24 Oct 2026Updated 24 October 2026 · By Regi Tom Antony, FCA, MBA (Australia), ACMA (UK), CGMA (USA), CISA (USA)
A client in Abu Dhabi, an engineer who has worked in the Gulf for twenty years, called me after a family wedding in Thrissur. "Everyone at the function was talking about GIFT City," he said. "Dollar deposits, funds, no tax. Is it real, and is it for people like me?"
It is real, and parts of it are designed with non-residents in mind. But GIFT City is a framework, not a product. Whether it suits you depends on your residential status, the specific income, and the entity you are dealing with, so it deserves the same questions you would ask of any overseas investment.
What GIFT City IFSC actually is
GIFT City in Gandhinagar, Gujarat, houses India's International Financial Services Centre. Banks, fund managers, insurers, exchanges and other financial institutions set up units there under the International Financial Services Centres Authority (IFSCA), which regulates them under the IFSCA Act, 2019.
The key legal point is in foreign exchange law. Under the RBI's Foreign Exchange Management (International Financial Services Centre) Regulations, 2015, a financial institution or branch set up in an IFSC and recognised by a regulator is treated as a person resident outside India. That is why IFSC units deal largely in foreign currency, and why money moving from mainland India into an IFSC is treated much like money going abroad.
The tax picture for IFSC units
Most of the headline tax incentives are aimed at the units themselves, not at individual investors. Under the Income-tax Act, 2025, an IFSC unit can claim a 100 percent deduction on eligible income. The Finance Act, 2026 lengthened this, from tax year 2026-27, to 20 consecutive years out of 25 for IFSC units, and to 20 consecutive years for offshore banking units, with business income from the IFSC taxed at 15 percent after the holiday ends. Offshore funds that relocate to GIFT City can do so on a tax-neutral basis, provided the relocation happens on or before 31 March 2030, after an extension in the Finance Act, 2025.
What it means for non-resident individuals
For an NRI, the more relevant rules are the exemptions available to non-residents on certain income connected with the IFSC. Broadly, these cover capital gains on specified securities listed on IFSC stock exchanges, interest on deposits that IFSC banking units pay to non-residents, and specified income from certain IFSC-based funds. Transactions on IFSC exchanges are also outside securities transaction tax and stamp duty.
Each exemption has its own conditions, and the section numbers changed with the Income-tax Act, 2025. So I always ask clients to identify the exact product and the exact provision before assuming the income is tax free.
For Gulf residents, there is an extra point. Where the Indian exemption applies, there is usually no tax in your country of residence either, because most Gulf states do not tax personal investment income. If you live in the UK, the US or another taxing country, your home country may still tax the same income, and you would look at treaty relief separately. I have written about that in our guide to DTAA relief for NRIs.
Resident family members and LRS
Many Gulf families have one foot in each place, with parents or adult children resident in Kerala. Resident individuals can send money to an IFSC under the Liberalised Remittance Scheme, within the overall LRS limit. Since the RBI's circular of 10 July 2024, resident individuals can remit under LRS to IFSCs for financial services and products permitted under the IFSCA Act, and can open a foreign currency account in an IFSC, which can also be used for other permitted LRS transactions abroad. For your resident relatives, that remittance counts against their LRS limit and attracts the usual LRS reporting and tax collection at source rules, and their income in the IFSC is taxed in India like any other income of a resident.
A worked example
Take Thomas (not his real name), who has worked in Dubai since 2008 and plans to return to Kochi in 2029. He has been offered a US dollar deposit with a bank's IFSC banking unit. While he is a non-resident, the interest should fall within the exemption for interest paid by IFSC banking units to non-residents, and the UAE does not tax it. The day his status changes, the position changes. In the year he returns he may be resident but not ordinarily resident, and because several IFSC exemptions are written for non-residents, he needs to check each one afresh. His mother in Kochi, who is resident, wants to put some savings into the same bank's IFSC unit through LRS. For her, the interest is taxable in India, and the remittance uses part of her LRS limit.
Same building, same bank, two quite different tax outcomes, all because of residential status.
What to check before you commit
- The entity's registration with IFSCA and the specific licence it holds for the product.
- Your residential status for the tax year, and how long you expect it to last.
- The exact exemption the income relies on, and its conditions.
- Currency risk, because products are usually in US dollars or other foreign currencies.
- For resident relatives, LRS limits, the purpose code used, and tax collected at source.
- Nomination and succession arrangements, which can differ from mainland Indian accounts.
People often ask me whether GIFT City is better than an NRE or FCNR deposit. That is not a question with one answer, and I do not recommend specific products. What I can do is lay out how each is taxed for your status, how money can come in and go out, and what happens when you return. Others ask whether the tax incentives they read about for GIFT City apply to them personally. Often the answer is that the big incentives belong to the units, and an individual benefits only through the narrower exemptions for non-residents described above.
GIFT City sits at the meeting point of FEMA, tax and residency planning, which is why we treat it as part of our cross-border tax and FEMA work. If you want to talk through your own case, write to us at letstalk@rtaandassociates.com.
For how this fits with FEMA, treaties and GST more broadly, see our guide to cross-border tax and FEMA advisory.
Related guides
- Cross-border tax and FEMA advisory: the full guide
- TCS on money you send abroad under LRS, from 1 April 2026
- Running a Dubai company from India: place of effective management and UAE corporate tax
- Is a tax residency certificate still enough? Treaty structures after Tiger Global
Regi Tom Antony, FCA, MBA (Australia), ACMA (UK), CGMA (USA), CISA (USA)
Regi Tom Antony & Associates, Chartered Accountants, Kochi
This is general information based on the law as at 24 October 2026, not advice for your particular situation.