Archive · 11 Oct 2026
GIFT City Funds or Direct Investing: Costs, Taxes and Risks
There are two main ways for Indian investors to put money into overseas markets.
They can invest in a GIFT City fund, where professionals manage a pool of money, or buy foreign shares and ETFs themselves.
Funds can be simpler, while direct investing gives people more control.
Each route has different costs, and direct investors need to keep track of their trades and tax reporting.
Some overseas remittances may have tax collected in advance, which can generally be adjusted against tax owed or claimed as a refund under applicable rules.
Taxes on investment gains and dividends also depend on the type of investment and its structure.
There is no single amount that makes one route best for everyone.
An adviser cited a possible 5–10% global allocation for some investors with portfolios above ₹5 crore, but said circumstances differ.
Overseas investments are intended to complement, not replace, diversified domestic holdings.
GIFT City funds offer professionally managed overseas exposure, while direct investing lets individuals choose foreign stocks and ETFs.
Both routes generally count under the LRS limit of $250,000 per resident individual per financial year for permitted transactions.
Fund expenses and possible exit loads apply to GIFT City schemes; direct investors may pay brokerage, platform, currency-conversion and remittance charges.
For applicable LRS remittances other than education or medical treatment, 20% TCS applies to the amount exceeding ₹10 lakh in a financial year.
Tax treatment varies by route and fund structure; investors should consider their portfolio, goals, risk tolerance and willingness to handle compliance.
- Who
- Indian resident investors considering international investments; Shweta Rajani of Anand Rathi Wealth explains the options.
- What
- A comparison of GIFT City funds and direct overseas investing, including costs, tax rules, compliance and allocation considerations.
- Where
- GIFT City, Gujarat, and overseas markets accessed through funds or brokerage accounts.
- Why
- To help investors understand the trade-offs involved in gaining exposure to international markets.
GIFT City funds
Direct overseas investing
Management and control
GIFT City funds
Professionals manage pooled investments, which may suit investors who want overseas exposure without choosing individual securities.
Direct overseas investing
Investors choose and manage their own foreign shares and ETFs, offering greater portfolio control but requiring more effort.
Costs and administration
GIFT City funds
Funds charge management and operating expenses, and some may impose exit loads; fund administration may reduce the investor's direct portfolio-management burden.
Direct overseas investing
There are no fund management fees, but brokerage, platform, currency-conversion and remittance charges may apply, and investors must track transactions and tax reporting.
Tax treatment
GIFT City funds
Tax treatment depends on the fund's legal structure and applicable provisions; in the retail structure described, the fund pays tax reflected in its NAV.
Direct overseas investing
Investors calculate and report taxable income from foreign shares and dividends under Indian tax rules, and may seek credit for eligible foreign taxes paid.
- LRS limit
- Up to $250,000 per financial year for permitted transactions by a resident individual.
- TCS
- 20% on applicable LRS remittances exceeding ₹10 lakh in a financial year, excluding education and medical treatment purposes.
- TCS example
- A ₹50 lakh remittance would attract ₹8 lakh in TCS under the rules described; the amount can generally be adjusted against tax liability or claimed as a refund, subject to applicable rules.
- Foreign-share holding period
- Short-term gains on holdings up to 24 months are generally taxed at the investor's slab rate; gains after 24 months are generally taxed at 12.5%, plus applicable surcharge and cess.
- Foreign dividends
- Generally taxable in India at the applicable slab rate; foreign withholding tax credit may be claimed subject to applicable rules, including Form 67 where required.
- Suggested allocation
- Rajani says investors with portfolios above ₹5 crore could consider around 5–10% in global assets, depending on their circumstances.
- GIFT City fund oversight
- GIFT City funds are regulated by the International Financial Services Centres Authority (IFSCA).