GIFT City Funds Explained: How Do They Differ from Indian Mutual Funds?

India's international financial ecosystem has expanded considerably. As of June 2026, GIFT IFSC had 1,260 registrations and authorisations, which is important news for investors. (IFSCA)

For investors trying to understand GIFT City investment, the important distinction is that GIFT City funds are not simply Indian mutual funds operating from a different location. Their regulation, currencies, eligible investors, investment universe and taxation may differ.

What Are GIFT City Funds?

These funds are investment schemes established within the IFSC (International Financial Services Centre) at Gujarat International Finance Tec-City, commonly known as GIFT City.

Under the IFSCA Fund Management Regulations, fund structures may include retail schemes, restricted schemes and venture capital schemes, among others. All schemes may invest in securities and other permitted assets in the IFSC, India or foreign jurisdictions. (IFSCA)

Regulatory Framework: IFSCA vs SEBI

The main regulatory difference is simple.

Funds established in IFSCA GIFT City are governed by the IFSCA (International Financial Services Centres Authority) under the IFSCA (Fund Management) Regulations, 2025, as subsequently amended. (IFSCA)

Indian mutual funds, on the other hand, operate under the SEBI (Mutual Funds) Regulations, 2026 and related circulars. (SEBI)

Both frameworks contain investor-protection, disclosure and governance requirements, but they are designed for different financial-market environments.

GIFT City Funds vs Indian Mutual Funds: Key Differences

Taxation of GIFT City Funds vs Indian Mutual Funds

GIFT City taxation should not be viewed as one standard tax rate.

Domestic mutual fund taxation depends on factors such as the nature of the scheme, holding period and applicable tax law. Tax treatment for a GIFT City investment may depend on the fund structure, underlying assets, the investor's tax residency and IFSC tax provisions apply.

Certain qualifying IFSC funds receive specific treatment under India's tax framework, but these provisions do not automatically apply in the same manner to every investor or every GIFT City scheme. The Income Tax framework contains separate provisions for eligible "specified funds" operating in an IFSC. (Income Tax Department)

Who Can Invest in GIFT City Funds?

Depending on the scheme and applicable foreign-exchange rules, potential investors may include non-residents, eligible resident Indians, institutional investors and accredited investors.

Resident individuals may access eligible international investments subject to applicable foreign-exchange rules, including the Liberalised Remittance Scheme (LRS), where relevant.

Eligibility should always be checked at the individual scheme level.

Benefits and Risks of Investing Through GIFT City

Potential benefits include access to international markets, foreign-currency investments and a wider range of investment strategies.

However, investors must also consider:

• market and volatility risk

• currency- exchange fluctuation risk

• overseas regulatory and geopolitical risks

• liquidity risk

• differences in taxation and reporting

• higher minimum investments for certain fund structures

GIFT City status itself does not make an investment low-risk or assure returns.

How to Invest in GIFT City Funds

The broad process may involve:

• Checking whether the investor is eligible for the chosen scheme

• Reviewing its offer document or placement memorandum

• Completing applicable KYC and regulatory documentation

• Meeting the scheme's minimum investment requirement

• Completing any foreign-exchange or LRS requirements that apply

• Investing through the channels permitted by the fund

GIFT City and India's Growing International Investment Ecosystem

GIFT City is steadily expanding its role as an international financial hub within India, supported by a regulatory framework designed for cross-border financial activity.

The scale of this expansion is visible in fund activity. As of June 2026, funds in the IFSC had raised more than $45 billion in cumulative commitments, indicating the ecosystem's growing fund-management presence. (IFSCA)

Blog Disclaimer

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision.

GIFT CITY disclaimer:

Investments in fund are subject to market risks, and currency exchange rate fluctuations. Please refer to the fund related documents carefully before investing. Past performance may or may not be sustained in future.

SEBI Registration No. MF/020/94/8

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.