A software engineer in Dubai messaged our WhatsApp community last month with a simple question: "GIFT City sounds too good to be true. What's the catch?"
He'd read about tax-free returns. Heard that repatriation was seamless. Saw impressive numbers about USD fixed deposits yielding 5-6%. But nobody had answered the questions he was actually thinking.
At Belong, we've helped thousands of UAE-based NRIs navigate this exact confusion. GIFT City is genuinely exciting.
It's India's first International Financial Services Centre, designed specifically for global Indians. But not asking the right questions upfront can cost you money, time, or both.
This guide covers the five questions we hear most often.
Not the marketing version. The real version that addresses tax, regulation, risk, and whether this actually makes sense for your situation.
Question 1: Am I Even Eligible to Invest in GIFT City?
This seems obvious but trips up many NRIs. Not everyone qualifies.
Under both the Income Tax Act and FEMA, you're classified as an NRI if you hold an Indian passport and stayed outside India for more than 182 days in the relevant financial year.
If your Indian income exceeds ₹15 lakh annually, the threshold becomes 120 days.
Most UAE-based Indians earning primarily in dirhams fall under the 182-day rule. As long as you've been outside India for more than six months in the financial year, you qualify.
OCIs (Overseas Citizens of India) are also eligible. SEBI's June 2024 amendment was significant here.
NRIs and OCIs can now contribute up to 100% of the corpus in funds seeking FPI registration at GIFT IFSC (Source: SEBI). Before this change, the limit was 50%.
👉 Tip: If you're a PIO (Person of Indian Origin) cardholder, convert to OCI before December 31, 2025. After this date, PIO cards become invalid.
Here's what makes GIFT City different from regular Indian mutual funds. Most AMCs in mainland India restrict NRIs from the US and Canada due to FATCA compliance issues.
GIFT City funds generally welcome NRIs from nearly all FATF-compliant countries.
The exception? Investors from countries on the FATF blacklist or grey list cannot invest. This is a regulatory requirement, not a GIFT City preference.
What you need for eligibility verification:
Your valid passport showing NRI status, overseas address proof less than three months old (utility bill or bank statement), and in most cases, a PAN card.
Some Category I and II AIF investments may not require PAN, but having one simplifies the process.
IFSCA implemented video KYC for NRIs in 2025. You can complete the entire process remotely without visiting India.
This is a significant improvement from the days when you had to physically visit a bank branch during your India trips.
Question 2: What Exactly is Tax-Free, and What's Not?
This is where the confusion runs deepest. The marketing says "tax-free returns." The reality is more nuanced.
Let's be direct. "Tax-free in India" does not automatically mean "tax-free everywhere."
Under Section 10(4D) of the Income Tax Act, income arising to a non-resident from the transfer of units of investment funds set up in an IFSC is exempt from Indian tax (Source: Income Tax Department).
This applies to mutual funds registered with IFSCA under Fund Management Regulations 2022, Category I, II, and III AIFs in GIFT IFSC, and specified trusts operating under IFSCA oversight.
Capital gains on redemption from these funds are exempt. No TDS is deducted. No Indian ITR filing is required if this is your only Indian income.
For USD fixed deposits at GIFT City, interest income is exempt from Indian tax under IFSC regulations. This is explicitly stated in IFSCA guidelines.
👉 Tip: Always ask the fund house: "Is this fund registered under IFSCA Fund Management Regulations 2022? Does Section 10(4D) apply to investor redemptions?" Don't assume. Verify.
What about your resident country's taxes?
Here's where NRIs from the UAE have a genuine advantage. The UAE has no capital gains tax. Combined with GIFT City's exemptions, you get genuinely tax-free growth. No tax in India plus no tax in UAE equals completely tax-free returns.
UK NRIs face a different situation. You must report foreign income on your Self Assessment tax return. GIFT City exempting your gains doesn't mean the UK will. You'll likely pay UK Capital Gains Tax depending on your personal circumstances.
US NRIs have PFIC (Passive Foreign Investment Company) rules to consider. These can complicate the tax treatment significantly. Always consult a US tax advisor before investing through GIFT City.
The India-UAE DTAA (Double Taxation Avoidance Agreement) provides additional protection. To claim benefits, keep your Tax Residency Certificate updated. This document proves you're eligible for treaty benefits.
Other tax exemptions at GIFT City:
Securities Transaction Tax (STT), Commodity Transaction Tax (CTT), and stamp duty are all exempt for transactions on IFSC exchanges (Source: IFSCA).
Interest income from foreign currency deposits is tax-exempt within the GIFT IFSC. Under Section 10(4E), income from derivatives and OTC contracts is 100% exempt from Indian income tax.
The Finance Bill 2025 expanded these exemptions further. Tax benefits for GIFT City investment units have been extended to March 31, 2030.
Question 3: How Safe is My Money in GIFT City?
This is the question that keeps cautious NRIs up at night. Safety has two dimensions here: regulatory protection and deposit insurance.
Regulatory framework:
GIFT City is regulated by IFSCA (International Financial Services Centres Authority), a unified regulator with powers similar to RBI and SEBI but with a mandate to facilitate international business.
As of 2025, GIFT City hosts 32 banks, over 337 capital market intermediaries, and more than 272 Alternative Investment Funds (Source: IFSCA).
GIFT City is ranked 43rd in the Global Financial Centres Index 2025, among the top 15 financial centres in Asia-Pacific.
The regulatory structure is modeled after international standards from Dubai International Financial Centre and Singapore.
Deposit insurance reality:
This is important. Unlike NRE/NRO fixed deposits covered by DICGC up to ₹5 lakh, GIFT City FDs are not covered under India's deposit insurance scheme. GIFT City operates under IFSCA, not RBI.
Does this mean it's risky? Not exactly. The banks operating in GIFT City are licensed by IFSCA and include major names like SBI, ICICI, HDFC, Axis, and Kotak.
They're the same institutions you'd trust with your NRE account. The regulatory oversight is robust.
👉 Tip: If deposit insurance is non-negotiable for you, split your investments. Keep some in insured NRE FDs and some in GIFT City products for tax efficiency.
What happens if you plan to return to India?
This is where GIFT City gets interesting. If you return to India and qualify as RNOR (Resident but Not Ordinarily Resident), your GIFT City investment returns remain tax-free during the RNOR period.
Only India-sourced income is taxable during this status.
You qualify as RNOR if you were NRI in at least 9 of the past 10 financial years, or if your total stay in India was 729 days or less in the preceding 7 years.
Once RNOR ends and you become ROR (Resident and Ordinarily Resident), the treatment changes. Capital gains from that point may become taxable. Plan your investments and returns with this timeline in mind.
Question 4: What are the Minimum Investments and Real Costs?
GIFT City used to be only for high-net-worth individuals. That's changed significantly.
Current minimum investments:
For GIFT City mutual funds, the barrier has dropped dramatically. Tata Asset Management launched the Tata India Dynamic Equity Fund at GIFT City in September 2025 with a minimum investment of just $500 (Source: Business Standard).
DSP Global Equity Fund offers similar accessibility through Belong's platform.
For Alternative Investment Funds, the minimum is $75,000 per investor (reduced from $150,000 in February 2025 per IFSCA circular). For USD fixed deposits, you can start with amounts as low as $500 with some banks.
Hidden costs to watch:
Currency conversion is the biggest hidden cost for many NRIs. If you're converting AED or USD to invest, the exchange rate spread matters.
A 2% spread on conversion effectively reduces your returns before you've even invested.
GIFT City products solve this by allowing direct USD investments. You avoid the rupee altogether. This is particularly valuable given the rupee's historical depreciation of 3-4% annually against the dollar.
Management fees vary by product. Mutual funds typically charge 0.5-2% expense ratios. AIFs may have performance fees on top of management fees.
Fixed deposits have no management fees, but the interest rate offered is the net return.
Repatriation from GIFT City is straightforward. Both principal and interest are fully repatriable to your country of residence without the Form 15CA/CB complications that plague regular Indian investment repatriation.
👉 Tip: Compare your total cost including conversion fees, management fees, and tax implications. A product with lower headline returns might deliver better post-cost, post-tax returns.
Question 5: What are the Risks I'm Not Being Told?
Every investment article highlights benefits. Here's what deserves equal attention.
Regulatory evolution risk:
GIFT City is barely a decade old. Regulations evolve frequently. In 2024, regulators prohibited investments into certain US-based ETFs, disrupting many NRIs' planning.
Policy can change, and what's permitted today might not be permitted tomorrow.
The tax benefits depend on government policy. While they've been extended to 2030, there's no guarantee beyond that.
If you're planning a 15-year investment horizon, factor this uncertainty into your decision.
Concentration limits:
IFSCA introduced a 33.33% investment concentration limit in a single investee company for certain fund structures.
This affects how family offices structure their GIFT City investments. If you're planning a significant allocation to a single strategy, understand these limits first.
Track record limitation:
GIFT City funds don't have the 10-year track records that mainland India mutual funds have.
Many products launched in 2023-2025. You're evaluating fund manager expertise and strategy, not historical returns.
Exit timing complexity:
The NAV calculation and settlement times may differ from what you're used to with UAE or US-based investments.
Understand the redemption process and timeline before investing. Some AIFs have lock-in periods of 3 years or more.
What GIFT City is not:
GIFT City is not a substitute for financial planning. It's a tool within a broader strategy. If your entire portfolio is in GIFT City products, you may be over-concentrated in India-linked assets regardless of currency denomination.
NRIs with primarily NRE accounts and Indian mutual funds might benefit from GIFT City's diversification. But replacing one concentration with another isn't diversification.
The Practical Decision Framework
After advising thousands of NRIs through Belong, here's how we suggest thinking about GIFT City:
Consider GIFT City if:
You're a UAE NRI wanting tax-efficient exposure to Indian markets without rupee conversion risk. You have at least $5,000-10,000 to invest and a 5+ year horizon. You're comfortable with a newer regulatory environment that's still maturing.
Be cautious about GIFT City if:
You need deposit insurance guarantees. You're a US NRI who hasn't consulted a US tax advisor about PFIC implications. You're expecting to return to India within 2-3 years and haven't modeled the tax status transition.
Questions to ask any advisor (including us):
Is this specific product registered with IFSCA? What Section of the Income Tax Act provides the exemption?
What's the minimum holding period for optimal tax treatment? What are the total costs including conversion and management fees?
How does this fit my overall portfolio, not just my India allocation?
What's Next?
GIFT City represents a genuine evolution in how NRIs can invest in India. The tax benefits are real.
The regulatory framework is credible. The USD denomination solves the currency headache that has frustrated NRIs for decades.
But it's not automatic. Not every product suits every NRI. Not every tax exemption applies everywhere.
Use our FD rates comparison tool to see current GIFT City and NRE FD rates side by side. Explore GIFT City mutual funds to understand what's available at lower minimums. Track market movements with our GIFT Nifty tool.
If you're still unclear, that's exactly why we built our WhatsApp community. Thousands of NRIs discuss these questions daily, share experiences, and help each other navigate the complexity. Join us there.
And when you're ready to take the next step, download the Belong app.
We've simplified the paperwork so you can focus on the investment decisions that actually matter.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Tax rules are subject to change. Consult a qualified financial advisor and tax professional before making investment decisions. Past performance is not indicative of future returns. Investments in GIFT City are subject to market risks. Read all scheme-related documents carefully.
