8 Benefits of GIFT City Mutual Funds: Why Smart Investors Are Choosing Them

In just three months, the number of investors in GIFT City’s retail funds more than doubled, rising from 3,438 in March 2026 to 8,467 in June 2026.

The numbers are still small compared with India’s mutual fund industry, but the pace of growth suggests that more investors are exploring this route.

What makes GIFT City funds attractive to NRIs living in the US or Dubai, as well as resident Indians in cities such as Ahmedabad and Bengaluru? Dollar-based investing, potential tax advantages for NRIs, simpler access to international markets and lower investment minimums.

Let’s understand the benefits of GIFT City mutual funds, how they differ for NRIs and resident Indians, and what you should check before investing.

The main benefits of GIFT City mutual funds include:

• Investing and holding money in US dollars
• Potential capital gains tax exemptions in India for NRIs investing in qualifying funds
• Investing directly from a foreign bank account without needing an NRE or NRO account
• Repatriating investments and returns abroad
• Accessing international markets through a regulated investment route
• Starting with as little as USD 500 in certain funds

What are GIFT City mutual funds?

GIFT City mutual funds are investment schemes offered through GIFT IFSC in Gandhinagar, Gujarat. These funds are regulated by the International Financial Services Centres Authority (IFSCA) under the IFSCA fund management framework.

Broadly, GIFT City funds fall into two categories:

• Inbound funds: These invest in Indian companies and markets. It suits you well if you are an NRIs who wants exposure to India’s growth while investing through a dollar-based structure. Examples include the Tata India Dynamic Equity Fund and Sundaram India Mid Cap Fund.
• Outbound funds: These invest in markets outside India, including the US, Europe and Asia. Examples include the Parag Parikh IFSC S&P 500 and Nasdaq 100 Fund of Funds and the DSP Global Equity Fund.

Also read: How to Invest in GIFT City Mutual Funds: A Complete Guide

Why is GIFT City investment growing?

GIFT City is attracting more fund managers and investors. IFSCA’s April–June 2026 data, reported by Business Standard, shows the following growth:

Retail investments were still relatively small, at around USD 87.32 million in June 2026. However, more fund houses are introducing products for individual investors.

The minimum investment is also becoming more accessible. In August 2026, PPFAS GIFT reduced the minimum investment in its S&P 500 and Nasdaq 100 funds from USD 5,000 to USD 500.

GIFT City has also improved its international standing. In September 2026, it climbed nine places to rank 37th in the Global Financial Centres Index.

8 key benefits of GIFT City mutual funds

1. You invest and earn in US dollars

With dollar-denominated GIFT City funds, your investment, the fund’s net asset value (NAV) and redemption proceeds are generally in US dollars.

If you are an NRI earning in dollars or dirhams, this can reduce the need to convert money into rupees and then back into a foreign currency.

It can also help match your investments with future expenses. For example, if you are saving for your child’s education in the US or planning to retire abroad, dollar-based investments may be useful because your future expenses will also be in a foreign currency.

Currency movements matter, too. The rupee has weakened against the dollar over long periods, partly reflecting differences in inflation between the two economies. However, currency movements are not guaranteed to move in one direction, and dollar investments can lose value when measured in rupees if the rupee strengthens.

2. GIFT City tax benefits for NRIs

Tax treatment is one of the main reasons NRIs consider GIFT City funds When NRIs redeem regular Indian mutual funds, tax may be deducted at source (TDS) on their capital gains. 

Depending on the investment and applicable rules, this can mean a deduction at redemption and additional paperwork to claim any excess tax back.

GIFT City funds can work differently. After the expansion of IFSC tax exemptions under Budget 2024, NRIs may qualify for an exemption from Indian capital gains tax when redeeming units of eligible funds. Certain dividends may also qualify for a concessional tax rate of 10 per cent.

However, these benefits depend on the fund structure and the applicable tax provisions. Investors should check the specific rules rather than assume every GIFT City investment receives identical treatment.

There are two important points to remember. First, your residential status when the income arises can affect the tax treatment. Second, the country where you live may tax the gains even if India does not. An NRI living in the UAE and one living in the US may therefore have very different tax obligations.

Before investing, check the applicable income tax rules in India and your country of residence with a qualified tax adviser.

Anuj says, “Many NRIs focus on the returns they earn but overlook how much tax may be deducted when they redeem their Indian mutual funds. GIFT City can simplify the Indian tax side for eligible investments, but it doesn’t automatically make the gains tax-free everywhere. We encourage clients to check their home country’s tax rules before investing a substantial amount.”

3. No NRE or NRO account hassles

NRIs investing in regular Indian mutual funds generally use an NRE or NRO account, depending on the source of funds and their requirements.

With eligible GIFT City funds, NRIs can generally invest directly from a foreign bank account after completing the required KYC process. This can reduce certain banking formalities associated with domestic investments.

Also read: A Detailed Guide on GIFT City Investments for NRIs

4. Your money can go back abroad

Repatriation means transferring your investment proceeds back to the country where you live. For eligible GIFT City investments, funds and returns can generally be repatriated to a foreign bank account, subject to applicable requirements. 

This can be convenient if you need the money for a property purchase, education expenses or other financial goals abroad.

5. A straightforward route to global markets for resident Indians

GIFT City funds can also help resident Indians diversify beyond domestic investments. Under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS), resident individuals can remit up to USD 250,000 per financial year for permitted transactions, including eligible overseas investments.

Outbound GIFT City funds offer a route to international markets without requiring investors to open a separate overseas brokerage account.

The PPFAS options are index funds, which simply copy the index.

Resident investors should also account for LRS limits, applicable tax collection at source (TCS), foreign asset reporting and the tax treatment of investment gains.

Anuj says, “For resident Indians, GIFT City funds can be a useful way to add international exposure, but they shouldn’t replace the core of an investment portfolio. We prefer to connect the investment to client goals, such as overseas education or future expenses in dollars, and build the allocation around the client’s overall financial plan.”

6. Lower minimum investments

Until recently, many GIFT City retail funds required a minimum investment of USD 5,000. From 25 August 2026, PPFAS GIFT reduced the minimum for its S&P 500 and Nasdaq 100 funds to USD 500.

According to Business Today, these funds also have no lock-in period or exit load. Minimums and other conditions differ across schemes, so check the latest scheme documents before investing.

New fund launches are expanding the options available to investors as well. Before investing in a new scheme, understand its objective, costs and underlying holdings. Our guide to new fund offers (NFOs) explains what you should consider.

7. A single regulator for the IFSC framework

In India’s domestic financial system, different regulators oversee different sectors. SEBI regulates mutual funds, RBI oversees banks and IRDAI regulates insurance.

Within GIFT IFSC, IFSCA regulates financial services under the IFSC framework, including fund management.

For you, this provides a dedicated regulatory framework for international financial activities. However, regulation does not eliminate investment risk. You should still check a fund’s structure, disclosures, costs and suitability.

8. Faster, paperless onboarding

Opening an investment account from overseas can involve document verification and cross-border paperwork. Digital KYC developments are intended to make the process easier for NRIs.

GIFT City introduced video KYC for NRIs in November 2025, initially covering countries including the US, UK, UAE and Singapore. By April 2026, reporting indicated that the facility covered 11 countries.

In September 2026, IFSCA also began piloting Aadhaar-based face authentication to simplify cross-border KYC.

These developments may make onboarding more convenient, although the process and eligibility still depend on your location and the company’s requirements.

GIFT City mutual funds vs regular Indian mutual funds for NRIs

Here is a broad comparison of the two routes.

Tax treatment depends on the fund structure, investor’s residential status and applicable laws. Always verify the scheme’s specific terms.

How the benefits differ for NRIs and resident Indians

Although both groups can benefit from GIFT City funds, the rules and practical advantages are different.

For resident Indians, TCS is generally an advance tax collection rather than an additional tax. Applicable thresholds and rates should be checked before remitting money. The amount collected may be adjusted against the final tax liability or claimed as a refund, subject to the rules.

Resident investors must also understand their foreign asset reporting obligations. These details are covered in the GIFT City eligibility and tax guide.

What to check before investing?

GIFT City funds offer useful features, but they are not automatically suitable for every investor.

• Currency risk: If the rupee strengthens against the dollar, your returns may be lower when converted into rupees.
• Market risk: International markets can fall, even when Indian markets are performing well. Different countries and sectors also carry different risks.
• Tax in your country of residence: NRIs living in the US, UK, Canada or Australia should understand local taxation. US tax rules for foreign funds can be particularly complex.
• Costs: Check the expense ratio and whether the fund invests through another fund, which may add another layer of expenses.
• Regulatory and tax changes: Rules can change. Verify the current requirements before making an investment.
• Investment horizon: Equity investments generally suit long-term goals, often with a horizon of at least five to seven years. Avoid investing money you may need in the near future.

Who should consider GIFT City mutual funds?

These funds may be worth evaluating in situations such as:

• An NRI in Dubai: If you want exposure to Indian markets without repeatedly converting foreign earnings into rupees.
• A couple saving for overseas education: If you are a parent who expects to meet future expenses in dollars and want to evaluate investments that match their goal’s currency.
• A resident Indian with an established portfolio: If you already have adequate financial protection and diversified Indian investments and want to add measured exposure to international markets.

If you’re still building your financial foundation, prioritise an emergency fund, adequate health and term insurance, and a suitable core investment portfolio. Our comprehensive financial management guide explains how these elements fit together. If retirement is your primary goal, our retirement planning guide can help you understand how to plan for your future needs.

GIFT City funds are best evaluated as part of a wider financial plan, not as a substitute for one.

How can Zenith Finserve help you?

For GIFT City investments at Zenith Finserve, we help clients: 

• Assess whether these funds suit their financial goals and investment horizon
• Compare inbound and outbound funds, including active and passive options
• Plan LRS remittances and understand TCS implications as resident investors
• Identify potential tax issues in their country of residence before investing as an NRI

Anuj says, “Before choosing a GIFT City fund, I want to understand what the money is meant to achieve. Is it for a child’s education abroad, retirement or long-term wealth creation? Once the goal is clear, we can evaluate whether an Indian investment, a global fund or a combination of both makes sense.”

Want to understand whether GIFT City investments fit your financial goals? Start a conversation with Zenith Finserve.

Conclusion

GIFT City mutual funds give investors access to dollar-based investments, international markets and, for eligible NRIs, potential Indian tax advantages. Lower minimum investments are also making certain schemes more accessible.

But the right investment depends on your residential status, tax obligations, financial goals, risk tolerance and time horizon. Start with what you need the money for, understand the rules that apply to you, and compare the available options before investing.

The aim is not simply to invest internationally. It is to make sure the investment serves a clear purpose in your overall financial plan.

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