HOW CAN INDIAN RESIDENTS ACQUIRE FOREIGN ASSETS THROUGH GIFT CITY , AHAMADABAD UNDER LRS SCHEME AND GIFT CITY FACILITATES ALL FINANCIAL TRANSACTIONS IN INDIA USING FOREIGN CURRENCY TO NON-RESIDENTS

 HOW CAN INDIAN RESIDENTS ACQUIRE FOREIGN ASSETS THROUGH GIFT CITY , AHAMADABAD UNDER LRS SCHEME AND GIFT CITY FACILITATES ALL FINANCIAL TRANSACTIONS IN INDIA USING FOREIGN CURRENCY TO NON-RESIDENTS

WHAT IS GIFT CITY?

GIFT City is short for GUJARAT INTERNATIONAL FINANCE TEC-CITY. Situated close to Ahmedabad, GIFT City facilitates all financial transactions in India using foreign currency (not Indian rupees).

Though it is located within India, it is considered a jurisdiction separate from the rest of India.

INTERNATIONAL FINANCIAL SERVICES CENTRES (IFSC)

Countries aspire for other countries to conduct international transactions within their borders because it can fuel economic growth and bring foreign capital into the country. So, some countries set up International Financial Services Centres (IFSC) within their territory, facilitating such transactions.

DUBAI INTERNATIONAL FINANCIAL CENTRE

One that is close to us and widely known is DIFC – Dubai International Financial Centre. GIFT City is India’s first IFSC centre.

TAX ADVANTAGES

NRIs can invest in foreign currencies without converting to Indian rupees. Numerous tax advantages are also given to such investments to attract more investors and capital.

WHAT ARE THE BENEFITS OF TRADING/INVESTING IN GIFT CITY?

The central government has exempted capital gain tax on the transfer of the following securities listed on a recognized stock exchange located in IFSC for non-residents – 

(i)                      Foreign currency-denominated equity share of a company; 

(ii)                    Foreign currency-denominated bond;

(iii)                 Bullion depository receipt;

(iv)                 Unit of investment trust; (v) unit of a scheme;

(v)                    Unit of an Exchange Traded Fund launched under IFSCA FME Regulations, 2022.

·      Exemption from requirement to obtain PANS by certain non-residents who qualify as foreign investors, subject to fulfilment of certain conditions.

·      Exemption from stamp duty for transactions carried out on the IFSC exchanges.

·      Exemption from commodities transaction tax and securities transaction tax in respect of transactions carried out on the IFSC exchanges.

RESIDENTS CAN INVEST IN FOREIGN STOCKS

While there are no tax benefits specifically for Indian residents, it allows investment in foreign stocks or Unsponsored Depository Receipts (representing foreign shares) that are being traded on the exchange in the GIFT City.

DECLARATION BY RESIDENTS FOR INVESTMENT IN FOREIGN SHARES OR INVESTMENTS

Schedule FA section of the Income Tax Return (ITR) form requires residents and ordinary residents to disclose details of any beneficial interests held in foreign bank accounts or other overseas investments.

NON-DISCLOSURE ATTRACTS PENALTY

Non-disclosure or incorrect reporting of foreign assets can attract severe penalties under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, with fines going up to ₹10 lakh.

INDIAN RESIIDENTS CAN INVEST IN FOREIGN STOCK UP TO $250000 PER ANNUM IN FOREIGN ASSETS OR FOREIGN STOCKS THROUGH LRS SCHEME.

IFSCA has provided much-needed clarity on operational aspects for opening bank accounts in GIFT IFSC under the LRS route through various circulars. Accordingly, remittances under the LRS route to GIFT IFSC are likely to pick up and therefore, disclosure requirements under Schedule FA need to be carefully evaluated. While the regulations are still evolving, it’s crucial to tread carefully and seek professional advice.

R V Seckar FCS, LLB

79047 19295

rvsekar2007@gmail.com