GIFT City Explained: What India's IFSC Means for Investors

GIFT City took a decade to get its biggest pieces in place

1. 11 yrs agoIFSC set upInside the GIFT City SEZ
2. ~10 yrs agoIndia INX opensBSE's international exchange
3. 9 yrs agoNSE IX set upNSE's international exchange
4. 6 yrs agoIFSCA formedOne regulator replaces four
5. 4 yrs agoBullion exchange opensIIBX
6. 3 yrs agoSGX Nifty moves inRenamed GIFT Nifty
7. 6 months onDirect listing allowedIndian firms can list at GIFT
8. This yearTax holiday doubled20 years out of 25

Who regulates GIFT City?

The International Financial Services Centres Authority, or IFSCA, was set up six years ago under a law passed the year before. Before it existed, a bank in GIFT City answered to the Reserve Bank of India (RBI), a broker to the market regulator SEBI, an insurer to the insurance regulator IRDAI, and a pension business to PFRDA. Four regulators wrote four sets of rules for one small zone.

IFSCA replaced all four inside the IFSC, so it can write rules for foreign-currency business without bending them around domestic ones. It has moved fast: new listing rules, a rewritten fund rulebook, and a new licence for firms that give Indians access to foreign markets.

What tax breaks does GIFT City offer?

The headline is the tax holiday. A business unit in the IFSC can deduct 100% of its qualifying business income for 20 consecutive years out of a 25-year window. This year's Union Budget doubled it from 10 years out of 15. When the holiday ends, that income is taxed at 15%. Without the IFSC rules, the same business would pay 25% to 38%.

Two details stop the holiday from being a free pass. First, IFSC companies still pay minimum alternate tax (MAT), a floor tax on accounting profit, at 9% of book profits. Second, a unit that starts in the current fiscal year or later gets the holiday only if it was not created by splitting or reorganising an existing Indian business. That blocks firms from simply relabelling an existing Indian desk.

For investors, the bigger points are about trading. No securities transaction tax (STT) applies on IFSC exchanges. Non-residents pay no Indian capital gains tax when they sell derivatives, bonds, certain fund units and similar assets on an IFSC exchange and are paid in foreign currency. Dividends that an IFSC company pays to non-residents are taxed at 10%.

The IFSC removes most of India's taxes on trading and on profits

Tax	IFSC unit or exchange	Mainland India
Profit tax	0% for 20 of 25 years	25% to 38%
After the holiday	15%	No change
Minimum tax	9% of book profits	14%
Securities transaction tax	None	Applies
Non-resident gains on derivatives	Exempt	Taxable, subject to treaties

How did SGX Nifty become GIFT Nifty?

SGX Nifty started on the Singapore Exchange 26 years ago. It was a dollar futures contract on the Nifty 50, India's main index of 50 large companies. It let foreigners bet on or hedge India without registering as a foreign portfolio investor (FPI) or dealing with Indian taxes and rupees. Indian regulators disliked the business leaving.

The fight broke into the open eight years ago, when India's exchanges said they would end their licensing deals with overseas exchanges. SGX planned its own India futures to replace SGX Nifty. A few months later NSE sued in the Bombay High Court, saying the new products copied the Nifty. The case went to arbitration. About two years after that, the two exchanges agreed to drop it and build a link instead: the NSE IFSC-SGX Connect.

The link went fully live three years ago. Contracts with a notional value of about $7.5 billion moved to NSE International Exchange (NSE IX) in GIFT City, and SGX Nifty became GIFT Nifty. Singapore brokers still send their clients' orders, but the orders now match in India.

India spent five years pulling its index back from Singapore

1. 26 yrs agoSGX Nifty launchesDollar Nifty futures in Singapore
2. 8 yrs agoIndia ends licencesExchanges cut overseas deals
3. 3 months onNSE sues SGXBombay High Court, then arbitration
4. 6 yrs agoTruceArbitration dropped for a trading link
5. 3 yrs agoContracts moveAbout $7.5B notional shifts to GIFT

How big is GIFT Nifty now?

Make a guess

About $7.5 billion of open SGX Nifty contracts moved to GIFT City three years ago. What is the most GIFT Nifty has traded in a single day since?

Tap your guess

Under $10BYour guess$10B to $18BYour guess$18B to $30BYour guess

$01234567890123456789.01234567890123456789BRecord day, last month

Spot on.Close, a little low.Close, a little high.Way off, too low.Way off, too high. It was $23.67B.

$23.67 billion in a single session last month, across 512,023 contracts. Open interest hit a record $21.87 billion the same day.

Record day, last month$23.67B

Notional moved from Singapore$7.50B

By NSE IX's count, GIFT Nifty traded 76.19 million contracts worth $3.52 trillion from the switch up to that record day. Last calendar year alone it traded 22.52 million contracts worth about $1.1 trillion. NSE IX says it handles more than 99.6% of exchange trading in GIFT IFSC, which tells you India INX, BSE's rival exchange next door, barely registers.

The record headlines hide something important. The daily high of $22.88 billion was set barely seven months after the move, and it stood for more than two years. The two records since then added less than 4% to it. Monthly turnover tells the same story: a record $100.13 billion two years ago, and $106.22 billion a year ago. GIFT Nifty stepped up when the Singapore business arrived. Since that early burst, growth has been slow.

GIFT Nifty's daily record has barely moved in nearly three years

5101520$25B0

$8.50B

$15.25B

$22.88B

$23.48B

$23.67B

Month 1Month 3Month 7Month 32Month 39

Why GIFT Nifty matters even if you never trade it

GIFT Nifty trades for about 21 hours a day, from 6:30 a.m. to 2:45 a.m. India time. The domestic Nifty opens at 9:15 a.m. and shuts in the afternoon. So when Wall Street sells off overnight, GIFT Nifty moves first. That is why Indian business TV quotes it every morning as the best guess of where the Nifty will open.

For an investor in the US, it is the live India price during American trading hours. If you own an India ETF, it shows how Indian stocks are reacting to a US event before Mumbai opens. NSE IX also holds an exemption from the US Commodity Futures Trading Commission (CFTC) under its "Part 30" rules, which allows US investors to take part. A fund that wants to hedge India exposure overnight now does it in India, under Indian rules.

What do banks actually do in GIFT City?

Banks operate through IFSC banking units (IBUs). These are branches of Indian and foreign banks that deal only in foreign currency. Four years ago there were 21 licensed banks with a little over $31 billion of assets. By late last year IBU assets had passed $100 billion. The regulator's latest count puts them above $120 billion.

Most of this is lending to Indian companies in dollars. External commercial borrowings (ECBs) are foreign-currency loans that Indian companies raise from abroad, and Indian banks' overseas branches have long competed for them. IFSCA's executive director, Pradeep Ramakrishnan, said last month that almost 75% of India's ECBs now go through GIFT City. He also said nearly $85 billion has been raised through bonds listed there, about $18 billion of it green, social or other sustainable bonds.

GIFT City's bank assets almost quadrupled in four years

20406080100$120B0

$31B

$100B

$120B

4 yrs agoLate last yrNow

For investors, the effect is indirect. Banks book dollar lending under a long tax holiday instead of in an overseas branch, and global companies' treasury centres there had $6.54 billion of credit outstanding at the latest count. None of this is a stock you can buy. It is a quiet cost tailwind for banks and borrowers.

Are funds and fund managers moving to GIFT City?

Slowly, yes. GIFT IFSC now has 235 fund management entities running more than 400 funds. Funds based there have raised more than $45 billion in cumulative commitments. Commitments are promises from investors, not money already invested, so the amount actually deployed will be lower.

Two rules do most of the work. First, offshore funds can move into GIFT without triggering tax, and that relief now runs for roughly three and a half more years. Second, Indian mutual funds face an industry-wide cap of $7 billion on overseas investing, and their GIFT City arms do not count against it. Ten to twelve Indian fund houses now run GIFT funds, some with a $500 minimum, which can keep taking money for foreign stocks when the domestic cap is full.

Can Indian companies list directly at GIFT City?

On paper, yes. Six months after GIFT Nifty arrived, the government let unlisted Indian public companies list shares directly on India INX and NSE IX, raising dollars from global investors without first listing in Mumbai. Already-listed companies had to wait for SEBI guidance. The catch is in the government's own FAQ: the only "permitted international exchanges" are the two in GIFT City. India's route to listing abroad leads to Gandhinagar, not New York or London.

In practice, no Indian company has done it yet. The first try was XED Executive Development, an executive education firm planning a $12 million IPO. The opening date slipped, the subscription window was extended several times, and earlier this year the company withdrew. It cited lukewarm institutional demand during tensions in West Asia, and paperwork problems with KYC checks (know-your-customer identity checks) that stopped retail investors from completing bids. The closest thing to a win is UPL, which this year became the first company to list its existing global depositary receipts on NSE IX.

Regulators have started fixing the plumbing. SEBI recently allowed India's KYC registration agencies to share information with IFSCA-regulated firms, so an investor already verified in Mumbai shouldn't have to start again in GIFT City. IFSCA's bigger fix is to skip the IPO. A consultation paper a few months ago proposed letting companies list without a public offer. "There is no need to come in through a traditional IPO," Ramakrishnan said last month, adding that the framework should arrive within months. That may produce listings. It will not by itself produce buyers.

Check the claimThree common claims about GIFT City

ClaimGIFT Nifty is just SGX Nifty with a new name.Tap to checkPartly trueThe contract is the same idea, but trading now matches on NSE IX in India, under IFSCA rules and Indian tax law. Singapore brokers still route orders to it.Flip backClaimIndian companies are listing at GIFT City to raise dollars.Tap to checkMythAllowed on paper, but the only attempt, XED's $12 million IPO, was withdrawn earlier this year.Flip backClaimGIFT City is now a major banking centre.Tap to checkFactIFSC banking units held more than $120 billion of assets at the latest count, up from about $31 billion four years earlier.Flip back

How do Indians buy US stocks through GIFT City?

Indian residents can send up to $250,000 per financial year abroad under the RBI's Liberalised Remittance Scheme (LRS), about ₹2.4 crore at our exchange rate. Until recently, most of that money went through foreign brokers and apps. GIFT City is pulling it into Indian-regulated pipes.

NSE IX launched its Global Access platform this year, starting with US stocks. Investors complete KYC digitally, send dollars to a GIFT City bank account, and buy US stocks without opening a demat account (India's electronic share account). They can buy fractions, such as a $10 slice of a $272 share. Holdings are unsponsored depository receipts (UDRs): receipts, created without the US company's involvement, that give the economic exposure of a share without direct ownership. ViewTrade executes in the US, and NSE IX aims to add 30 more markets.

Ramakrishnan said nearly 3 million Indians have signed up under GIFT City's revamped global access programme, and GIFT-based brokers offer stocks, bonds and ETFs in about 50 countries.

Rupees leave India once, then stay inside Indian-regulated plumbing

1. Indian saver (Rupee bank account) to LRS remittance (Up to $250,000 a year)
2. LRS remittance (Up to $250,000 a year) to GIFT City bank (Dollar account)
3. GIFT City bank (Dollar account) to NSE IX Global Access (ViewTrade executes)
4. NSE IX Global Access (ViewTrade executes) to US stock as UDR (Fractions allowed)

What about aircraft leasing and the bullion exchange?

Indian airlines have long leased planes from lessors based abroad. GIFT City wants that business. Entities in the IFSC have leased 454 aircraft and ship assets so far. The tax rules are generous. Gains on selling an aircraft fall under the 20-year holiday. Dividends between leasing units are exempt. Non-residents pay no tax when they sell shares in a leasing unit, as long as it starts operating within roughly the next three and a half years, the same deadline that applies to fund relocations.

The India International Bullion Exchange (IIBX) opened four years ago to let qualified jewellers and dealers import gold and silver through an exchange rather than through banks. It now has 668 intermediaries and participants. Roughly 110 tonnes of gold and 1,200 tonnes of silver have come in through GIFT IFSC so far, and IFSCA wants more of India's gold pricing to happen on its exchange.

Leasing and bullion are real but still small

454Aircraft and ship assets leasedCumulative

668Bullion exchange participantsLatest IFSCA count

110tGold imported via GIFTCumulative

1,200tSilver imported via GIFTCumulative

How does GIFT City compare with Singapore and Dubai?

On size, it doesn't yet. Singapore's asset managers looked after S$6.7 trillion (US$5.2 trillion) at the end of last year, and 76% of it came from outside Singapore. Dubai's financial centre, DIFC, had 8,844 active companies, more than 500 wealth and asset managers, 102 hedge funds and 50,200 workers at the same point.

Dubai and Singapore are still far bigger than GIFT City

Measure	GIFT IFSC	DIFC (Dubai)	Singapore
Firms	1,260 registered	8,844 active	—
Fund managers	235	500+	1,320 licensed
Money	$45B+ fund commitments	—	US$5.2T managed
Headline tax	0% for 20 of 25 years, then 15%	0% on qualifying free-zone income, else 9%	17%

The tax comparison is closer than the size comparison. GIFT City's 20-year holiday is more generous than Singapore's 17% headline rate and roughly matches Dubai's 0% on qualifying free-zone income. But both Singapore and the UAE now apply a 15% minimum tax to multinational groups with revenue of at least €750 million. For the largest banks and fund groups, that narrows how much any zero-tax zone, GIFT City included, can actually save them.

The real difference is where the business comes from. Singapore and Dubai attract money from everywhere. GIFT City mostly collects Indian business once done abroad: index futures, dollar loans, outbound savings, gold imports. That is a big pool, but a home one, and the capital controls that make GIFT City necessary also stop rupee money flowing freely through it.

Singapore manages more than 100 times what GIFT funds have raised

Singapore AUM$5,200B

GIFT fund commitments$45B

Different measures: assets under management versus cumulative commitments raised. The gap is the point, not the exact ratio.

Even fast growth leaves GIFT funds far smaller than Singapore today

Pick a yearly growth rate for GIFT fund commitments and a time horizon, starting from $45 billion

Yearly growth

20%30%40%

Years

3510

GIFT fund commitments$77.8B$112.0B$278.6B$98.9B$167.1B$620.4B$123.5B$242.0B$1,301.6B

−98.5%−97.8%−94.6%−98.1%−96.8%−88.1%−97.6%−95.3%−75.0%below Singapore AUM, last yrbelow Singapore AUM, last yrbelow Singapore AUM, last yrbelow Singapore AUM, last yrbelow Singapore AUM, last yrbelow Singapore AUM, last yrbelow Singapore AUM, last yrbelow Singapore AUM, last yrbelow Singapore AUM, last yr

Singapore AUM, last yr $5,200.0B

$77.8B$1,301.6B

What could go wrong?

The tax holiday is policy, and policy can be tightened as easily as extended. The headline numbers also need care. Registrations are not active businesses, and fund commitments are not invested money. Activity is concentrated: one product, GIFT Nifty, is nearly all exchange trading, so a rule change in Singapore or India could hit most of GIFT's market volume at once. And the equity market has not shown it can attract buyers, as XED's withdrawal made clear.

Our read

GIFT City has done what India built it to do. It brought the offshore index contract home, became, by the regulator's count, the main route for India's dollar borrowing, and gave Indian savers a home-regulated way to buy US stocks. Bank assets rising from about $31 billion to over $120 billion in four years show the plumbing is being used.

It is not yet a market for investors. No Indian company has listed shares directly there. GIFT Nifty's daily peak has hardly moved in nearly three years, which suggests the early jump came from Singapore's existing business moving in, not new demand. On funds, Singapore manages more than 100 times what GIFT funds have raised.

For a US investor, GIFT City matters in one practical way: GIFT Nifty is the live price of Indian stocks while America trades. Watch it. Don't expect to buy Indian companies there instead of through US-listed ETFs or the FPI route.

For an Indian resident, GIFT City is now a practical route for LRS money. Compare Global Access and GIFT-based funds with foreign brokers on cost; the funds also sit outside the $7 billion mutual fund cap.

Our test for whether GIFT City has arrived is simple. We want to see a meaningful Indian company list there and trade with real depth, and a GIFT Nifty daily record well above $23.67 billion. Until then, GIFT City is important infrastructure and a minor investment story.

Go deeper

• Competitive advantage: GIFT Nifty only won because regulators forced the move. This chapter shows how liquidity and network effects protect an incumbent like Singapore, and how to tell a real moat from a policy-made one.
• Risk and scenarios: GIFT City's economics rest on a tax holiday and on capital controls. Use this chapter to build bear cases around policy changes instead of guessing at price moves.
• How the stock market works: Explains order books, prices and indexes, the machinery behind reading GIFT Nifty as an overnight signal for the Nifty.

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