India’s $7 billion industry-wide cap on overseas investments through domestic mutual funds has been fully utilized. With this limit exhausted, investors face reduced options for investing in global indices such as the S&P 500 or Nasdaq 100. GIFT City funds offer an alternative within a well-understood regulatory framework supervised by the IFSCA, even though these investments are classified as offshore.
One significant benefit of GIFT City funds pertains to taxation. Most of these funds are organized as trusts, meaning that tax is assessed at the fund level. Investors receive redemption proceeds post-tax, in contrast to traditional international mutual funds where tax obligations fall on the investor.
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Additionally, there is no Tax Collected at Source (TCS), enhancing liquidity in comparison to direct overseas stock investments.
Fatehpuria mentioned that the risks are largely akin to those of any international investment, including market volatility and currency fluctuations. Nevertheless, investors must become familiar with the procedures for remitting money abroad under the Liberalised Remittance Scheme (LRS).
These funds are dollar-denominated, which can assist investors in gradually accumulating foreign currency assets and capitalizing on rupee depreciation.
Regarding portfolio allocation, Fatehpuria recommends beginning with a 7–10% exposure to global markets and progressively increasing it to 15–20% as comfort levels improve.
While the costs are higher—with expense ratios falling between 1.5% and 1.75%—GIFT City funds can serve as a valuable component for diversification beyond India’s borders.
For the full discussion, watch the accompanying video
First Published: Dec 20, 2025 4:24 PM IST
