Investing is no longer limited by borders. Many Indian investors want to invest in global markets, while foreign investors are looking to participate in India's growth story. But investing across countries can involve different rules, tax considerations, currency issues and paperwork, making the process seem complicated.
This is where GIFT City enters the conversation.
GIFT City, short for Gujarat International Finance Tec-City, is home to India’s International Financial Services Centre (IFSC), located in Gujarat, a specially regulated financial hub for international financial services. It provides a platform through which eligible Indian investors can access global investment opportunities, while also enabling foreign investors to invest in India through internationally aligned financial structures.
But what exactly are GIFT City funds? And how are they different from a regular mutual fund investment available through a domestic investment platform?
What is GIFT City?
First let us understand what is meant by GIFT City.
GIFT City is built as an International Financial Services Centre, or IFSC. In simple terms, it is a financial zone in India that deals with global financial services. Think of it as a specialised counter at a bank branch. The bank is still in India, but that counter operates under a different regulatory framework to handle foreign-currency transactions, global clients, and cross-border investments.
For investors, the interesting part is not the buildings or the location, but the framework. Investment products offered through the IFSC can be structured differently from regular domestic investment products. That is why GIFT City investments are increasingly discussed in the context of offshore investing, gaining foreign-currency exposure, and global diversification.
What are GIFT City Funds?
GIFT City funds are investment funds set up within the IFSC framework and are regulated by the International Financial Services Centres Authority (IFSCA). These funds may invest in overseas markets, global securities, feeder structures, or other permitted assets, depending on the scheme documents and regulatory permissions.
They are not the same as ordinary domestic mutual fund schemes that investors buy through a standard Indian mutual fund platform. A regular domestic mutual fund is governed under India’s domestic mutual fund framework. A GIFT City fund sits in the IFSC environment and may operate in foreign currencies, such as the US dollar, and are designed to facilitate cross-border investments.
At first glance, investing in a GIFT City fund may seem similar to investing in a domestic mutual fund – KYC applicability, investing, professional management of assets, value tracked over time, and redemption of investments subject to the fund's terms. However, the underlying structure, regulatory framework, documentation, currency, taxation, and investment universe can be quite different.
However, “GIFT City fund” is a broad term, not a single product. The IFSC framework allows for a range of fund structures catering to different investor segments and investment strategies. These include retail schemes, restricted schemes aimed at accredited or sophisticated investors, venture capital and private equity funds and other alternative investment structures.
How do GIFT City Funds Work?
A GIFT City fund is managed by a regulated entity in the IFSC. Eligible investors complete the required onboarding and KYC process, transfer money through the permitted route, and invest in the chosen fund subject to the fund's eligibility criteria and applicable regulations.
For resident Indians, the route may involve foreign remittance rules and product-specific conditions. The investing is generally subject to the Liberalised Remittance Scheme (LRS) and other applicable foreign exchange regulations. The investment process typically involves remitting funds in a foreign currency, such as the US dollar, before investing in the selected fund.
Many GIFT City funds are denominated in foreign currencies. As a result, investors are exposed not only to the performance of the underlying investments but also to movements in exchange rates. For example, even if the value of the underlying investment remains unchanged, changes in the rupee's value against the US dollar can affect the final return when the investment is converted back into rupees.
The investment process may resemble that of a domestic mutual fund, but the regulatory framework, currency, taxation and investment universe can differ significantly. Investors should therefore understand the fund's structure, investment strategy and associated risks before investing.
The investment process may resemble that of a domestic mutual fund, but the regulatory framework, currency, taxation and investment universe can differ significantly. Investors should therefore understand the fund's structure, investment strategy and associated risks before investing.
Who Can Invest in GIFT City Funds?
The eligible investor base depends on the type of fund and its investment mandate. Some structures may be available to resident Indians, Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), foreign investors, or institutional investors. Eligibility is determined by the fund's offer documents, applicable regulations, minimum investment requirements, onboarding process and the permitted route for transferring funds.
There is also growing NRI and global investors’ interest in GIFT City-linked products, with diaspora-linked fund allocations reaching USD 747.27 million in the January-March quarter of 2026, compared with USD 630.13 million in the previous quarter, based on IFSCA bulletin data cited in the report. However, this does not automatically make the product suitable for every investor.
For example, an investor building long-term wealth through a rupee-denominated SIP in a domestic mutual fund may have very different needs from someone seeking global exposure through a foreign-currency fund in GIFT City. Understanding these differences is essential before making an investment decision.
GIFT City Funds Vs Regular Mutual Fund Investment
A regular mutual fund investment in India is easy for most investors to access and invest in. These funds are regulated by the Securities and Exchange Board of India (SEBI) and are usually denominated in Indian rupees. The investor can simply select a scheme, check the riskometer, read the scheme information document, and invest through approved channels.
GIFT City funds, on the other hand, are set up in the IFSC and are regulated by IFSCA. Many of these funds are denominated in foreign currencies, such as the US dollar, and may require more documentation, foreign-currency transfer, additional tax review, and a better understanding of overseas assets.
Investing in GIFT City funds may also involve additional costs, such as remittance fees, currency conversion charges, transaction costs and fund management fees. Investors should also understand the tax implications and currency risks before investing.
Neither option is inherently better than the other. The right choice depends on an investor's financial goals, risk appetite, investment horizon, and whether they are looking for domestic or global market exposure.
Why Investors Look At GIFT City Investment
Investors usually explore GIFT city investment for three broad reasons.
-
First, global diversification. GIFT City funds may provide access to international investment opportunities, including global equities, bonds, ETFs and other overseas assets.
-
Second, currency exposure. Investors with future foreign-currency needs, such as overseas education, travel, may look at dollar-denominated investments as part of a wider financial plan.
-
Third, access to international investment structures from an India-based IFSC. This may appeal to NRIs, foreign investors and certain resident investors who understand the added layers.
Like any investment, GIFT City funds are also exposed to several risks and require careful evaluation. Investors should consider factors such as
-
Market risk, as global markets can be volatile.
-
Currency risk, since exchange rate movements can affect returns.
-
Costs, including remittance, currency conversion and fund-related charges, can reduce the total returns.
-
Tax implications, which may differ from those applicable to domestic mutual funds.
Key Risks and Considerations
Before investing in a GIFT City fund, read the offer document carefully. Check the currency denomination, underlying assets, liquidity terms, redemption process, costs, tax treatment, investor eligibility, and the applicable regulatory framework.
Tax deserves extra consideration. Many GIFT City mutual fund investors may be confused over whether such investments need to be treated as foreign or domestic assets for tax reporting purposes. The tax treatment of GIFT City investments can differ from that of domestic mutual funds and may vary depending on the fund structure, the investor's residential status and the applicable tax laws. Investors should understand the tax implications before investing and seek professional advice where necessary.
It is equally important to assess whether the fund aligns with your investment objectives, time horizon and risk appetite. While GIFT City funds can provide access to global investment opportunities, which can broaden an investment portfolio, but it should be part of a well-thought-out investment strategy rather than the sole reason for investing.
Conclusion
GIFT City funds are IFSC-based investment funds that may give eligible investors access to global investment opportunities or internationally aligned fund structures from India’s GIFT City framework. For investors seeking geographic diversification or foreign-currency exposure, they can complement a well-diversified portfolio.
However, GIFT City funds are not a substitute for traditional domestic mutual funds. They operate under a different regulatory framework and may involve additional considerations relating to currency, taxation, costs and compliance.
Like any investment, the decision should be based on careful evaluation. Read the offer documents, understand the risks and costs, and seek professional advice where necessary before investing.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.