Indian investors seeking exposure to US stocks like Apple, Nvidia, and Tesla can access global markets through GIFT City, bypassing traditional foreign brokerage houses. Located in Gujarat along the Sabarmati River, GIFT City (Gujarat International Finance Tec-City) operates as India’s first smart city, divided into a Multi-Services Special Economic Zone and a Domestic Tariff Area. By operating under the International Financial Services Centres Authority (IFSCA), the hub offers a single regulatory body for international trade instead of managing compliance through the Reserve Bank of India, SEBI, and IRDAI separately. This structure aims to simplify the process of reclaiming overseas financial operations for domestic investors.
To begin trading, investors must select a platform. The direct route involves downloading the NSEIX GA Global Access app, available on iOS and Android. Alternatively, users can register through established brokerages such as INDMoney, Zerodha IFSC, and HDFC Securities IFSC, which are registered subsidiaries operating within the zone. After selecting a platform, the next step is completing the Know Your Customer (KYC) verification.
This process requires uploading a PAN card and Aadhaar card. The investor must also complete mandatory self-certifications for FATCA/CRS tax forms. A critical document for tax purposes is the W-8BEN form, which non-US individuals use to certify their foreign status to the U.S. Internal Revenue Service (IRS) to claim treaty benefits and avoid a default 30% tax withholding on dividends. The form is typically pre-filled digitally during the application process.
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Funding the Account via LRS
Funding the account requires an outward remittance under the Liberalised Remittance Scheme (LRS). The transfer must be processed in US dollars through an Indian bank portal or branch, using the standard RBI Purpose Code S0001 for investment in overseas securities. Under this scheme, investors can remit up to $250,000 per financial year. However, a 20% Tax Collected at Source (TCS) applies to total outward remittances exceeding Rs 7 lakh within a single financial year. This tax is collected by the bank but can be claimed as a refund when filing the Income Tax Return (ITR).
Buying and selling on the exchange begins once the funds are remitted and appear in the investor’s digital wallet or dashboard. Trading on the NSE International Exchange (NSEIX) allows for flexibility, as investors do not need to purchase whole shares. Value-based fractional orders can be placed starting as low as $10. Trading hours align with the US market, typically between 7:00 PM and 1:30 AM IST. A significant operational benefit of this system is the exemption from domestic taxes, including Securities Transaction Tax (STT), Goods and Services Tax (GST), and stamp duties.
Tax Implications for Gains and Dividends
Tax rules differ depending on the type of income. The US does not levy capital gains tax on sales by non-residents, and GIFT City also exempts gains from Unsponsored Depository Receipts (UDRs). However, Indian investors must pay tax on these gains according to domestic regulations. Long-term gains held for over two years are taxed at 12.5%, while short-term gains are taxed according to the investor’s income tax slab.
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Dividend taxation involves a two-step deduction. The US withholds 25% tax on dividends from UDRs, and the platform charges an additional 10% service fee on the remaining amount. For example, a $10 dividend would result in approximately $6.75 after these deductions. While the US tax is withheld at the source, Indian investors are liable for tax on the gross dividend amount in India. They can utilize the India-US Double Taxation Avoidance Agreement (DTAA) to claim a credit for the tax paid in the US and avoid double taxation.
While the current structure offers exemptions from domestic levies, the tax regime remains subject to change. The IFSCA has previously indicated that it plans to introduce a capital gains tax on GIFT City transactions, which would alter the current cost-benefit analysis for long-term holders. Until such regulations are formally enacted, investors currently benefit from the lack of STT and stamp duty, though they must remain vigilant regarding potential future policy shifts in the International Financial Services Centres Authority’s guidelines.
