When Indian investors think about investing overseas, the first thing that usually comes to mind is the Liberalised Remittance Scheme (LRS). Under LRS, the RBI allows residents to remit up to USD 250,000 per financial year for expenses such as education, travel, medical expenses, and, yes, investments in foreign shares, mutual funds, bonds, and even real estate.
And Indians are clearly using it. According to RBI data, overseas investments through LRS grew by 12.45% year-on-year, touching USD 1.70 billion in 2024–25.
For many years, the simpler alternative to direct overseas investing was to buy Indian mutual funds that invested abroad—either directly in foreign stocks or through global ETFs. But these funds have an overall industry cap of USD 7 billion, which has limited on how much investors can actually deploy as most international mutual funds have stopped accepting subscriptions.
Quietly, however, a third route has been taking shape—and that’s where GIFT City enters the picture.
What Exactly is GIFT City?
GIFT City’s International Financial Services Centre (IFSC) in Gujarat is designed to function like an offshore financial hub—think Singapore or Dubai, but located in India.
It has
- Its own regulator (IFSCA),
- A separate tax framework,
- And rules that allow global financial activity while staying within Indian oversight.
Gift City has two broad Investment options, Inbound.. (NRI’s & foreigners can invest in India in dollar denominated products) & Outbound, whereby Resident Indians can invest overseas securities and products in foreign currency.
We will talk mainly about the outbound options in this piece.
Investments made through GIFT City remain covered under the overall LRS limit, but the experience is expected to be far more streamlined.
How has GIFT City grown so far?
Since its inception, GIFT City has expanded rapidly:
- 200+ companies are already operating there, including global banks like JP Morgan and Standard Chartered bank.
- Two international stock exchanges are functional here.
- Fintech firms, insurance companies, and even India’s first international bullion exchange are present too.
- It has earned a top-10 global ranking among emerging financial centers.
Clearly, this isn’t an experiment anymore—it’s aiming to be a serious financial ecosystem.
What Can You Invest in at GIFT City?
1. Alternative Investment Funds (AIFs)
These include angel funds, venture capital, and private equity strategies focused on high-growth opportunities. These are mainly super HNI’s as ticket size is fairly larg of about USD 150,000. There are over 200 AIFS already registered with over 3000 + active investors.
2. GIFT City Offshore Funds.
There are many wrappers that an investor can choose from. Global Portfolio Management Schemes, Active mutual funds that create portfolios as per their own mandates, feeder funds that feed into international funds or ETFs.
Every option has tax impact, so investor needs to keep that in mind.
3. Global Stocks & ETFs
Through IFSC brokers, investors can directly access international stocks and ETFs, traded in foreign currency.
4. Offshore Banking & Deposits
IFSC banks also offer USD-denominated fixed deposits and accounts that appeal to investors seeking dollar exposure without permanently moving money overseas. Although, as of now there are limited options available in these.
Why Use GIFT City instead of opening accounts directly abroad?
If you’re comfortable opening a US brokerage account, dealing with foreign tax forms, understanding overseas statements, and managing LRS remittances, then direct investing may work for you.
But many investors may not want that level of complexity.
GIFT City funds simplify things:
- You don’t need to pick individual stocks or ETFs—the fund manager does that for you.
- No direct foreign tax filings—the fund handles taxes internally.
- You still invest and redeem units like a regular mutual fund, with NAVs and statements.
- Everything happens in a regulated environment, overseen by IFSCA and governed by Indian rules.
For many long-term investors, even a modest allocation to overseas markets can meaningfully improve diversification.
How do GIFT City Funds Actually Work?
At first glance, they feel like regular mutual funds—but there’s one big structural difference.
Taxation (The key differentiator!)
Here, the fund itself pays the tax, not the investor.
That means:
- Capital gains, dividends, and interest are taxed at the fund level.
- When you redeem, the proceeds you receive are already post-tax.
- You don’t have to calculate capital gains or file separate foreign tax returns.
In short, you get global exposure without the annual tax compliance headache that comes with direct overseas investing.
Please keep in mind that every product has different tax impact at the fund level, as well as on the length of your investments.
Why do Investors like this route?
1. Sector Diversification
You gain access to global leaders in:
- Technology platforms
- Enterprise software
- Global consumer brands
- Specialized healthcare segments
Many of these businesses simply aren’t available in Indian markets.
2. Currency Diversification
Over long periods, the rupee has tended to weaken against the US dollar. Holding assets in strong foreign currencies can act as a hedge against domestic inflation and currency risk.
3. A Smoother Long-Term Experience
Indian and global markets don’t always move in sync. Adding overseas equity can help reduce the risk of being entirely dependent on Indian market cycles.
A few Important Caveats..
No investment is risk-free, and GIFT City funds are no exception.
- Market & concentration risk: Indices like the S&P 500 or Nasdaq 100 are still dominated by large tech names. If overseas markets correct where your funds invest corrects, these funds will reflect that.
- Currency risk: A depreciating rupee boosts returns—but a strengthening rupee can reduce them, even if the fund performs well.
- Regulatory risk: Fund-level taxation is a major advantage today, but future rule changes can’t be ruled out.
- Ticket size: With a minimum investment of USD 5,000, these are not mass-retail products.
Please keep in mind though that above Rs.10 lacs of LRS investment there is a 20% tax collected at source.Also for Non US citizens, if the investment is above 60,000 USD in US based securities and if the investors passes away then the estate tax is 40% of the value of the portfolio. There are products like ETFs that feed into UCITS, Mfs & ETFS that are based out of Ireland & Luxemborg that circumvent this issue.
Gift – Gujarat International finance-Tec City is an idea whose time has come. A single regulator IFSCA is the governing body committed to make the process seamless is a dream come true for investors.
In short while the options in Gift City are multiple and very interesting, investors will have to pick and choose the ones which suit them the best.
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