How to Choose a GIFT City Mutual Fund

A GIFT City mutual fund is a US dollar-denominated mutual fund that is launched and managed through GIFT City, India’s International Financial Services Centre (IFSC). These funds give investors access to global investment opportunities while investing through an Indian financial ecosystem.

However, the real question is whether it deserves a place in your portfolio, and if yes, how much you should invest?

Consider two investors.

Rohit is a 38-year-old salaried professional in Pune with investments across mutual funds, EPF and fixed deposits.

Meera is a 45-year-old NRI living in Dubai with most of her savings in Dirhams. 

Although both are interested in GIFT City mutual funds, the right solution for each of them is completely different. Understanding why is one of the most important parts of choosing the right fund.

If you are new to GIFT City, you may first want to read our detailed guide on GIFT City Investments for NRIs, which explains the overall framework, eligibility, taxation and investment process.

Who can invest in GIFT City Mutual funds?

Before comparing different funds, you should first understand which investment is suitable for you. Your residential status determines how you can invest and, in some cases, even which funds you are allowed to invest in.

GIFT City is considered an international jurisdiction due to its special status. So, for resident Indians, investments are made under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS). Under the current rules, a resident individual can remit up to USD 250,000 in a financial year for eligible overseas investments.

One aspect many first-time investors overlook is Tax Collected at Source (TCS). If your total overseas remittances exceed ₹10 lakh in a financial year, TCS becomes applicable on the amount above this threshold. It is important to remember that this is not an additional tax. The amount can generally be adjusted against your final income tax liability or claimed while filing your income tax return.

For example, if Rohit remits ₹13 lakh during the financial year, TCS is collected only on the ₹3 lakh exceeding the threshold ₹10 lakhs. So, in this case TCS works out to ₹60,000 (20% of ₹3 lakhs). That means, if Rohit initiates investment with ₹13 lakhs, the net investment will be for ₹12.4 lakhs only as ₹60,000 will be deposited to the government. Although this temporarily affects his cash flow, the amount can later be adjusted while filing his income tax return.

If you are an NRI and OCI  (Overseas Citizen of India), you invest directly using funds held in your overseas bank accounts. As GIFT City is tax free for you, no tax provisions apply to you.. Investments and redemption proceeds generally remain fully repatriable.

One eligibility rule that changes everything

This is one of the most important aspects of GIFT City investing, yet it is often overlooked.

Resident Indians are permitted to invest only in outbound GIFT City mutual funds, which invest outside India.  If you are an NRI or OCI, the investment universe is broader. You can invest in India-focused (inbound) and international funds (outbound).

This means Rohit’s shortlist is naturally limited to global investment funds, while Meera can evaluate both India-focused and international opportunities before deciding what best fits her portfolio.

Anuj says: “The first discussion should never be about which mutual fund has performed the best. It should begin with understanding your financial goals, your residential status and why you want Indian or global exposure in the first place. Once those questions are answered, choosing the right fund becomes much simpler because half the options eliminate themselves naturally.”

GIFT City Mutual Fund landscape today

The GIFT City mutual fund universe is still relatively small, which actually makes it easier for first-time investors to understand. As of late July 2026, individual investors can choose from seven retail mutual fund schemes offered by six asset management companies (AMCs). An AMC is simply the company that manages your mutual fund.

Broadly, these funds fall into two categories. Five are outbound funds, which invest outside India, while two are inbound funds, designed primarily for eligible overseas investors looking for India exposure through GIFT City.

This list will continue to evolve as more fund houses launch products.

Many GIFT City products also have restrictions for investors based in countries such as the United States and Canada, or jurisdictions covered under FATF restrictions. If you are considering investing from overseas, first check which companies you are eligible to invest in.

Besides mutual funds, GIFT City also offers portfolio management services (PMS), Alternative Investment Funds (AIFs), foreign currency deposits and other global investment products. If you would like to understand the broader investment universe, our guide on Top GIFT City Investment Products provides a detailed overview.

Which one fits your portfolio, inbound or outbound funds?

This is probably the most important distinction to understand before selecting any GIFT City mutual fund.

Inbound funds invest in India. Although your investment is made in US dollars, the underlying portfolio consists of Indian companies or Indian mutual funds. They are primarily designed for NRIs and foreign investors who want India exposure while keeping their investments in foreign currency.

Outbound funds invest outside India. They provide exposure to overseas companies, global indices or international markets, helping diversify a portfolio that is otherwise concentrated in Indian assets.

The right choice depends on what your existing portfolio already looks like.

If most of your wealth is already invested in India through EPF, Indian mutual funds, direct equities and real estate, an outbound fund may provide better diversification.

On the other hand, an NRI earning and saving in US dollars may want part of their portfolio invested back into India through an inbound fund.

Which approach should you choose, active or passive?

Once you decide to invest in an outbound GIFT City mutual fund, the next question is whether you want an active or passive strategy.

If you are new to mutual funds, our Comprehensive Guide to Mutual Funds in India explains the differences in greater detail.

A passive fund simply tracks a market index such as the S&P 500 or Nasdaq 100. There is no fund manager selecting stocks. The objective is straightforward—to replicate the performance of the underlying index as closely as possible.

An active fund works differently. The fund manager researches companies and decides which businesses deserve a place in the portfolio. The aim is to outperform the benchmark, although there is no guarantee this will happen consistently.

GIFT City Mutual Fund minimum investment and charges

Before comparing returns, look at three practical factors that determine whether a GIFT City mutual fund is suitable for you: the minimum investment, the exit rules and charges. 

Minimum investment – Most outbound GIFT City mutual funds require an initial investment of USD 5,000, which works out to roughly ₹4.8 lakh at exchange rates prevailing in late July 2026. Additional investments are usually much smaller, often starting from USD 500. Edelweiss currently has a higher entry requirement of USD 10,000, while Tata’s inbound fund starts at just USD 500, although it is available only to eligible overseas investors.

Exit load – An exit load is simply a charge for redeeming your investment within a specified period. Not every GIFT City mutual fund has one. For example, the two Parag Parikh IFSC passive funds currently have no exit load or lock-in period, while some actively managed funds charge an exit load if you withdraw within the first two years.

Framework for choosing the right GIFT City Mutual Fund

To select the right fund, rather than starting with the funds, start with yourself. Your goals, portfolio, investment horizon and risk appetite will eliminate many options before you even begin comparing performance numbers.

Step 1: Decide how much of your portfolio should go into GIFT City

A GIFT City mutual fund should complement your existing portfolio. Your emergency fund, insurance, domestic investments and long-term financial goals should already have a place in your overall plan before you allocate money overseas. That is why every comprehensive goal-based financial plan starts with understanding your complete financial picture rather than recommending products.

For most first-time investors, global exposure usually begins with a modest allocation. There is no fixed percentage that suits everyone, but many investors prefer starting small and increasing exposure gradually as their portfolio grows.

This is where minimum investment amounts become important.

Take Rohit. His total investment portfolio is worth ₹40 lakh. Suppose he wants only 5% invested internationally. That works out to ₹2 lakh. However, if the minimum investment required is around ₹4.8 lakh, he would end up allocating nearly 12% of his portfolio instead. That changes the decision completely.

His choices are straightforward:

• Wait until his overall portfolio grows.
• Invest the larger amount knowingly.
• Delay international investing until it becomes more suitable.

All three are perfectly valid decisions.

Meera faces the opposite situation. Since most of her wealth is already outside India, her question is not whether she needs global exposure, it is whether she needs more exposure to India.

Anuj says: “Never decide your investment amount because the minimum application size allows it. First decide how much global exposure your portfolio actually needs. Then see whether a particular fund fits that allocation. If it doesn’t, waiting is better.”

Step 2: Match the fund to your investment horizon

Your investment timeline should determine the type of fund you choose.

If you expect to need the money within the next few years, equity-based international funds are generally not the right place.

As a broad guide:

• Less than three years: avoid equity funds altogether.
• Three to five years: be cautious about funds with exit loads or concentrated portfolios.
• Five years or longer: global equity funds become much more suitable.

Rohit is investing for his daughter’s higher education more than a decade away, so short-term volatility is unlikely to affect his plans.

Meera expects to relocate to India in six or seven years. Her investment horizon is long enough, but her future residential status may influence which funds remain suitable for her.

If you are planning investments around multiple life goals, our guides on saving for financial goals and retirement planning explain how different investment horizons require different solutions.

Step 3: Choose a fund you can stay invested in

Many investors believe they have a high risk appetite until markets actually fall. A better question is this:

If your investment falls by 20% within six months, what would you do?

If your first instinct is to sell, you probably need a simpler, broader investment rather than a specialised one.

In general:

• Broad global index funds spread investments across hundreds of companies and sectors, making them the least volatile option.
• Nasdaq-focused funds carry higher exposure to technology companies and therefore experience larger ups and downs.
• Actively managed global funds depend on the fund manager’s stock selection and typically hold fewer companies.
• Regional funds, such as Greater China funds, concentrate risk even further because they depend on the performance of a single geography.

If you are a first-time investor, the simplest diversified option may be the most suitable place to begin.

Step 4: Buy what your portfolio is missing

This is where many investors make the wrong decision.

Rohit’s portfolio already consists almost entirely of Indian assets through EPF, NPS, and domestic mutual funds. Adding an India-focused GIFT City fund would not improve diversification.

A global outbound fund gives him exposure to businesses, industries and economies outside India.

Meera’s situation is exactly the opposite.

Her income, savings and investments are already held overseas. For her, an India-focused GIFT City fund could actually improve diversification by adding exposure to the Indian economy without requiring repeated currency conversions.

Step 5: Understand that you are also taking a currency bet

Every dollar-denominated investment has two sources of return.

The first comes from the investment itself. The second comes from movements in the exchange rate.

Suppose Rohit invests approximately USD 5,000 when the exchange rate is ₹96.5 per dollar. If the investment itself delivers zero return over the next year:

• If the rupee weakens to ₹101 per dollar, his investment becomes worth more in rupee terms.
• If the rupee strengthens to ₹92 per dollar, the same investment loses value when converted back into rupees.

Neither movement has anything to do with the fund. It is purely the effect of currency.

Over long periods, international investments can provide currency diversification benefits, but exchange rates move both ways. 

For Meera, whose wealth is already denominated in foreign currency, the currency equation is very different, making India-focused funds more relevant than they might be for Rohit.

Step 6: Consider tax and future residency before investing

Tax should never be the only reason for choosing an investment, but it should always be part of the decision.

The tax treatment of GIFT City mutual funds depends on several factors, including your residential status, the type of fund and the tax rules applicable when you invest or redeem. These rules also evolve over time, so it is worth confirming the latest position before investing.

Another thing is, if you currently live overseas but expect to return to India in the future, your residential status may change while you still hold these investments.

Some GIFT City funds require investors to inform the fund house if their residency changes. In certain cases, additional investments may no longer be permitted and existing holdings may need to be dealt with differently.

That means your return-to-India plans should be part of your investment decision before relocation.

Anuj says: “Many NRIs spend a lot of time selecting the right fund but very little time planning what happens when they move back to India. Your residency status can change your eligibility, taxation and future investment options. Planning the exit is just as important as planning the entry.”

A simple way to decide

If you have worked through the six steps above, the decision is probably clearer than when you started. Here is a quick summary.

Using this framework, Rohit’s decision becomes fairly straightforward. Since most of his investments are already in India and the current minimum investment is larger than the allocation he wants, waiting may actually be the better decision until his portfolio grows.

Meera arrives at a different conclusion. Since most of her assets are already held overseas, an India-focused GIFT City fund could improve diversification. Before investing, however, she should first consider how a future move back to India might affect her holdings.

Two investors. The same investment category. Completely different answers. That is exactly why fund selection should always begin with your financial situation rather than the fund itself.

What can you realistically expect from performance?

One mistake many investors make is trying to rank these funds solely on past returns.

Most retail GIFT City mutual funds are still very new. Several were launched only during 2025 and 2026, which means they simply do not have enough performance history to draw meaningful conclusions.

Instead, evaluate them differently.

• For passive funds, focus on how closely they track their benchmark after expenses rather than whether they delivered the highest recent return.
• For actively managed funds, give the fund manager time. Judging performance over a few months rarely tells you whether the investment strategy actually works.
• Remember that an AMC’s track record in domestic mutual funds, PMS or other products does not automatically translate into similar results for a newly launched GIFT City fund.

For the same reason, we have intentionally avoided quoting recent returns here. Performance numbers can quickly become outdated and often create a misleading impression when a fund has only a short operating history.

The same principle applies whenever you evaluate a newly launched mutual fund. Our guide on whether you should invest in a New Fund Offer (NFO) explains why a short performance history should never be the primary reason for investing.

Common mistakes to avoid when choosing a GIFT City Mutual Fund

A few mistakes appear repeatedly among first-time investors.

• Treating GIFT City as an all-or-nothing decision instead of deciding how much of your portfolio actually belongs there.
• Investing because someone recommended a fund without checking whether it suits your own goals, time horizon and risk appetite.
• Allowing the minimum investment amount to determine your portfolio allocation instead of deciding the allocation first.
• Chasing whichever country, sector or theme has performed best over the previous year.
• Ignoring how a future change in residency could affect your eligibility or future investments.

Most investment mistakes are not caused by choosing the “wrong” mutual fund. They happen because investors choose a fund that does not fit their own financial situation.

Selecting the right GIFT City mutual fund is therefore less about finding the best-performing scheme and more about finding the one that fits naturally into your overall investment strategy.

Also read –  6 common mistakes to avoid when investing in GIFT City

How can Zenith Finserve help you?

Choosing the right GIFT City mutual fund is not really about picking the “best” fund. It is about deciding whether GIFT City belongs in your portfolio at all, how much exposure makes sense, and which type of fund fits your financial goals. That is why we start with your overall financial picture rather than a product recommendation.

At Zenith Finserve, our approach is always portfolio-first and product-second.

• We help you decide whether GIFT City deserves a place in your portfolio, how much allocation is appropriate, and how it fits alongside your Indian mutual funds, fixed deposits and other global investments through our GIFT City Investment Services and Investment Planning Services.
• We explain the tax, currency and residency implications based on your own situation, whether you are a resident Indian, an NRI or planning to return to India, so you understand the consequences before investing.
• We compare active and passive funds, inbound and outbound strategies, costs, exit loads and portfolio suitability to recommend what genuinely fits your goals instead of what happens to be popular today. The same disciplined approach guides our Mutual Fund Advisory Services for your domestic investments as well.

Many investors spend weeks comparing funds when the bigger question is whether GIFT City is even the right solution for them.

If you have reached that stage, it is often worth speaking with a professional.

Our guide on How to Get Professional Help with Personal Finances explains when expert advice can add real value.

Conclusion

There is no single best GIFT City mutual fund.

The right choice depends on your residency status, your existing portfolio, your investment goals, your comfort with market fluctuations, and even where you expect to live in the future.

The fund itself is only one part of the decision. Your allocation, investment horizon, costs, taxation and currency exposure will often have a much bigger impact on your long-term outcome than choosing between two similar funds.

And sometimes the right decision is to wait. If the minimum investment forces you into a larger allocation than you are comfortable with, there is nothing wrong with postponing the investment until it fits naturally into your portfolio.

If you would like to understand whether GIFT City is suitable for your financial plan, or want an objective second opinion before investing, we would be happy to help.

Explore our Investment Planning Services, GIFT City Investment Services, or simply schedule a conversation with our team. Our focus is not on selling products, but on helping you make better financial decisions with confidence.

FAQs

What is a GIFT City mutual fund?

A GIFT City mutual fund is a US dollar-denominated mutual fund launched from India’s IFSC at GIFT City and regulated by the IFSCA. Depending on the scheme, it invests either in global markets or Indian markets.

Can resident Indians and NRIs invest the same way?

No. Resident Indians invest through the Liberalised Remittance Scheme (LRS) and can currently invest only in outbound funds. NRIs and OCIs invest directly from overseas bank accounts without LRS limits or TCS and can access both inbound and outbound funds.

What is the minimum investment?

Most outbound GIFT City mutual funds require a minimum investment of USD 5,000, with top-ups starting from USD 500. Some inbound funds have lower minimums but are generally available only to NRIs.

Are GIFT City mutual funds better than domestic international mutual funds?

Not necessarily. GIFT City funds are free from domestic overseas investment limits and can offer a simpler fee structure. However, they require much higher minimum investments. For smaller SIPs, domestic international funds may still be more suitable.

How many GIFT City mutual funds are available?

As of July 2026, there were seven retail GIFT City mutual funds across six asset management companies. The number is expected to grow over time.

Are GIFT City mutual fund returns taxable?

Yes. The tax treatment depends on your residency status and the scheme. Resident investors may also have foreign asset reporting requirements. Always seek tax advice before investing.

What happens if I return to India after investing as an NRI?

Some fund houses require you to notify them if your residency changes. Depending on the scheme, further investments may be restricted or your holdings may need to be redeemed. Our Detailed Guide on Investments in GIFT City for NRIs explains this in detail.

Should I choose an active or passive GIFT City mutual fund?

For most first-time investors, a passive fund is a good starting point. It offers lower costs, broad diversification and does not depend on a fund manager outperforming the market. Active funds suit investors willing to pay more for professional stock selection.