Why GIFT City Is the New Front Door to Global Investing

International mutual funds in India are running out of room. Here is the route that is quietly opening up instead.

By Aakarsh Dalmia, CFP · Author, Live Rich Die Rich

Over the past two years, a familiar message has greeted Indian investors trying to start an international mutual fund SIP: scheme temporarily closed for fresh subscriptions. It is not a glitch, and it is not specific to one fund house. It is a structural ceiling that the entire industry has hit at the same time — and it has quietly redirected serious global investors toward a route most people have never heard of: GIFT City.

Why the door closed

RBI caps the total amount Indian mutual funds, collectively, can invest overseas — set at USD 7 billion, with an additional USD 1 billion window for funds investing in overseas ETFs. This is an industry-wide ceiling, not a per-fund or per-investor limit. For years it sat comfortably above actual demand. That changed as more Indian investors sought exposure to US equities, and the combined industry inflow crept steadily toward the cap.

Once a fund house gets close to its share of that ceiling, it has only one option under current rules: stop accepting new money. Not reduce it, not slow it — stop it entirely, for SIPs and lump sum investments alike. This is why an investor can hold a fund that has performed well for years and still be unable to add a single additional rupee to it today.

What GIFT City actually is

GIFT City — Gujarat International Finance Tec-City — is India’s International Financial Services Centre, located in Gandhinagar. Funds established there are regulated by the IFSCA (International Financial Services Centres Authority), a regulator separate from SEBI. Because IFSCA-regulated funds sit outside SEBI’s domestic mutual fund framework, they are not bound by the USD 7 billion overseas investment cap that has frozen so many conventional international funds.

In practice, this means a resident Indian investor can access funds tracking the S&P 500, the Nasdaq 100, or broader global equity baskets through a GIFT City-domiciled fund, structured and administered within India, at a time when the equivalent domestic international fund may be closed to them entirely.

How the process works

1. Choose a fund. A small but growing shelf of retail outbound funds is available, including offerings from PPFAS and DSP, tracking indices such as the S&P 500 and Nasdaq 100.
2. Complete a separate KYC. GIFT City investments require their own KYC process with the IFSC entity, distinct from your existing domestic mutual fund KYC.
3. Remit funds via the Liberalised Remittance Scheme. Money is routed through an Authorised Dealer bank under the RBI’s LRS, with the appropriate Form A2 declaration and purpose code.
4. Invest, typically as a lump sum. Most retail GIFT City funds do not yet offer an automated monthly SIP debit. Entry is generally one-time, with a common minimum of USD 5,000.
5. Disclose correctly at tax time. Holdings must be reported under Schedule FA (Foreign Assets) in ITR-2 or ITR-3 — mandatory, not optional, and frequently the step investors underestimate.

What makes this genuinely useful

• Sidesteps the SEBI overseas cap entirely, remaining open even when domestic international funds are shut.
• Principal and returns are fully repatriable, without the FEMA-related friction of some other cross-border structures.
• Real, USD-denominated exposure to globally recognised indices — not a synthetic substitute.
• Regulated within India under IFSCA — a domestic framework, not an offshore grey zone.
• Backed by established, credible fund houses already known to Indian investors — PPFAS, DSP, HDFC and with more entering.

What to weigh before committing

• Minimum entry — typically USD 5,000, puts this out of reach as a starting vehicle for newer or smaller investors.
• No automated monthly SIP facility yet; investing is largely manual and lump-sum.
• 20% TCS applies on foreign remittance above ₹10 lakh in a financial year.
• The product shelf is still early-stage, narrower than mature international investing markets.
• Schedule FA disclosure is mandatory and adds a compliance step beyond domestic mutual fund investing.

Who this is actually for

GIFT City is best understood as a satellite allocation, not a starting point. An investor who already holds a ₹25–30 lakh domestic portfolio, looking to allocate 15–20% toward global equities, will typically land close to the minimum ticket size — making this a natural next step. An investor just beginning their journey, working with smaller monthly amounts, is generally better served by a domestic international fund (when open) or a staggered LRS plan, until their base portfolio justifies a proportionate allocation here.

The honest takeaway

The cap that has shut so many international mutual funds is a regulatory ceiling, not a statement that global diversification is unavailable to Indian investors. GIFT City is the structural workaround the system has built for exactly this moment — open, India-regulated, and increasingly backed by credible fund houses. It is not the right fit for every investor or every stage of an investing journey. But for the investor with a sizeable base portfolio looking for genuine, low-friction global exposure, it is, right now, the most accessible legal route available.

Aakarsh Dalmia is a Certified Financial Planner and author of Live Rich Die Rich. He manages ₹100Cr for 300 Indian families through Dalmia Financial Services, Kolkata. For a complimentary financial health check, DM “PLAN” on Instagram @wealthwithaakarsh

Aakarsh Dalmia
Certified Financial Planner CFP^CM

@wealthwithaakarsh