For Non-Resident Indians (NRIs), safe and tax-efficient returns on deposits have always stayed at the top of the list. Traditionally, most of the NRIs have resorted to NRE (Non-Resident External) and FCNR (Foreign Currency Non-Resident) deposit accounts as tools of safe and secure income. While these products have enjoyed the advantage of the safety of capital as well as repatriability, the dynamic interest rate scenario and newer financial architectures have driven more and more investors to look for more lucrative avenues. One of the alternatives that is rapidly emerging in a short timeframe is the GIFT City investments.
GIFT City, short for Gujarat International Finance Tec-City, is the very first operational International Financial Services Centre (IFSC) of India. Why it’s appealing is the fact that it’s considered an overseas jurisdiction, yet it exists on Indian soil. NRIs can take advantage of regulations related to repatriation and global financial instruments managed by Indian institutions. It’s the ‘best of all worlds’ situation—global reach within the comfort of home.
GIFT City FDs can be compared to FCNR deposits as both FCNR and GIFT City accounts let NRIs earn interest in foreign currency without the risk of INR depreciation at good interest rates. Both FCNR and GIFT City deposits offer similar interest rates. In addition to this, GIFT City FDs offer shorter tenures starting at 7 days. The investor gets a part of accrued interest in case of premature withdrawal of GIFT City FD. In case of FCNR deposit the entire amount gets forfeited if withdrawn before a year.
One of the major concerns of the new investors is how to open GIFT City banking accounts. Luckily, the account opening process has been streamlined. Generally, the investor would be required to provide KYC documents evidencing NRI status, like photocopies of the passport, overseas address proof, and foreign bank account statements. Currently, there are startups that are working to create a digital platform to invest in GIFT City deposits without opening a bank account. The account can be funded in foreign currency directly as well be transferred through funds transfer from NRE/NRO accounts.
Benefits of GIFT City fixed deposit for NRIs go way beyond the competitive rates of interest. One of the bigger attractions is the relief from most of the limitations of domestic banking. For instance, GIFT City accounts do not carry the same repatriation limitations as NRO FDs. Investors can decide on the tenure based on their own requirements of liquidity, and hence it becomes a handy proposition for medium as well as long-term storage of wealth.
Since the deposits are in major currencies such as USD, GBP, etc., the need to keep converting INR to foreign currency (and vice versa) does not arise. This, by itself, can lead to significant savings in transaction costs.
One of the most appealing features, perhaps, of the GIFT City accounts is the NRI tax benefits that GIFT City offers. The interest income obtained through the fixed deposits is generally exempted from Indian taxation. For example, NRI investors residing in countries like UAE which do not have income tax would get entire gains as tax free. This is where the savings potential of GIFT City FD lies.
Furthermore, the GIFT City is not limited to fixed deposits at all. There are other investment products, such as foreign currency bonds, overseas ETFs, and foreign currency-based insurance products. But among these, even fixed deposits are most popular due to their simplicity and certainty of return.
What differentiates GIFT City from the traditional Indian finance hubs is its regulatory clarity and ease of doing business. The special zone falls under the authority of the International Financial Services Centres Authority (IFSCA), which has implemented a single-clearance window. It combines the regulatory powers of RBI, SEBI, PFRDA and IRDAI.
Another overlooked benefit of GIFT City deposit lies in portfolio diversification. These fixed deposits allow NRIs to diversify their portfolio as a low-risk, offshore currency-based asset that adds stability to their overall portfolio.
In today’s volatile global economy, a secure offshore deposit in a well-regulated hub like GIFT City offers a smart hedge against currency shifts, inflation, and geopolitical risks.
Simply put, GIFT City is redefining the NRIs’ thinking of savings and security. Its higher interest rates, transparency of taxation, and easy onboarding make it no longer an experiment but a go-to financial hub.