India built a foreign country inside its own borders.

Edition 10: The GIFT City Files, Part 1 of 3 · What Gandhinagar Is For · August Visa Bulletin

Manish Hemrajani
August 02, 2026

The Rundown

A quick favor before you read on. This is Part 1 of a three-week series on GIFT City, and Part 3 tests the "tax-free" claim against the US tax code. If you know one NRI who has received the GIFT City pitch — or the 15% deposit pitch — forward this issue now, so they read the full series before signing anything. One forward is how most readers find us.

This week we open a three-part series on GIFT City, the offshore financial center India built on 886 acres between Ahmedabad and Gandhinagar. Every NRI forum and bank relationship manager is pitching it as tax-free investing in India, and since September 2025 the price of entry has fallen from $150,000 to $500. Over three Sundays we will cover what it actually is, what you can buy there, and — the part nobody else writes — what “tax-free” means when you file a 1040. It means less than you think.

The 15% “deposit” now being offered to NRIs runs through GIFT City. In June, the RBI agreed to absorb the currency hedging cost on fresh 3-to-5-year FCNR(B) deposits, then permitted banks to lend against those deposits through their GIFT City branches, with no ceiling on the leverage multiple. Most domestic banks are offering about 9 times the investor’s capital; HSBC’s GIFT City unit is offering up to 19. The structure, the US tax question that can turn the advertised return negative, and the reason it requires a GIFT City account are in the Deep Dive.

The August Visa Bulletin brought no relief. EB-2 India remains unavailable for the rest of the fiscal year, and the State Department now warns that EB-1 India may also become unavailable in the coming weeks. One projection matters more than the rest: the Department expects EB-2 India to advance to July 15, 2014 or earlier when new visa numbers arrive on October 1.

The Markets

Index	Value	Week	YTD
S&P 500	7,489.72	+1.05%	+9.38%
NIFTY 50	24,383.60	+2.59%	−6.62%
SENSEX	78,094.64	+2.68%	−8.38%
Rupee (per USD)	95.39	+1.22%	−5.95%

Data as of market close, Friday July 31, 2026. YTD measured against year-end 2025 closes. Rupee row shows depreciation against the USD: a higher USD/INR reading is a weaker rupee, so a rising pair is a negative for the rupee.

Ticker	NAV	AUM ($M)	1-Wk	YTD
INDA	$49.80	6,760	+3.71%	−7.86%
FLIN	$35.68	2,490	+3.39%	−7.54%
EPI	$42.99	2,140	+3.12%	−7.13%
SMIN	$70.01	650	+2.83%	+0.14%
INDY	$43.75	563	+3.23%	−11.24%

NAV and performance as of market close, Friday July 31, 2026. AUM in US$ millions. YTD measured against year-end 2025 NAV.

THE DEEP DIVE - MOVEMENT OF CAPITAL

The pitch is everywhere. What the zone actually is should govern whether you answer it.

The Foreign Country Next Door: What India Actually Built in Gandhinagar

You have seen the pitch by now. A cousin’s WhatsApp forward, a bank relationship manager’s call, a LinkedIn post with a rendering of glass towers rising out of the Gujarat plain. GIFT City: invest in India, in dollars, tax-free. The pitch has grown considerably louder this year, and before you wire a dollar toward it, you should understand what the place actually is — because the answer is stranger, and more interesting, than the marketing suggests.

GIFT City — Gujarat International Finance Tec-City — is, for financial purposes, a foreign jurisdiction that happens to sit on Indian soil. Under India’s exchange control regulations, a financial institution operating from the zone is treated as a person resident outside India, and the Foreign Exchange Management Act largely does not apply to it. Accounts are held in dollars, not rupees. Contracts trade in dollars. When you move money from your US checking account into a GIFT City bank, Indian law treats it roughly the way it would treat a wire to Singapore. One qualification is worth noting now: the Income Tax Act still considers the zone part of India. Offshore for currency purposes, onshore for tax purposes. That dual status becomes important in Part 3.

What India built, and why

For decades, the business of India’s own currency and capital was conducted somewhere else. The market for rupee forwards ran through Singapore, Dubai, and London. Funds investing in Indian companies were domiciled in Mauritius and managed from Singapore. The most telling case was the SGX Nifty: futures on India’s flagship stock index traded on the Singapore Exchange, and for years the price of Indian equities was discovered each morning in a city 2,400 miles from Mumbai — before Indian markets opened.

India’s answer was not to fight the offshore world but to build a piece of it at home. The idea dates to 2007, when the Gujarat state government announced the project. The first IFSC regulations were operationalized in 2014, and the first international banking unit opened in 2015. And in July 2023, the SGX Nifty itself moved: the contract left Singapore and became GIFT Nifty, trading on the NSE International Exchange inside the zone. The product that symbolized India’s offshore leakage now trades on Indian soil — in dollars.

One regulator instead of four

The second thing India built is administrative, and for anyone who has opened an NRI account, it may be the more radical of the two. Mainland Indian finance answers to four regulators — the RBI for banking, SEBI for securities, IRDAI for insurance, and the PFRDA for pensions — each with its own rulebook and forms. In 2020, Parliament handed all four sets of powers, for this one zone, to a single body: the International Financial Services Centres Authority, the IFSCA. One regulator, one window, one rulebook written from scratch with foreign-currency business in mind.

If you have ever chased an NRO repatriation through Form 15CA, 15CB, and a branch banker who has never processed one, you understand why this matters. The friction you have learned to live with on the mainland is, in large part, the friction this zone was designed to remove.

The incentives that filled the towers

Institutions did not move to a greenfield site in Gujarat out of patriotism. They were paid to come. A unit set up in the zone can deduct 100% of its business profits from Indian tax for any ten consecutive years out of its first fifteen — a tax holiday few functioning jurisdictions anywhere offer. Trades on the zone’s exchanges carry no securities transaction tax and no commodities transaction tax, the levies that apply to every mainland trade.

The incentives worked. As of September 2025, the zone hosted 35 banks — 18 foreign and 17 Indian — with a banking asset size of $100 billion, and the register had crossed 1,000 entities across banking, fund management, insurance, leasing, and capital markets. The fund business is the fastest-moving piece: commitments raised by funds

Built for institutions, opened to individuals

Here is the part the marketing omits: none of this was built for you. GIFT City was designed to onshore institutional flows — derivatives desks, fund vehicles, aircraft leasing, treasury centers. Individual investors were admitted afterward, in stages, and the regulator’s own rulebook spells out the ladder: venture capital schemes require an investment of at least $250,000, restricted schemes take accredited investors or a minimum of $150,000, and only the newest category, retail schemes, is open to everyone. The fund register shows how recent that opening is. Of the 310 funds operating in the zone as of September 2025, exactly four were retail schemes. The other 306 were built for institutions and the wealthy. The retail door opened in September 2025, when the regulator approved the first mutual fund available to ordinary investors, and the price of entry fell from $150,000 to $500.

That is a 99.7% reduction in the price of admission, and it happened eleven months ago. It is the reason the pitch reached your inbox this year and not in 2019. It also means the retail layer of GIFT City — the funds, the platforms, the onboarding — is very young, and young financial infrastructure deserves the same scrutiny you would give a bank that opened last fall.

The scheme that is opening the accounts

There is a second, more immediate reason your bank wants you in GIFT City this summer, and it does not involve mutual funds. Readers of our FCNR edition will recognize the base product. On June 8, the RBI announced a dollar-rupee swap facility under which it absorbs the full currency hedging cost on fresh 3-to-5-year FCNR(B) deposits. Relieved of that cost, banks raised dollar deposit rates to 6% and higher; Ujjivan Small Finance Bank’s 7.5% is the highest published rate in the program. In late June, an RBI FAQ removed the last constraint: Indian banks and their overseas branches, explicitly including their GIFT City units, may lend against FCNR(B) deposits raised under the scheme, and the RBI set no ceiling on the leverage multiple.

The consequence became clear within weeks. A single bank can now run both sides of the transaction — accept your FCNR deposit on the Indian side and extend a loan against it through its GIFT City branch, which is treated as a foreign branch and does not operate under the domestic rulebook. The loan proceeds fund further deposits, and those deposits secure further loans, so the return on the investor’s own capital rises with each turn of leverage. Most large domestic banks have offered about 9 times the investor’s capital. HSBC, through its GIFT City unit, is offering up to 19 times. The arithmetic behind the sales presentation: at a 6.5% deposit rate and a one-point difference between the deposit rate and the loan rate, 9 times leverage produces roughly 15.5% on capital. The marketing materials generally end at that figure.

This structure is the reason a GIFT City account appears in the paperwork. The loan is booked at the banking unit, and taking the loan requires becoming a customer of that unit. Three points deserve attention before signing anything. First, the return is a spread trade, and the spread is fixed at the outset — the risk in this product is not that rates move against you later, but that the economics are set narrow on day one, and the leverage magnifies every cost, fees included. Second, this is a personal loan obligation secured by your deposits, not a deposit. Third, consider why the program exists. The rupee spent mid-July within one percent of its record low, and NRI dollar deposits are among the most reliable foreign capital India can raise. The RBI designed this facility to attract dollar funding at a difficult moment for the currency, not to improve the return on your savings.

The largest unknown, however — and the one most capable of turning the advertised return negative — is US tax treatment. The product only works economically if you are taxed on the spread, the difference between the deposit interest and the loan interest. Reporting on that net basis is a defensible position where each loan is cleanly documented against each deposit, but it is not settled, and the alternative reading is severe: the full deposit interest is taxable as ordinary income, while the loan interest is an investment interest expense, deductible only by filers who itemize and only against net investment income. Consider the exposure at 9 times leverage and a 6.5% deposit rate. The gross interest subject to that reading is on the order of 60% of your capital each year. A 37% federal rate applied to that figure exceeds the entire 15.5% spread the product advertises. The same structure, under two readings of the same tax code, produces either a mid-teens return or a loss.

The state return deserves separate scrutiny, because state rules do not simply follow the federal treatment, and the two states where NRI professionals are most concentrated illustrate the range. New Jersey is the harsher case: the state’s gross income tax permits only a short list of specific deductions, federal itemized deductions do not carry over, and investment interest is not on the list — so a New Jersey filer is taxed on the full deposit interest with no offset for the loan interest, a treatment that can erase the spread on its own, whatever the federal return allows. California allows the deduction, calculated on its Form 3526, but only for filers who itemize on the California return — and at marginal rates that reach 13.3%, even the favorable outcome surrenders a meaningful share of a spread this thin. Which state you file in changes the arithmetic of this product.

COMPLIANCE GUARDRAIL

A GIFT City account is a foreign financial account — the banking-unit account itself, any dollar deposit inside it, and the leveraged FCNR structure booked through it. If it pushes the aggregate maximum value of your foreign accounts above $10,000 at any point in the year, it must be reported on the FBAR (FinCEN Form 114), and likely on Form 8938 as well — measured on the gross leveraged deposit, not your equity. Interest the banking unit pays a non-resident is exempt from Indian tax, which also means no foreign tax credit arises to offset the US tax on that same interest. The reporting attaches from the first dollar. The exemption is India’s, not yours.

PLAYBOOK MOVE

If you have received this offer, request two figures in writing before anything else: the locked loan rate and the all-in fees, both stated against the deposit rate. The economics of the entire product sit inside that spread. Then put one question to a cross-border tax professional before signing, not after: how will the deposit interest and the loan interest be treated on your federal return and on your state return. If the answers do not support net treatment in both places, the after-tax return is not the number in the presentation. If the bank will not provide the spread in writing, decline.

One more thing before we close. The phrase attached to every GIFT City pitch is “tax-free.” On the Indian side, for a non-resident, the exemptions are largely real. But you file a US return, and the US taxes your worldwide income regardless of what India exempts — and for certain pooled products, US law treats GIFT City funds in ways that can turn the tax-free pitch upside down. That analysis is Part 3, and it is the reason this series exists. Between now and then, invest nothing.

The Priority Date Tracker

Monthly Visa Bulletin movement for India-born applicants.

THIS MONTH

The August 2026 bulletin extends the fiscal-year squeeze. EB-2 India remains unavailable — the annual limit was exhausted in July, and no numbers will be issued in the category before October 1. EB-5 Unreserved India remains unavailable as well. EB-1 India held at October 15, 2022, but the State Department now warns that high demand may force the category to unavailable in the coming weeks; if your EB-1 priority date is current, the closing window is measured in weeks, not months. EB-3 India held at January 1, 2014, with no movement. The EB-5 set-aside categories — rural, high-unemployment, and infrastructure — remain current and are still the only EB-5 lane open to India-born investors.

The forward-looking line worth keeping: the Department projects that EB-2 India will advance to July 15, 2014 or earlier when fiscal year 2027 numbers arrive on October 1. If your priority date sits in the second half of 2014, September is the month to have your documents ready.

Category	Final Action Date	Movement
EB-1	Oct 15, 2022	no change — unavailability warned
EB-2	Unavailable	closed for FY 2026
EB-3	Jan 1, 2014	no change
EB-5 Unreserved	Unavailable	closed for FY 2026
EB-5 Set-Asides	Current	no change

USCIS is using the Final Action Dates chart for employment-based filings in August.

The Number

500

The new price of admission to GIFT City — down from $150,000 in one regulatory approval.

From 2015 through most of 2025, the practical minimum for a GIFT City fund investment was $150,000 — a figure that confined the zone to institutions and the wealthy. In September 2025, the IFSCA approved the first retail mutual fund operating from the zone, and the minimum fell to $500. A 99.7% price cut in the space of one regulatory approval is why a financial center you had never heard of two years ago is suddenly in every NRI conversation. Keep the proportions in mind, though: of the 310 funds operating in the zone as of September 2025, four were open to retail investors. Whether the products behind that newly opened door deserve your money is a separate question — one that Parts 2 and 3 of this series will answer with the fine print in hand.

The Week Ahead

A few dates worth marking as the series runs:

Mon Aug 3: India Manufacturing PMI for July. The standing gauge of whether the industrial economy is giving the rupee any support.

Wed Aug 5: India Services PMI, the larger half of the story.

Fri Aug 7: US jobs report for July (8:30 am ET), the week’s main input for the dollar side of the dollar-rupee pair. RBI foreign exchange reserves data follows in the Indian evening.

Thu Oct 15 (mark it now): The real FBAR deadline. If your foreign accounts crossed the $10,000 aggregate maximum at any point in 2025 and you have not filed FinCEN Form 114, ten weeks remain.

COMING NEXT SUNDAY

The GIFT City Files, Part 2: The menu and the door.

Every product an NRI can actually buy in GIFT City — dollar fixed deposits, $500 mutual funds, $75,000 portfolios, direct shares on the zone’s exchanges — with the minimums in one table. Then the door itself: the video-call account opening that takes about thirty minutes, and a side-by-side of the GIFT City dollar account against the NRE, NRO, and FCNR accounts you already hold. If you pulled your bank’s rate sheet this week, bring it.

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Disclaimer. NRI Playbook is for informational purposes only and does not constitute financial, tax, legal, or immigration advice. We are not registered investment advisors, tax preparers, or attorneys. Information reflects our editorial perspective at the time of writing. For decisions about your specific situation, consult a qualified cross-border tax professional, financial advisor, or immigration attorney. Past performance is not indicative of future results. Market data may be delayed or revised.