As India’s financial landscape evolves rapidly, GIFT City (Gujarat International Finance Tec-City) has emerged as India’s International Financial Services Centre (IFSC), with the objective of creating a globally competitive financial ecosystem within the country. Unlike traditional domestic financial hubs, GIFT City is designed to operate under a separate regulatory framework that enables cross-border financial activity, foreign currency transactions, and access to international markets. Within this structure, GIFT city mutual funds have emerged as an important investment product category. These funds are distinct from domestic Indian mutual funds in terms of regulation, investment universe, and currency framework. While they naturally appeal to investors with international exposure requirements, their relevance extends to a broader set of investors seeking global diversification through an India-regulated platform.
This article explains what GIFT city mutual funds are, their features, what products and services are currently available via GIFT City, the investment process, and whether GIFT City mutual funds are right for your portfolio, so you can make informed decisions with confidence.
What Are GIFT City Mutual Funds?
GIFT City mutual funds are investment schemes established within the IFSC at GIFT City. In the mainland (domestic) Indian market, mutual funds are regulated by SEBI. However, in the IFSC, these vehicles are governed by the International Financial Services Centres Authority (IFSCA).
These funds operate under a regulatory framework aligned with international financial centres, which is different from India’s domestic mutual fund regulations.
At a functional level, GIFT city mutual funds support both inbound and outbound investment strategies. Inbound fund structures allow overseas and offshore investors to invest into Indian markets through IFSC-based vehicles, while outbound fund structures enable IFSC-registered domestic fund managers to invest in global equities, debt instruments, and international assets.
IFSCA (Fund Management) Regulations, 2025, streamlined the process for fund managers. This framework allows for faster product launches and more innovative structures than traditional domestic funds. Whether you are an NRI looking for an inbound fund to invest in India or a resident Indian looking for an outbound fund to invest in the S&P 500, the GIFT City route provides a unified gateway.
Why Should You Invest? The Key Benefits
Investing in GIFT city mutual funds offers a distinct set of advantages that are hard to replicate in the domestic market.
1. Tax Efficiency
For non-resident investors, GIFT City is a tax haven within a regulated framework.
- No GST: Management fees charged by fund managers in GIFT City do not attract GST.
- Capital Gains: There is no capital gains tax on the transfer of units of a fund for non-residents.
- Dividend Concessions: Dividend income from these funds is often taxed at lower rates or enjoys treaty benefits that are more favorable than the mainland.
2. Dollar-Denominated Investing
Currency depreciation can often eat away at your returns. If the INR depreciates against the USD, your domestic gains might shrink when converted back to foreign currency. Gift city mutual funds allow you to invest in USD. This acts as a natural hedge against rupee volatility, making it an ideal choice for NRIs who plan to spend in foreign currency in the future.
3. Global Access with Local Expertise
Previously, if a resident Indian wanted to invest in US Tech stocks, they had to open a foreign brokerage account. Now, through GIFT city mutual funds, Indian residents can use the Liberalized Remittance Scheme (LRS) to invest in global portfolios managed by India’s top fund houses operating out of the IFSC.
Types of GIFT City Mutual Funds
The IFSCA provides various types of funds to suit different needs. Understanding these types is crucial before you approach a mutual fund advisor to build your portfolio.
Types of GIFT City Mutual Funds Based on Direction of Capital
| Fund Type | Description | Target Investor |
| Inbound Funds | Funds that collect foreign capital to invest in Indian equities/debt | NRIs, OCIs, and Foreign Nationals |
| Outbound Funds | Funds that collect domestic capital to invest in global markets (USA, EU, etc.) | Resident Indians (via LRS) and NRIs |
| Feeder Funds | Funds that “feed” onshore or offshore capital into a larger master fund based in India or abroad, simplifying cross-border cash flows | Investors seeking access to established strategies |
Types of GIFT City Mutual Funds Based on Structure
- Retail Schemes: These are the equivalent of traditional mutual funds. They are open to all investors and have low minimum investment thresholds.
- Exchange Traded Funds (ETFs): These funds track specific indices and are listed on the GIFT IFSC exchanges (India INX or NSE IX).
- Real Estate Investment Trusts (REITs) & InvITs: For those looking to invest in infrastructure or commercial real estate through a structured vehicle.
Beyond Mutual Funds: PMS and AIF Strategies
While GIFT city mutual funds cater to a broader retail audience, PMS and AIF structures offer sophisticated investors deeper customization and access to private markets.
1. Portfolio Management Services (PMS)
In GIFT City, PMS providers manage personalized portfolios with direct ownership of securities, transacted in USD.
- Equity PMS: High-conviction strategies focusing on Indian or global listed markets.
- Multi-Asset PMS: Dynamically shifts capital between Equity, Debt, and Gold to manage volatility.
- Quant & AI PMS: Utilizing algorithmic models and data patterns to remove emotional bias.
2. Alternative Investment Funds (AIF)
AIFs are pooled vehicles for “Alpha” seekers, categorized by their investment mandates:
- Venture Capital Schemes: These facilitate investments in startups and early-stage ventures. They are essential for investors looking to capture high-growth opportunities in the Indian tech ecosystem.
- Special Situation Funds (SSFs): These funds invest in stressed or distressed assets, including loans, equity of companies under insolvency, or assets undergoing corporate restructuring.
- Category II AIFs (Private Equity & Credit): Focus on unlisted companies, private debt, and Pre-IPO opportunities.
- Category III AIFs (Hedge Funds): Utilize complex trading strategies, including long-short equity and derivatives, to manage market volatility.
Investment Comparison at a Glance
| Feature | GIFT City Mutual Funds | GIFT City PMS | GIFT City AIF |
| Min. Investment | ~USD 500 | USD 75,000 | USD 75,000* |
| Complexity | Simple / Daily NAV | Customized | High / Sophisticated |
| Asset Type | Listed Securities | Listed Securities | Listed & Unlisted |
| Best For | Retail Diversification | HNI Personalization | Complex Alpha Seeking |
*Note: Minimum investment for AIFs is USD 75,000 as of February 2025. Some funds may offer different thresholds for accredited investors depending on the specific scheme structure
Who Can Invest in GIFT City Mutual Funds?
The eligibility criteria are broad, making GIFT City mutual funds a versatile investment hub.
- Non-Resident Indians (NRIs) & OCIs: This is perhaps the most catered-to segment. NRIs can invest their foreign earnings directly into these funds without worrying about NRE/NRO account complexities in some cases.
- Resident Individuals: Under the RBI’s LRS route, a resident can remit up to USD 250,000 per financial year. You can use this quota to buy units of GIFT city mutual funds that provide exposure to international stocks.
- Foreign Nationals & Institutions: Global investors who want to participate in the “India Story” but prefer an international regulatory environment and USD settlement.
Step-by-Step Guide to Invest in GIFT City Mutual Funds
Navigating a new financial jurisdiction can seem daunting. This roadmap can help you begin your journey with GIFT City mutual funds.
Step 1: Define Your Goals
Are you investing for your child’s foreign education? Or are you an NRI looking to bring money back into Indian equities? Defining the currency of your goal (USD vs. INR) will determine if GIFT City is right for you.
While information is available online, the tax implications between your country of residence and India can be complex. Consulting a mutual fund advisor can help you navigate the Double Taxation Avoidance Agreement (DTAA) benefits. A qualified mutual fund consultant can also help you compare the expense ratios of IFSC funds versus domestic funds.
Step 2: Complete KYC (IFSC Standards)
The KYC process for GIFT City is separate from your domestic KYC. It is aligned with global Anti-Money Laundering (AML) standards. You will typically need:
- Passport/OIC Card copies.
- Proof of foreign residence.
- Tax Identification Number (TIN) of your country of residence.y
Step 3: Remit Funds
- For Residents: Use the LRS route through your bank to transfer USD to the fund’s account in GIFT City.
- For NRIs: Direct transfer from your overseas bank account.
Step 4: Monitor and Rebalance
Just like domestic investments, it is important to monitor the performance of your GIFT city mutual funds and rebalance whenever necessary.
Tax Implications: A Deeper Look
Taxation is the primary reason why many are shifting their focus to GIFT city mutual funds.
- For Non-Residents: Income arising from the transfer of units of a retail scheme in the IFSC is generally exempt from tax in India, provided the consideration is paid in foreign currency.
- For Residents: The tax treatment usually follows the “look-through” principle. Since you are remitting money under LRS, the gains are treated similarly to foreign investments, which may be subject to Tax Collected at Source (TCS) at the time of remittance and capital gains tax upon redemption.
Note: Always verify current tax laws with your tax consultant, as these regulations are subject to annual budget changes.
Is a GIFT City Mutual Fund right for you?
Ask yourself these three questions:
- Do I have a future liability in USD? (e.g., a child’s tuition in London or a home in Dubai). If yes, GIFT city mutual funds are an excellent choice.
- Am I an NRI looking to simplify tax compliance? GIFT City offers a simple, tax exempt environment for many foreign investors.
- Do I want to diversify away from the Indian Rupee? If you believe the USD will strengthen over the long term, holding assets in USD via the IFSC is a smart move.
If you answered “Yes” to any of these, you may explore the specific offerings from the leading global and domestic asset management companies that have established a presence in GIFT City.
Conclusion
The GIFT City financial hub has moved from an initial conceptual stage to an active operational environment. As of February 2026, the International Financial Services Centres Authority (IFSCA) has registered approximately 300 funds, managed by over 180 Fund Management Entities (FMEs). Cumulative investment commitments have reached approximately USD 22 billion, reflecting a steady increase in institutional and individual participation.
The regulatory framework has reached a state of relative stability, with established processes for GIFT City mutual funds, AIFs, and PMS structures. While the ecosystem continues to evolve, the core infrastructure for cross-border capital flow and dollar-denominated investing is now functional. Investors evaluating this route should analyze the specific fee structures, tax implications of their home jurisdiction, and the track record of the fund management entities involved.
Frequently Asked Questions (FAQs)
Q: What is the minimum investment for GIFT City products?
A: Minimum investment amount varies for each product:
- Retail mutual fund schemes are designed for the general public with lower minimums, as low as USD 500
- PMS schemes typically require a minimum of USD 75,000
- AIFs generally required USD 150,000, but this was reduced to USD 75,000 in February 2025
Q: Can resident Indians invest in these funds?
A: Yes. Residents can invest via the Liberalised Remittance Scheme (LRS), allowing up to USD 250,000 per financial year.
Q: Are these funds regulated?
A: Yes. All funds in GIFT City are regulated by the IFSCA, a unified statutory body overseeing securities, banking, and insurance within the zone.
Q: Can I repatriate my money?
A: Yes. GIFT City is designed for full repatriability. Since transactions occur in foreign currency, redemption proceeds can be moved to international bank accounts according to regulatory guidelines.
DISCLAIMER: This document is for informational and educational purposes only and does not constitute investment advice, or an offer to buy or sell any securities. GIFT City mutual funds, AIFs, and PMS products involve market risks, including the potential loss of principal. Tax treatment varies based on individual circumstances and jurisdiction. Investors should consult with qualified financial professionals before making investment decisions. The regulatory information provided reflects conditions as of February 2026 and is subject to change. Always verify current regulations with IFSCA and relevant authorities.
