What is GIFT City in simple terms?
It is a designated financial centre inside India that operates on its own tax and regulatory footing. The design intent is that business transacted there, such as fund management, banking, insurance and leasing, is treated as international business rather than domestic business, with a separate regulator and a separate set of rules. It sits in Gujarat and is subject to Indian law, while commercially it is meant to compete with financial centres outside the country. That double character is both the attraction and the difficulty, because the same entity can be Indian for one question and treated as offshore for another.
Is GIFT City outside India for tax purposes?
No. The phrase that gets repeated, that it is treated as offshore, describes the commercial intent rather than the law. An entity there is established under Indian law and answers to Indian authorities. What differs is the treatment given to particular activities and particular income, granted deliberately and on conditions. So the question is never whether the centre is inside or outside the country. It is whether your specific activity and your specific income fall within a concession, and whether you go on meeting the conditions attached to it. Treat every relief as conditional and check the conditions annually.
Can an NRI open an account in GIFT City?
Individuals resident outside India do use the centre, and the accounts available there are built around foreign currency rather than rupees. The practical difference from an ordinary domestic Indian account is which regulatory regime the account sits under, and therefore what can be moved in and out without separate approval. Before opening one, settle two things: what you intend the account to do, and how the income it generates will be reported in the country where you actually live. The second question is the one people leave alone until a bank or a tax authority abroad asks about the account.
Does a GIFT City entity still file Indian returns?
Yes. A concession on the tax payable is not an exemption from filing, and the filing is usually how the concession gets claimed in the first place. The distinction matters when a group assumes that a relieved entity is administratively invisible and lets its compliance lapse. There is also a second layer, because the centre has its own regulator with its own reporting, running alongside the tax return rather than replacing it. Plan for both calendars. The cost of a missed filing here is rarely the tax itself; it is the risk to the conditions on which the relief depends.
Why do fund managers set up in GIFT City?
Because it offers one place where the fund, its manager and its service providers can sit under a single regime aimed at international business, instead of splitting the structure between a domestic entity and an offshore one. The driver is not only the tax result but substance. Regulators and treaty partners increasingly ask where decisions are actually made, and a manager operating from the centre can answer that with people and premises rather than with correspondence. Whether it works for a particular fund depends on where its investors are and what their own advisers need to see.
Does my country's treaty with India still apply there?
An entity established in the centre is an Indian entity, so the treaty network is available to it in the ordinary way, subject to the same conditions any other resident faces. That includes residence evidence and whatever anti-abuse tests the treaty partner applies. What the centre does not do is create a treaty position out of nothing. If a structure exists mainly to obtain a benefit rather than to carry on a business, the concessions available inside India do not answer the question the other country will ask. Build the substance first and rely on the treaty second.
How do you avoid double taxation?
You claim relief once, in the right country, in the right order. Usually the source country taxes first, the residence country then gives a credit for that tax against its own charge on the same income, and a treaty caps the source-country rate. Getting the order wrong is what produces a double charge you then have to unwind. The mechanism differs by income type, which is why we map the whole position before filing either return. See how to avoid double taxation.
Is double taxation legal?
Yes. Nothing prevents two countries from taxing the same income under their own domestic law — each is exercising its own jurisdiction. What treaties and credit systems do is relieve the outcome rather than prohibit the charge, and relief is generally something you must claim on a return or a form, not something applied automatically. Miss the claim and the double charge stands. Double taxation explains the mechanism.
