What Problem Does GIFT City Really Solve for NRIs

A Dubai-based software engineer recently shared something in our Belong WhatsApp community.

He said, "I earned 7% on my NRE FD last year. But after the rupee fell, I made less than 3% in dollar terms.

That's not investing. That's running on a treadmill."

He's not alone.

For years, NRIs have poured money into India through NRE accounts, NRO fixed deposits, and mutual funds.

But three stubborn problems kept eroding their real returns: currency depreciation, tax deductions at source, and the impossibility of getting money back out cleanly.

GIFT City was built to fix all three. Not partially. Structurally.

Here's exactly how.

The Currency Problem: You Earn in Dollars, But Invest in Rupees

This is the silent wealth killer for NRIs.

You earn in AED, USD, or GBP. The moment you invest in India through a traditional NRE or NRO account, your money gets converted to rupees.

Over the past decade, the rupee has depreciated from around ₹60 to roughly ₹85 against the dollar (RBI reference rate data).

That's a 30%+ erosion on your principal. Even a 7% FD return struggles to keep pace.

GIFT City operates entirely in foreign currency. Your dollars stay as dollars. Your returns are in dollars. When you redeem, you get dollars back. There's no forced conversion to INR at any stage.

This is why FEMA treats GIFT City as "foreign territory" on Indian soil. Your investment sits outside India's domestic currency framework, regulated by the IFSCA.

👉 Tip: If you live in a zero-tax country like the UAE, investing in dollar-denominated GIFT City FDs or mutual funds means your capital isn't exposed to INR depreciation risk at all.

The Tax Problem: TDS Gets Deducted Before You Even See Your Returns

Ask any NRI who has redeemed a mutual fund in India or earned interest on an NRO FD. A chunk of money disappears before it reaches your account. That's TDS (Tax Deducted at Source).

On NRO FD interest, banks deduct 30% TDS plus surcharge and cess. On mutual fund redemptions, NRIs face 20% to 30% TDS depending on the fund type and holding period. You can claim some of it back by filing an Indian Income Tax Return, but the refund process often takes months.

GIFT City investments are exempt from TDS under Section 10(4D) of the Income Tax Act for specified funds registered with IFSCA. Capital gains from these funds attract zero Indian tax.

No TDS. No ITR filing required (if this is your only Indian income).

No waiting for refunds.

For NRIs based in the UAE, where there's no personal income tax, this effectively means tax-free returns. For those in the UK or US, you still report income in your resident country, but you skip the entire Indian tax compliance layer.

👉 Tip: Not all GIFT City funds qualify for Section 10(4D) benefits. Check that the fund is registered with IFSCA under the Fund Management Regulations 2022. Our GIFT City mutual fund explorer lists only IFSCA-regulated options.

The Repatriation Problem: Getting Your Money Out of India Is a Nightmare

This is the one NRIs talk about most.

Sending money into India? Easy. Getting it back? A maze of forms, approvals, and bank visits.

To repatriate from an NRO account, you need Form 15CA and 15CB (a Chartered Accountant's certificate), proof of tax compliance, and there's a $1 million annual cap per RBI's FEMA regulations.

The process often takes weeks.

GIFT City bypasses this entirely. All transactions happen in foreign currency through IFSC Banking Units (IBUs). Your capital and returns are fully repatriable.

No annual dollar cap. No Form 15CA or 15CB. Transfers move via SWIFT in 24 to 48 hours.

This matters especially if you're planning to return to India someday. Funds parked in GIFT City accounts don't get reclassified as NRO deposits when your status changes.

You retain the flexibility to move money out even after becoming a resident.

👉 Tip: If you hold large sums in NRE fixed deposits, consider moving a portion into GIFT City USD FDs before returning. Once your status changes, NRE accounts get redesignated and repatriation rules tighten. Our residential status guide explains this.

What GIFT City Doesn't Solve (Be Aware of This)

No investment structure is perfect. A few things to keep in mind.

GIFT City deposits are regulated by IFSCA, not RBI. This means they're not covered under India's DICGC deposit insurance (which covers up to ₹5 lakh for domestic bank deposits).

The banks operating in GIFT City are reputable (SBI, HDFC, ICICI, Axis), but this distinction matters.

Alternative Investment Funds (AIFs) require a minimum of $75,000 (reduced from $150,000 in February 2025, per IFSCA circular). Retail mutual funds start at $500, which is far more accessible.

US-based NRIs face additional complexity. GIFT City funds may be classified as PFICs under US tax law, triggering Form 8621 reporting.

UK NRIs must report gains under self-assessment rules since the Indian exemption doesn't carry over to HMRC. Check the India-UK DTAA implications with your advisor.

NRIs in tax-free jurisdictions like the UAE benefit the most. Zero Indian tax plus zero local tax equals genuinely tax-free returns.

But even for NRIs in taxed countries, the simplified compliance, dollar stability, and unrestricted repatriation make GIFT City worth serious consideration.

The real problem GIFT City solves isn't about returns alone. It removes the friction that made NRIs say, "I'll invest in India later." Later kept getting pushed. GIFT City makes "now" possible.

Compare GIFT City FD rates across all banks, explore GIFT City mutual funds, or track GIFT Nifty live. Thousands of NRIs discuss GIFT City strategies in our WhatsApp community. Download the Belong app to get started.

Disclaimer: This article is for informational purposes only. Tax laws and regulations are subject to change. Consult a qualified tax advisor before making investment decisions. Belong is an IFSCA-regulated platform. Past performance does not guarantee future results.