GIFT City Outbound Funds: With international funds closing down for SIP

With international mutual funds shut for fresh SIPs, GIFT City IFSC funds offer Indian investors a new route to global diversification through the LRS framework

With the closure of Baroda BNP Paribas Aqua FoF to fresh SIPs, no international mutual fund in India remains open for new SIP investments. As a result, investors seeking global exposure are likely to explore alternative routes. GIFT City's International Financial Services Centre (IFSC) is emerging as an alternative route for Indian investors seeking global diversification.  

Currently, resident Indians investing under the Liberalised Remittance Scheme (LRS) can access outbound retail funds that invest in international markets, offering exposure to regions such as the U.S., Europe, Japan, China, Taiwan and other developed economies.  

Available funds and investment destinations 

GIFT City IFSC currently offers two broad categories of funds: Outbound Funds and Inbound Funds, based on investment objectives and investor profiles.  

“Outbound retail funds allow investors to diversify beyond Indian equities and participate in global themes such as artificial intelligence, semiconductors, healthcare and technology," says Niteen Dongare, director and chief executive officer (CEO), Anand Rathi International Ventures IFSC. 

According to Dongare, Inbound funds are meant for Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and foreign investors seeking exposure to Indian markets through the GIFT City International Financial Services Centre (IFSC). 

Key benefits 

These feeder funds provide a regulated and efficient route to global investment strategies under the International Financial Services Centres Authority (IFSCA) framework.  

“These funds offer global diversification, exposure to international companies and currencies, and the convenience of investing through GIFT City,” says Navneet Munot, MD & CEO, HDFC AMC. 

“Primary benefits include global diversification, no U.S. inheritance tax risk, and minimal tax compliance for investors, as taxes are handled at the fund level,” says Nirmal Bari, Principal Officer, PPFAS GIFT. 

Suitable investors 

These funds suit resident Indians seeking global portfolio exposure. “These funds suit investors seeking long-term global diversification through a low-cost passive route, including both retail and affluent investors,” says Bari. He adds, these funds are not suitable for short-term investors or traders, as gains on investments held for under 24 months are taxed at up to 42.744 per cent.  

Advice for investors 

Investors must take a portfolio approach when investing in these funds. “They are meant to provide global diversification and improve the entire portfolio's risk-weighted returns over long periods of time and not outperform their Indian portfolio at all times,” says Bari. 

Key drawbacks 

GIFT City outbound funds have higher minimum investment requirements than domestic mutual funds, making them less accessible to small retail investors. “Investors also incur foreign exchange conversion and remittance costs, must disclose foreign assets under Schedule FA (Foreign Assets) in their income tax returns, and may face limited track records, lower liquidity, and no rupee-denominated systematic investment plans (SIPs),” says Abhishek Kumar, Securities and Exchange Board of India (Sebi)-registered investment adviser and founder, SahajMoney.com. 

The entry barrier is relatively high. “Most funds require a minimum investment of USD 5,000. Investments must be made through the Liberalized Remittance Scheme (LRS), which involves bank documentation, while investors also bear foreign exchange costs and must disclose overseas holdings in Schedule FA (Foreign Assets) of their income tax return,” says Arihant Bardia, CIO and Founder, Valtrust. 

As of July 2026, five outbound retail funds from four fund houses are available. They are dollar-denominated and funded through the Liberalised Remittance Scheme (LRS). “Investments use up the USD 250,000 Liberalised Remittance Scheme (LRS) limit, may attract 20 per cent, Tax Collected at Source (TCS) on remittances above ₹10 lakh, and involve foreign exchange and SWIFT transfer charges,” says Prashant Mishra, founder, Agnam Advisors. He adds, all-in costs run from about 0.65 per cent for the passive funds to over 2 per cent for active ones, against far cheaper domestic index alternatives. 

How to invest  

Choose the fund after reviewing its fees, exit load, and tax rules, then complete the KYC process with PAN, Aadhaar, bank details, FATCA, and risk profiling. “Submit the application to create a folio, remit dollars under the Liberalised Remittance Scheme (LRS), receive units after funds are realised, and track or redeem investments through your Indian bank account,” says Mishra. 

LRS costs 

Investors can remit dollars under the Liberalised Remittance Scheme (LRS) by submitting Form A2 and an LRS declaration through an authorised dealer bank. “Costs include foreign exchange markups, SWIFT and bank charges, and GST. Frequent small investments are best avoided, as fixed charges raise the overall cost,” says Kumar. 

“The biggest cost is usually the foreign exchange spread, not the remittance fee. Retail spreads can reach ₹0.50 per US dollar but may be negotiated to around ₹0.15–0.20,” says Bardia. 

Mishra points out that investors are better off batching remittances quarterly or half-yearly and negotiating the markup; it is rarely non-negotiable at larger ticket sizes. 

Minimum investment 

According to Mishra, all five schemes require a minimum investment of USD 5,000 (about ₹4.3–4.5 lakh), with top-ups generally starting at USD 500. “While there is no regulatory minimum, the high entry amount makes these funds more suitable as a satellite allocation for investors with larger portfolios,” says Mishra. 

Tax and TCS 

A 20 per cent, Tax Collected at Source (TCS) applies on Liberalised Remittance Scheme (LRS) investments exceeding ₹10 lakh in a financial year and can be claimed as a tax credit. 

“At the fund level, GIFT City entities enjoy specified tax exemptions. At the investor level, capital gains are taxed under foreign asset rules—short-term gains at slab rates and long-term gains at 12.5 per cent,” says Kumar. 

“These schemes are typically set up as trusts in the IFSC and settle tax on their own income, declaring a post-tax NAV. Gains churned by the fund within 24 months can be taxed at the maximum marginal rate, so a high turnover strategy carries a real tax drag that never appears in the expense ratio,” says Mishra. 

SIP option 

Rupee auto-debit SIPs are not available, as each investment requires a fresh Liberalised Remittance Scheme (LRS) remittance. Some fund houses allow monthly top-ups, but each transfer must be initiated separately.  

“A practical alternative is to remit a larger amount once or twice a year and invest it in phases or as an annual lump sum. Monthly remittances are costly due to fixed transfer charges, while rupee auto-SIPs remain unavailable,” says Mishra. Several AMCs and banks are developing solutions to simplify the process and make investing more seamless. 

How to go about investing

• Complete KYC and onboarding with fund management entity or its distributor
• Submit PAN, Aadhaar, bank proof, Foreign Account Tax Compliance Act (FATCA) details 
• Submit subscription application, after which the fund creates a folio and provides its IFSC bank account details
• Approach authorised dealer bank 
• Submit Form A2, LRS declaration and supporting documents 
• Bank transfers US dollars to fund’s bank account
• Pay TCS, forex conversion charges, bank-processing fees, SWIFT charges and GST
• Fund allots units at applicable NAV