Govt opens doors for Indian HNIs to trade on tax-free GIFT platform

PALAK SHAH Mumbai | Updated on November 24, 2020 Published on November 24, 2020

Move also signals partial capital convertibility of rupee in offshore jurisdiction, say experts

There is a bonanza for India’s high net-worth stock market traders. The government has now opened the doors for HNI traders to plan on Gujarat International Financial Tech (GIFT) city platform. It is a massive tax break for those who can trade stocks, commodities and currencies on GIFT platform as it is completely exempt from all the levies, income and capital gains tax.

With this, India is also bringing in partial capital convertibility of the rupee in the offshore jurisdiction, experts said.

India has a Liberalised Remittance Scheme (LRS) of RBI under which residents can transfer up to $250,000 (roughly ₹1.5 crore) annually for investment or trading purposes to any exchange in the world. GIFT is considered as an offshore venue and the same LRS scheme has now been extended to the stock exchanges in that jurisdiction. Both the BSE and the National Stock Exchange have their platforms there. Earlier this month, a government notification said that resident Indians with annual income of more than $1 million (approximately ₹7.5 crore) can trade on GIFT platform. Experts say, usually the government keeps a threshold high in the beginning and later brings it down, which is expected in this case also.

So far only foreign investors are allowed to trade on the GIFT platform, which enjoys a 10-year tax holiday. There is no securities transaction tax, capital gains tax or any other levy. All the foreign portfolio investors registered with market regulator SEBI are automatically eligible for trading on GIFT. Under the LRS scheme, the money is transferred through banks that act as an agent for individuals.

Opening up retail trade

“Resident Indian individuals with net-worth over $1 million are allowed to open bank accounts in IFSC in US Dollars and other foreign currencies and participate in the IFSC Exchange products as permitted under RBI LRS. This makes IFSC a free convertible currency zone for qualified resident individuals from India and they will be able to participate now in our exchange as clients and effectively opens up retail participants to trade on our Exchange. We also look forward to retail brokers from India to also open their operations in India INX,” said V Balasubramanian, MD and CEO, INX, a GIFT exchange.

The new regulations also include permission for setting up IFSC Banking Units and permitting persons resident outside India (having net-worth not less than $1 million) to open foreign currency accounts in any freely convertible currency at banks in IFSC.

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Published on November 24, 2020
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