If you have tried investing in a US or global mutual fund through your usual Indian investment platform, you may have come across a familiar message: “not accepting fresh investments”.
With many international mutual funds restricting inflows, GIFT City mutual funds have emerged as another route for Indian investors looking to access global markets.
But how do these funds work? Are they different from regular Indian mutual funds, and who should consider investing in them?
This guide explains GIFT City mutual funds, their types, eligibility, taxation and risks, helping you understand whether they belong in your financial plan.
What is a GIFT City mutual fund?
A GIFT City mutual fund is an investment fund established in the International Financial Services Centre (IFSC) at GIFT City, Gandhinagar. It is regulated by the International Financial Services Centres Authority (IFSCA).
Investments are made in foreign currency. Investments can be made both in India through inbound funds and overseas markets through outbound funds.
It pools money from multiple investors, like a normal mutual fund, which a professional fund manager invests according to the scheme’s objectives. The main difference is the regulatory framework, currency and investment structure.
For resident Indians, investing in an outbound GIFT City fund generally involves sending money overseas under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS) scheme. NRIs can invest using eligible overseas funds, subject to the scheme’s requirements.
First, what is GIFT City?
GIFT City (Gujarat International Finance Tec-City) is a business district near Gandhinagar, Gujarat. It houses India’s first International Financial Services Centre, designed to provide financial services in a framework comparable to global financial hubs such as Singapore and Dubai.
The IFSCA became the unified regulator for financial services in the IFSC in April 2020. GIFT City is also gaining recognition as an international financial centre. In September 2026, it moved up to 37th in the Global Financial Centres Index, from 46th.
How does a GIFT City mutual fund work?
The investment process generally involves these steps:
- You complete KYC: You complete Know Your Customer (KYC) verification, which establishes your identity and helps meet regulatory requirements.
- You transfer money: Resident Indians generally convert rupees into foreign currency and remit the amount under LRS. As an NRI, you may transfer money from overseas accounts.
- You receive fund units: Your investment buys units at the scheme’s net asset value (NAV), usually quoted in US dollars.
- You redeem your investment: When you sell your units, the proceeds are generally paid in foreign currency.
Also read: How to Invest in GIFT City Mutual Funds, A Complete Guide
Types of GIFT City Mutual Funds
Under the IFSCA’s Fund Management framework, you can see the list of all types of funds in the GIFT City. However, there is no structured categorisation like we have in the homeland Indian mutual funds.
That makes it difficult to compare the funds. That’s why we at Zenith Finserve have our own categorisation for GIFT City funds.
GIFT City mutual funds can be broadly classified into inbound funds and outbound funds, depending on where they invest.
- Inbound funds: Investing in India
Inbound funds allow eligible non-resident and foreign investors to access Indian markets through the GIFT City framework. Many such funds operate as feeder funds, investing in an underlying Indian mutual fund rather than selecting Indian securities directly.
For example, HDFC International Equity Fund offers exposure to Indian equities through an underlying Indian mutual fund. The exact underlying scheme and structure should be checked in the fund’s latest documents.
HDFC’s inbound range includes schemes such as the HDFC India Flexi Cap Fund and HDFC India NIFTY 50 Fund, which provide different approaches to Indian equity exposure through the GIFT City platform.
- Outbound funds: Investing outside India
Outbound funds give eligible investors access to overseas markets. They can be divided into three broad categories based on their investment approach.
- Index-tracking funds: These invest in overseas exchange-traded funds (ETFs) or similar instruments to track a market index. For example, the Parag Parikh IFSC S&P 500 Fund of Fund tracks the S&P 500, while the Parag Parikh IFSC Nasdaq 100 Fund of Fund provides exposure to the Nasdaq-100 Index.
- Actively managed global equity funds: These select individual overseas companies rather than simply tracking an index. For example, the DSP Global Equity Fund invests directly in global equities across countries, using its own stock-selection approach.
- Country, Region or Sector-focused funds: These concentrate on a particular geography or investment theme. Examples include the Edelweiss Greater China Equity Fund and the Edelweiss US Technology Equity Fund.
As new mutual funds continue to come up in the GIFT City, this is an evolving space so we, at Zenith Finserve, will keep revising our GIFT City mutual funds categorisation and structure. Understanding this structure helps you assess its investment approach, costs and risks.
GIFT City mutual funds vs regular Indian mutual funds
If you are new to mutual funds, our guide to mutual funds in India explains the basics. Here is how the two structures compare.
Feature | Regular Indian mutual funds | GIFT City mutual funds |
Regulator | SEBI | IFSCA |
Currency | Indian rupees | Generally US dollars |
Investments | Primarily Indian markets, with overseas investments subject to applicable limits | Overseas markets for outbound funds; Indian markets for eligible inbound funds |
Eligible investors | Residents and eligible NRIs | Eligible residents through LRS; |
Minimum investment | Some funds start at ₹100–₹500 | Varies; some funds start at US dollar 500 while US dollar 5,000 is common |
How do you invest? | Bank transfer, UPI or SIP mandate in rupees | Residents through LRS |
Taxation | Depends on the fund category and applicable tax rules | Depends on the fund structure, your residential status and applicable tax rules |
Why are GIFT City funds getting attention?
One reason is that access to international mutual funds through the conventional Indian route has become more limited.
Indian mutual funds have operated under an industry-wide overseas investment limit of US dollar 7 billion, with an additional US dollar 1 billion limit for overseas ETFs. These limits were reached in 2022.
As a result, many international schemes stopped accepting fresh investments. According to Outlook Money’s report, 54 of the 66 international funds tracked by Value Research were closed to fresh investments as of July 2026.
In the meantime, GIFT City’s fund management industry has also expanded. According to data reported by Business Standard, as of 30 June 2026, the IFSC had 235 fund management entities and 401 schemes. A year earlier, the figures were 177 entities and 272 schemes.
Total investments crossed US dollar 45 billion compared with US dollar 22.11 billion in June 2025. The earlier figures are also discussed in this report on IFSCA’s fund management growth.
Anuj says, “When Indian international funds stop accepting fresh investments, investors naturally look for another way to access global markets. GIFT City can provide that route, but the investment should serve a clear purpose. If you are saving for your child’s education in the US, dollar exposure may be useful. If you are planning to buy a home in Pune, the same investment may not be appropriate for that goal.”
Who can invest in a GIFT City mutual fund?
Eligibility depends on the scheme, the investor’s residential status and the applicable regulations.
- NRIs, OCIs, and Foreign Nationals: If you are an NRI, OCI, or a foreign national, you can invest in a GIFT City mutual fund.
If you want to participate in India’s growth story, you can invest in an inbound fund.
If you want to invest outside India but use GIFT City structure to keep all your investment in one place, then you can invest through suitable outbound fund(s).
However, some schemes restrict investments from residents of certain countries, including the US and Canada. So, check the scheme eligibility before investing.
- Resident Indians: As a resident India, you can invest through the Liberalised Remittance Scheme (LRS), which permits remittances of up to US $250,000 per person per financial year.
The RBI’s LRS FAQs explain the framework. A July 2024 RBI circular also allowed resident Indians to remit funds to IFSCs for investments in outbound funds under LRS.
Also read: Detailed Guide on GIFT City Investments for NRIs
How are GIFT City mutual funds taxed?
Taxation depends on the fund’s structure, the investor’s residential status and the applicable tax rules. The points below provide a broad overview, not individual tax advice.
For resident Indians
- TCS on remittances: A 20% TCS may apply to LRS investment remittances exceeding ₹10 lakh in a financial year. This can generally be adjusted against your income tax liability or claimed as a refund.
- Tax within the fund: PPFAS states that tax is paid at the scheme level for its outbound GIFT funds. Its taxation note explains the treatment, including the applicable rate for long-term capital gains (LTCG). Other funds may follow different tax rules.
- Foreign asset reporting: Certain holdings may need to be disclosed in Schedule FA of your income tax return. Check the tax implications of GIFT City investments and consult a tax professional.
For NRIs
Certain transactions through an IFSC may qualify for Indian tax exemptions, depending on the applicable conditions. However, tax treatment in the country where the investor lives can be different. An NRI living in Dubai may face a different tax position from someone living in London or the US.
Your residential status, the fund’s structure and the tax rules in each relevant jurisdiction should be considered before investing.
Risks to know before you invest
GIFT City funds offer access to global markets, but they are not risk-free.
- Currency risk: If you invest in a GIFT City fund and later the rupee strengthens against your currency while the investment remains unchanged in dollars, its value falls purely due to currency risk. Although, the same can work in your favour if the rupee weakens.
- Market risk: Investments can lose value. Diversification reduces concentration risk but does not eliminate market risk.
- Limited track records: GIFT City’s retail fund market is relatively new. However, there are funds in GIFT City that feed into existing funds that have long track records.
Is investing in a GIFT City mutual fund right for you?
If you are a Resident Indian, an outbound GIFT City mutual fund could be useful for you to diversify your investment portfolio and also take exposure in other countries and currencies.
If you are an NRI, OCI, or a foreign national, you can invest in inbound fund(s) to participate in India’s growth story. You can also invest in outbound fund(s) to take benefit of GIFT City structure and taxation. This will also help you to manage your global investments from one place for operational simplicity.
The right decision depends on your goals, time horizon, existing investments, liquidity needs, tax, and residential position. Financial planning helps bring these factors together before you choose a product.
Anuj says, “I would start by understanding the client’s goals and how much international exposure their portfolio actually needs. Comparing two global funds before answering those questions puts the product ahead of the plan. The fund should follow the financial goal, not the other way around.”
Not sure whether a dollar fund fits your goals? A short review can show how much global exposure, if any, makes sense for you.
How can Zenith Finserve help you with GIFT City mutual fund investments?
GIFT City mutual funds offer opportunities to invest in Indian and international markets. Though, choosing a fund is only the beginning. You also need to decide how much to invest, how it fits into your overall portfolio and how to manage it as your financial needs evolve.
At Zenith Finserve, we assess your financial goals, existing investments, risk profile, currency needs and tax position to help you make informed decisions. Our role continues after the initial investment, through ongoing portfolio monitoring, periodic reviews and guidance on the changes needed to keep your investments aligned with your goals.
If you are a Resident Indian, we help you assess whether international diversification makes sense, determine an appropriate allocation and shortlist suitable outbound GIFT City mutual funds. We also help you understand the associated costs, currency risks, LRS requirements, applicable TCS and tax implications.
If you are an NRI, OCI or a Foreign National, we help you evaluate inbound funds for Indian market exposure and outbound funds for international investments. We consider your existing portfolio, financial goals, country of residence, fund eligibility and relevant tax, reporting and repatriation requirements.
Our ongoing service includes reviewing your portfolio’s performance and allocation, assessing whether your investments remain suitable, identifying when rebalancing or other changes may be needed, and guiding you through the recommended actions.
Our objective is to build a long-term relationship in which your portfolio evolves with your financial goals. This helps you avoid managing investments in isolation or having to reassess your strategy on your own whenever circumstances change.
Conclusion
GIFT City mutual funds have expanded the options available to investors seeking exposure to Indian and international markets. For eligible Resident Indians, NRIs and OCIs, they offer investment routes worth considering alongside conventional mutual funds and other existing investments.
However, choosing a fund requires more than comparing its investment strategy or past performance. Its underlying structure, costs, currency exposure, taxation, eligibility conditions and role within your overall portfolio all matter.
An investment that suits one investor may be inappropriate for another. Ultimately, the value of GIFT City mutual funds lies not simply in access to new markets, but in how effectively they serve your financial goals.
Frequently Asked Questions
Is a GIFT City mutual fund the same as an international mutual fund in India?
No. An Indian international mutual fund is regulated by SEBI, accepts investments in rupees and is subject to the applicable overseas investment limits. A GIFT City fund is regulated by IFSCA, investments are US dollar denominated in and outside India.
Can resident Indians invest in GIFT City mutual funds?
Yes. Eligible resident Indians can invest through LRS, subject to its annual limit of US $250,000 per person and the applicable rules. TCS is applicable to investment remittances exceeding ₹10 lakh in a financial year.
What is the minimum investment in a GIFT City mutual fund?
The minimum varies by scheme. Generally, the minimum limit is US $5,000 but a few schemes accept US $500 as well.
Are GIFT City mutual funds safe?
These funds operate under IFSCA’s regulatory framework. However, regulation does not guarantee returns or prevent losses. Market movements, currency fluctuations and the specific investment strategy can all affect the value of your investment.
Do I need a foreign currency account to invest?
A foreign currency account may not be required. You can invest directly from a bank account in your home country.
How to decide which fund to invest in the GIFT City?
At Zenith Finserve, we help you select the fund that is suitable to you based on your needs. You can schedule a meeting with us to understand our process and offerings.
