Title Cover Image Source: Wikipedia
GIFT City is a special economic zone (SEZ) with multiple services. It houses India’s first International Financial Services Centre (IFSC) and a Domestic Tariff Area (DTA). It also includes a residential zone for people to enjoy a high-quality lifestyle.
Currently, GIFT City is under development. The focus is on creating excellent infrastructure and sustainable planning. The IFSC aims to compete with global financial centers like London, Shanghai, New York, Hong Kong, Singapore, and Dubai.
The Indian government recognizes GIFT City as a model Smart City among the upcoming 100 smart cities. This recognition positions it as a future financial hub, offering numerous benefits to businesses and investors.
Major exchanges in GIFT City:
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India INX:
The first international exchange in India, the India International Exchange (India INX), was inaugurated by Prime Minister Shri Narendra Modi in January 2017. India INX offers a wide range of financial products for trading, including equities, derivatives, debt securities, and currencies.
Image Source: IndNIX
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NSE IFSC:
Launched in July 2020, the NSE IFSC serves as a subsidiary of the National Stock Exchange of India (NSE) and provides trading opportunities in a wide range of financial products.
Source: NSEIX Presentation
Direct Stock Investing
- Investors can buy foreign shares directly through the BSE IFSC (India INX) using the direct share buying facilitator route, while the NSE IFSC employs the depositary receipt (DR) route.
- BSE IFSC enables investors to purchase foreign shares directly from over 130 stock exchanges in more than 31 countries. In contrast, NSE IFSC currently offers US stock investing options exclusively.
- An Indian demat account (opened separately with an IFSC broker) will hold NSE US stock DRs, while a foreign custodian or broker will hold BSE IFSC stocks.
Taxation on US Stocks:
- Tax from dividends: Flat 25%
- Long-term capital gains (>24 months) are taxable at 20% plus applicable surcharge and fees.
- STCG are taxed as per applicable income tax slab rates.
NSE IX International Exchange – Debt Securities Market
Interest on Long Term Bonds and Rupee Denominated Bonds listed only on a recognised stock exchange in IFSC has lower rate of 9% withholding tax on interest paid on debt securities. This makes debt investments attractive in IFSC.
AIFs
A privately pooled fund, known as an AIF, combines capital from multiple investors to make investments that ultimately benefit those investors. NRIs can invest in AIFs listed in the IFSC and enjoy various tax benefits.
The Central Board of Direct Taxes has clarified that non-resident investors will not face taxation on income generated from offshore investments channeled through an Alternate Investment Fund established within an International Financial Services Centre. Foreign investors are exempt from the requirement of obtaining a PAN (Permanent Account Number) and filing Tax Returns.
Any income in the hands of the non-resident investor from off-shore investments routed through the Category I or Category II are not taxed in India. But Category III AIFs are subject to fund level taxation.
The IFSCA currently has approximately 63 AIFs, and some of them are displayed above.
Conclusion:
GIFT City, provides investors with cost advantages, including lower management and operational costs, making it an attractive option compared to hubs like Mauritius, Singapore, Dubai etc. GIFT City is a rapidly developing financial hub that offers a variety of investment opportunities for residents and NRIs alike. With its world-class infrastructure, tax benefits, and wide range of financial products, GIFT City is well-positioned to become a major player in the global financial landscape.
To know more about investing in the Gift city, register your details below:
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