You want to invest in India. But from the UAE, the UK, or the US, it feels complicated. Currency conversion eats into your returns. TDS gets deducted before you even see profits. And repatriating money back? That's a paperwork marathon.
We hear this every day in our Belong WhatsApp community. NRIs want exposure to India's growth story, but not the headaches that come with traditional Indian mutual funds. That's where GIFT City mutual funds change the game entirely.
At Belong, we've spent months studying every fund type available at GIFT City - AIFs, retail schemes, feeder funds, PMS. This guide breaks down each category so you can pick what fits your goals, budget, and risk appetite.
What Are GIFT City Mutual Funds?
GIFT City mutual funds are investment schemes launched by Asset Management Companies (AMCs) operating within Gujarat International Finance Tec-City - India's first and only International Financial Services Centre (IFSC).
These funds operate under the International Financial Services Centres Authority (IFSCA), not SEBI. The regulatory framework mirrors global financial hubs like Singapore and Dubai, making it familiar for internationally-mobile investors.
Three things make GIFT City funds different from regular Indian mutual funds:
USD-denominated: Your investment stays in dollars (or euros, pounds, etc.). No forced rupee conversion.
No TDS: Tax Deducted at Source doesn't apply to most GIFT City fund transactions.
Simplified repatriation: Capital and returns are fully repatriable without the complications of standard FEMA procedures.
As of mid-2025, GIFT City hosts over 200 registered fund management entities with a combined committed capital exceeding $15 billion. Source: IFSCA Bulletin Q1 2025
The Five Types of Funds Available in GIFT City
Not all GIFT City funds are the same. Understanding the categories helps you match investments to your goals.
1. Alternative Investment Funds (AIFs)
AIFs are the dominant fund structure in GIFT City today. They pool capital from sophisticated investors for specific strategies across asset classes.
Three categories exist under IFSCA regulations:
Category | Focus | Examples |
|---|---|---|
Category I | Venture capital, infrastructure, social ventures | Startup investments, SME funds |
Category II | Private equity, debt funds | Growth equity, structured credit |
Category III | Hedge fund strategies, long-short positions | Arbitrage, derivatives-based |
Key characteristics:
Minimum investment: USD 150,000 (reduced from earlier thresholds). For accredited investors, some funds offer relaxed minimums. Source: IFSCA Circular Feb 2025
Lock-in period: Typically 3 years, extendable by 2 years
Tax treatment: Category III AIFs investing in Indian equity mutual funds are fully exempt from capital gains tax in India - taxable only in your country of residence
For UAE-based NRIs in zero-tax jurisdictions, this means entirely tax-free returns on qualifying Category III AIF investments.
👉 Tip: If you're investing $150,000+, AIFs offer the most tax-efficient route to Indian equities. Explore options using our GIFT City AIF explorer.
2. Retail Mutual Funds
This is the newest and most exciting category for average NRI investors.
In September 2025, Tata Asset Management received IFSCA approval for the Tata India Dynamic Equity Fund – GIFT IFSC - the first retail inbound mutual fund from GIFT City. Source: Business Standard
What makes retail mutual funds different:
- Minimum investment: Just $500 - accessible to most NRIs
- Open-ended: Enter and exit without multi-year lock-ins
- Feeder structure: Invests in Tata's existing Indian mutual fund schemes and ETFs
- Dynamic allocation: 50-100% in broad-based equity funds, up to 50% in sectoral/thematic
This is a breakthrough. Previously, GIFT City was primarily for high-net-worth investors with $150,000+ to spare. Now, any NRI can access tax-efficient Indian equity exposure with just $500.
More AMCs including Nippon India and Mirae Asset are planning similar retail launches. The ecosystem is expanding rapidly.
👉 Tip: The Tata India Dynamic Equity Fund is now available through Belong. Compare options here.
3. Portfolio Management Services (PMS)
PMS offers personalized portfolio management for high-net-worth individuals who want tailored strategies rather than pooled funds.
Two types of PMS available in GIFT City:
Type | How It Works | Best For |
|---|---|---|
Discretionary PMS | Fund manager has full authority over investment decisions | Investors who want hands-off management |
Non-Discretionary PMS | Manager recommends, you approve each decision | Investors who want control but need guidance |
Key details:
- Minimum investment: USD 75,000 (proposed under recent IFSCA regulations)
- Customization: Portfolios tailored to your specific goals and risk tolerance
- Tax exemption: Income from investments in securities outside India is tax-exempt
PMS works best for NRIs who have specific investment mandates - say, only technology stocks, or only dividend-yielding securities - and want a professional to execute that vision.
4. Venture Capital Funds (VCFs)
VCFs are a specialized subset focused on startups and early-stage companies.
These funds pool capital specifically for:
- Unlisted securities of startups
- Early-stage and growth-stage investments
- Innovation and technology ventures
Typical structure:
- Closed-ended with 7-10 year horizons
- Higher risk, potentially higher returns
- Illiquid until exit events (IPO, acquisition)
For NRIs interested in India's startup ecosystem - think fintech, healthtech, deeptech - VCFs offer a regulated path through GIFT City.
5. Family Investment Funds (FIFs)
A recent IFSCA innovation, FIFs are designed specifically for NRI families wanting to pool wealth for managed investments.
Key features:
- Can be structured as company, LLP, or trust
- Minimum corpus: USD 3 million (reduced from earlier USD 5 million)
- Can invest globally or in Indian markets
- 100% NRI/OCI contribution now permitted Source: IQ-EQ Analysis
SEBI's June 2024 decision allows NRIs to completely own global funds based in GIFT City - up from the previous 50% cap. This opens doors for family offices seeking professional management of cross-border wealth.
Inbound vs Outbound Funds: Where Does the Money Go?
GIFT City funds invest in two directions:
Inbound Funds
- Invest in Indian securities (equities, bonds, mutual funds)
- Give NRIs exposure to India's growth story
- Example: Tata India Dynamic Equity Fund
Outbound Funds
- Invest in global securities outside India
- Access US stocks, European bonds, emerging market ETFs
- Example: Mirae Asset Global Allocation Fund
Some Category III AIFs combine both - investing partly in Indian markets and partly globally, offering true diversification.
Resident Indians can only invest in outbound funds (through LRS with a $250,000 annual cap). NRIs face no such restrictions and can freely invest in either type.
👉 Tip: If you're earning in USD and want India exposure, inbound funds make sense. If you want global diversification while keeping money in India's regulatory framework, outbound funds work better.
Tax Benefits: Why GIFT City Beats Regular Mutual Funds
This is where GIFT City truly shines. The tax structure is designed to compete with Singapore and Dubai.
For NRIs Investing Through GIFT City Funds:
Tax Type | Regular Indian MF | GIFT City Fund |
|---|---|---|
TDS on dividends | 20% | 10% (concessional) |
Securities Transaction Tax (STT) | Applicable | Exempt |
Stamp duty | Applicable | Exempt |
GST on fund management fees | 18% | Exempt |
Capital gains (Category III AIF) | 10-15% depending on holding | Exempt in India |
The biggest advantage: Category III AIFs investing in Indian equity mutual funds are fully exempt from capital gains tax in India. Your tax liability depends only on your country of residence.
For UAE-based NRIs: No income tax in UAE + No capital gains tax in GIFT City = 100% tax-free returns
For UK-based NRIs: UK taxes apply on repatriated gains, but you avoid Indian TDS and double taxation.
Source: Income Tax Act Section 10(4D), IFSCA Fund Management Regulations 2022
No PAN Required for Certain Investments
NRIs investing solely through Category I or II AIFs in GIFT City don't need a PAN card. If the AIF has already deducted applicable taxes, you're exempt from:
- Filing Indian tax returns
- Obtaining a PAN
This dramatically simplifies compliance for NRIs who don't have other India income sources.
Minimum Investment Comparison
Here's what you need to get started with each fund type:
Fund Type | Minimum Investment | Best For |
|---|---|---|
Retail Mutual Funds | USD 500 | First-time GIFT City investors |
AIF (Accredited Investor) | USD 75,000 | HNIs seeking tax efficiency |
AIF (Standard) | USD 150,000 | Sophisticated investors |
PMS | USD 75,000 (proposed) | Tailored portfolio needs |
Family Investment Fund | USD 3 million corpus | Family offices, ultra-HNIs |
The reduction of AIF minimums from $150,000 to $75,000 in February 2025 expanded access significantly. And with retail mutual funds starting at $500, GIFT City is no longer just for the wealthy.
How NRIs Can Invest in GIFT City Funds
Step 1: Confirm Your NRI/OCI Status
You must be a Non-Resident Indian or Overseas Citizen of India per FEMA guidelines. Your residential status determines which products you can access.
Step 2: Complete KYC
IFSCA implemented video KYC in July 2025, allowing remote completion without visiting India. You'll need:
- Valid passport
- Overseas address proof
- Visa/work permit
- PAN card (for certain transactions; not mandatory for all)
The process takes 15-30 minutes via encrypted video session with AI-based face matching.
Step 3: Open Required Accounts
Option A: Global Savings Account Open an account with an IFSC Banking Unit (ICICI, HDFC, SBI, Axis) in your preferred currency (USD, GBP, EUR, AED).
Option B: Use Existing NRE Account Fund investments through your NRE account with foreign currency.
Step 4: Select Your Fund
For $500-$75,000: Start with retail mutual funds like Tata India Dynamic Equity Fund
For $75,000-$150,000: Explore AIFs with accredited investor relaxations
For $150,000+: Full access to all AIF categories and strategies
Step 5: Fund Transfer and Invest
Transfer money through authorized banking channels. All monetary movements must comply with FEMA regulations, ensuring traceable and legal fund transfers.
👉 Tip: Use Belong to explore GIFT City mutual funds and AIFs in one place. We aggregate options so you don't have to visit multiple AMC websites.
GIFT City vs Regular Indian Mutual Funds
Let's see why GIFT City funds often make more sense for NRIs:
Factor | GIFT City Funds | Regular Indian MFs |
|---|---|---|
Currency | USD/EUR/GBP | INR only |
TDS | Exempt or concessional | 10-30% applicable |
STT/Stamp Duty | Exempt | Applicable |
Repatriation | Simple, foreign currency | Complex, INR conversion |
Minimum | $500 (retail) / $75,000+ (AIF) | ₹500 |
US/Canada NRI access | Unrestricted | Heavily restricted |
The currency difference is massive.
Imagine investing AED 50,000 when USD-INR was ₹71. Your investment becomes ₹9,66,000 in a regular Indian fund. Five years later, the fund grows 60% to ₹15,45,600. Great returns, right?
But when you convert back at ₹84/USD, you get only $18,400 - a 36% return in dollar terms, not 60%. Rupee depreciation consumed 24% of your gains.
With GIFT City's USD-denominated funds, your $13,600 investment simply grows to $21,760 (60%). No currency leakage.
Key AMCs Operating in GIFT City
Several established Indian fund houses have set up GIFT City operations:
Tata Asset Management
- Fund: Tata India Dynamic Equity Fund – GIFT IFSC
- Type: Retail inbound feeder fund
- Minimum: $500
- Strategy: Dynamic allocation across large, mid, small-cap and sectoral themes
- Learn more
Mirae Asset
- Fund: Mirae Asset Global Allocation Fund
- Type: Category III AIF
- Minimum: $150,000
- Strategy: Global ETFs across developed/emerging markets, AI, semiconductors
- Source: Meta Investment
Nippon India
- Retail schemes in development
- Existing AIF operations
- Visit Nippon GIFT City portal
Other Registered Entities
IFSCA's portal lists 200+ registered fund management entities including:
- Motilal Oswal
- Edelweiss
- White Oak
- Several global names like JP Morgan and Barclays
Risks and Considerations
GIFT City funds aren't risk-free. Here's what to consider:
Market Risk
These funds invest in marketable securities. Values fluctuate with market conditions. A Category III AIF following aggressive strategies can see significant volatility.
Currency Risk
While USD denomination protects from INR depreciation, NRIs earning in other currencies (AUD, GBP, CAD) face USD exchange risk. If the dollar weakens against your earning currency, returns diminish.
Liquidity Constraints
- AIFs typically have 3-year lock-ins
- Retail mutual funds may have exit loads for early withdrawal
- GIFT City's ecosystem, while growing, isn't as liquid as mature markets
Regulatory Evolution
GIFT City regulations continue evolving. In 2024, IFSCA prohibited certain US-based ETF investments, disrupting some investor strategies. Tax benefits are guaranteed only until March 2030 under current sunset clauses.
Higher Entry Thresholds
Despite reductions, the $75,000-$150,000 AIF minimum exceeds most NRIs' annual savings. Diversifying across multiple AIFs requires $225,000-300,000. Compare this to regular Indian mutual funds starting at ₹500.
👉 Tip: Start with the $500 retail mutual fund option to test GIFT City waters before committing larger amounts to AIFs.
US and Canada NRI Considerations
US-based NRIs face unique complications:
PFIC Rules Most GIFT City mutual funds qualify as Passive Foreign Investment Companies under US tax law. This triggers:
- Form 8621 filing requirements
- Taxation on unrealized gains
- Potential punitive tax rates
FBAR Reporting If aggregate foreign accounts exceed $10,000, you must report via FBAR.
These complications often negate GIFT City's tax benefits for US-based NRIs. Consult a cross-border tax specialist before investing.
Canadian NRIs face similar foreign property reporting requirements. The T1135 form applies to foreign property exceeding CAD 100,000.
What's Coming Next
GIFT City's fund ecosystem is expanding rapidly:
April 2026: Mutual funds and ETFs can relocate to GIFT City from offshore jurisdictions (Mauritius, Singapore) without triggering capital gains tax. This "tax-neutral relocation" will bring more funds to GIFT City.
More Retail Launches: Following Tata's success, multiple AMCs are developing retail schemes with $500-1,000 minimums.
Lower AIF Thresholds: Industry expects further relaxation of minimum investment requirements to attract mid-tier HNIs.
Insurance Products: Life insurance proceeds from GIFT City IFSC offices became tax-exempt from April 2025, positioning GIFT City for insurance-linked investments.
The government extended GIFT City's tax holiday through March 2030 in Union Budget 2025, providing five years of policy certainty.
What's Next?
GIFT City funds represent the future of NRI investing in India. Tax efficiency, currency flexibility, and simplified compliance address the exact pain points that made traditional Indian mutual funds frustrating.
Whether you're starting with $500 in the Tata retail fund or committing $150,000+ to a Category III AIF, the options have never been better.
Our recommendation:
- Start with a GIFT City USD fixed deposit if you want guaranteed returns
- Graduate to the $500 retail mutual fund for equity exposure
- Move to AIFs when you have $75,000+ and want tax-optimized alternatives
We track every GIFT City fund launch and regulatory change. Join 5,000+ NRIs in our WhatsApp community for real-time updates.
Download the Belong app to explore GIFT City mutual funds, compare AIFs, and access tools built specifically for NRIs.
Sources
- IFSCA Fund Management Regulations 2022 (Amended 2025)
- Tata Asset Management GIFT City Launch - Business Standard
- Income Tax Act Section 10(4D)
- IQ-EQ: GIFT City Fund Management Regulations
- World Gold Council: GIFT City Tax Analysis
- IFSCA Circular on AIF Minimum Investment - February 2025
- Tata Mutual Fund GIFT City Portal
- Nippon India GIFT City Portal
