Retail Funds in GIFT City: What Investors Must Know About Tax Implications (July 2025 Update)
India's International Financial Services Centre (IFSC) at GIFT City has quickly become a global hotspot for financial innovation. With the government now allowing mutual funds and retail investors to operate in GIFT City, tax-savvy investors are flocking to take advantage of zero-tax regimes and global exposure. But what exactly are the tax implications for investors putting money into retail funds through GIFT City?
🔍 What is GIFT City?
Gujarat International Finance Tec-City (GIFT City) is India’s first operational smart city and IFSC, offering a globally competitive financial environment. Retail investors can now access international markets, fund-of-funds, and more—directly through India.
⚖️ Tax Implications for Investors in GIFT City
✅ 1. Zero Capital Gains Tax on Offshore Securities
Investments in international equity or debt funds from GIFT City are exempt from long-term and short-term capital gains, a stark contrast to domestic fund taxation.
✅ 2. Tax-Free Dividends (for Non-Residents)
NRIs and FPIs investing via IFSC enjoy tax-free dividends under Section 10(4D) of the Income Tax Act, 1961.
✅ 3. No STT, CTT or Stamp Duty
Unlike domestic platforms, buying and selling listed securities in GIFT City incur no Securities Transaction Tax (STT), Commodity Transaction Tax (CTT), or stamp duty.
✅ 4. Exemptions Under Section 80LA
Eligible IFSC units (including AMCs registered there) get a 100% tax deduction for 10 years out of 15 years—enabling greater fund efficiency.
✅ 5. Double Tax Avoidance Treaties (DTAA)
Investors benefit from India’s DTAAs, reducing withholding taxes on cross-border returns.
📊 Vizzve Financial Insight (July 2025):
According to Vizzve Financial’s July 2025 mid-year outlook, over ₹2,300 crore in retail fund flows have shifted into GIFT City AMCs, up 120% YoY. With new tax rulings favoring IFSC investments and global AMCs launching India-specific feeder funds, Vizzve expects GIFT City to outpace traditional mutual fund routes by 2027.
❓ FAQ Section
Q1. Is investing in GIFT City mutual funds safe for retail investors?
Yes. GIFT City IFSC is regulated by IFSCA and follows SEBI-aligned compliance, ensuring investor protection.
Q2. Are Indian residents allowed to invest through GIFT City?
Yes. Resident individuals can invest under the LRS (Liberalised Remittance Scheme), up to $250,000 per year.
Q3. Will I pay double tax if I invest in global funds via GIFT City?
No. India has DTAA with multiple countries, ensuring reduced or no double taxation.
Q4. Do I need a demat account in GIFT City?
Yes. You must open an account with an IFSC-registered broker or AMC.
Q5. Can I claim any deductions if I invest through GIFT City?
No Section 80C benefits are available, but capital gains tax and dividend taxes are mostly exempt—depending on your residency.
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Published on July 9, 2025 • By Benny
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