during the transition. Your RNOR status after returning gives you a 2-3 year window to restructure.

If you're undecided:

Default to 50% USD, 50% INR. This gives you maximum flexibility regardless of what you decide later. You can always rebalance once your plans become clearer.

For all three scenarios, start with the simplest product, a GIFT City USD FD, and expand from there as you get comfortable.

Read our comprehensive guide on building an asset allocation strategy for investing in India for a deeper framework.

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 advisors. Tax laws and interest rates are subject to change. All data cited is from published sources as of early 2026.