GIFT City Fund for NRIs (2026): How to Invest in Indian Mutual Funds in US Dollars

Want to invest in Indian mutual funds without first converting your US dollars into Indian rupees? For many NRIs, investing in India traditionally means dealing with currency conversion, NRE/NRO accounts, Indian mutual fund platforms, and separate tax considerations. Now, a new GIFT City fund offers eligible NRIs another route to gain exposure to Indian mutual funds through a US-dollar-denominated structure. But how exactly does it work, who can invest, what are the costs and tax implications, and is it actually better than investing directly in Indian mutual funds? This guide explains everything  you need to know about GIFT City Fund for NRIs.

What Is the New GIFT City Fund for NRIs?

The fund is set up as a ended Category III AIF, which is a type of Alternative Investment Fund. It was launched by the IFSC branch of Wealth Company Asset Management. This company is a Fund Management Entity that is registered with IFSCA. It operates from GIFT City. If you do not know how GIFT City works you should read our explanation about GIFT City and how it works for NRIs before you learn more about the fund.

This fund is like a fund-of-funds. Of choosing individual Indian mutual fund schemes you put your money in one fund that uses dollars. The fund manager then puts your money into a mix of mutual funds, ETFs and SIFs. The fund manager chooses these for you. The mix can include different types of funds such as equity funds, sectoral schemes, debt funds, hybrid funds, index strategies and gold or silver ETFs. The fund manager decides what to invest in based on the fund’s goals.

The main differences between this fund and a regular Indian mutual fund are the currency, the regulator and the structure. This fund uses dollars of Indian rupees. It is regulated by IFSCA of SEBI because it is in the IFSC. It is also set up as an AIF, which’s different from a regular mutual fund.

How Does the GIFT City Fund Work?

The flow is fairly straightforward once you see it laid out:

NRI (USD) → GIFT City Fund of Funds → Indian Mutual Funds / ETFs / SIFs

You transfer US dollars into the fund from your existing foreign bank account (this typically doesn’t require routing through India’s Liberalised Remittance Scheme, since LRS applies to resident Indians remitting money abroad — as an NRI, you’re investing directly from funds you already hold overseas). The fund pools this capital along with money from other eligible investors and deploys it across the underlying Indian mutual funds, ETFs, and SIFs it has selected.

Because the fund itself is dollar-denominated but the underlying investments (Indian mutual funds, ETFs) are rupee-denominated, there’s an unavoidable layer of currency conversion happening at the fund level, even though you never personally touch INR. This is a meaningful point to understand before investing — we’ve covered it in more depth in our piece on currency risk in GIFT City funds, which explains how USD-INR movement can affect your actual returns even when the underlying Indian funds perform well.

The fund manager handles scheme selection, portfolio allocation, and periodic rebalancing evaluating underlying funds based on historical returns, risk parameters, relative performance, and forward-looking market outlook. This is different from investing directly, where you pick the specific schemes yourself.

Who Can Invest in the GIFT City Fund?

This isn’t open to every overseas Indian. Based on the fund’s current eligibility criteria, it’s targeted at:

• Eligible NRIs
• HNIs and UHNIs (high and ultra-high-net-worth individuals)
• Accredited investors
• Global family offices and institutional investors

A few important restrictions to note: resident Indians cannot invest in this fund, and notably, investors resident in the US and Canada are currently excluded, along with investors from jurisdictions restricted under FATF (Financial Action Task Force) rules. If you’re a US- or Canada-based NRI specifically, this particular fund won’t be accessible to you right now, largely due to the additional securities-law and tax-reporting complexity that comes with those two jurisdictions.

Standard KYC and accreditation documentation will apply, similar to what’s required for any AIF investment.

How Can NRIs Invest in the GIFT City Fund?

While the exact onboarding steps can be a little different depending on the distributor or the platform the overall process usually goes like this: 

1. Check eligibility — confirm you meet the NRI/HNI/accredited investor criteria and aren’t resident in an excluded jurisdiction.
2. Complete KYC — including IFSC-compliant investor onboarding, which is separate from your regular Indian KYC if you already have NRE/NRO accounts.
3. Submit required documents — passport, overseas address proof, PAN or Form 60, and accreditation proof if applicable.
4. Transfer USD — fund your investment directly from your overseas bank account.
5. Subscribe to the fund — complete the subscription agreement and initial investment.
6. Track your investment — monitor NAV and portfolio allocation through the fund’s reporting.
7. Redeem according to fund terms — exit as per the fund’s redemption window and notice period, since this is an AIF structure and not a daily-liquidity mutual fund.

What Can NRIs Invest in Through the Fund?

The current launch specifically mentions exposure across diversified equity funds, sectoral schemes, debt funds, hybrid funds, index strategies, and gold/silver ETFs, in addition to SIFs giving the fund manager fairly wide latitude to build a diversified portfolio on your behalf.

GIFT City Fund vs Direct Indian Mutual Funds for NRIs

This comparison matters more than it might seem, because it’s really the crux of the decision: are you paying for convenience and dollar-denomination, or would you rather have direct control and (often) lower costs by investing in Indian mutual funds yourself? We’ve broken down the actual cost difference — expense ratios, platform fees, and currency conversion charges — in our dedicated comparison on GIFT City funds vs. direct Indian mutual fund costs for NRIs, which is worth reading before you commit capital either way.

Tax on GIFT City Fund for NRIs

This is the section that matters most if you’re managing your India tax compliance carefully  and it’s also where we want to be precise rather than promotional.

GIFT City / IFSC as a jurisdiction does carry certain tax incentives under Indian tax law for what are classified as “specified funds” — including potential exemptions on specific categories of income under provisions like Section 10(4D) of the Income Tax Act, subject to conditions around the fund’s structure and its investor base being predominantly non-resident. However — and this is important — these benefits are not automatic or blanket. Whether this specific fund qualifies as a “specified fund,” and which categories of your returns (capital gains, dividend income, interest income passed through from underlying schemes) actually benefit from any exemption, depends entirely on the fund’s own structuring, its offer documents, and how the IFSCA/tax authorities classify it.

Here’s what to actually check before assuming any tax outcome:

• Returns and capital gains: Ask the fund directly (or your advisor) how gains distributed or realised through this AIF structure are characterized for Indian tax purposes — as capital gains, business income, or another head — since AIF taxation can differ meaningfully from plain mutual fund taxation.
• TDS: Confirm whether TDS applies on distributions or redemptions, and at what rate, since AIF-level withholding can differ from standard mutual fund TDS rates for NRIs.
• DTAA applicability: If you’re resident in a country with a Double Taxation Avoidance Agreement with India (such as the US, UK, or several other jurisdictions), check whether treaty relief applies to income from this specific fund structure — it isn’t automatic just because a DTAA exists between the two countries.
• UAE-based NRIs: Since the UAE has no personal income tax, the entire tax outcome for you will depend on how income is taxed at source in India (or exempted under IFSC-specific provisions) — there’s no offsetting credit to claim back home, so getting the India-side treatment right matters even more.
• ITR reporting: Even if a portion of your returns is tax-exempt under IFSC provisions, you may still need to report the investment and any taxable income in your Indian ITR, depending on your overall India-sourced income and filing obligations.

Bottom line: don’t assume “GIFT City” automatically means “tax-free” for you as an investor. The jurisdiction has favourable provisions built in for certain fund structures, but your actual, individual tax outcome depends on the specific fund’s classification and your own residential status — this needs to be verified against the fund’s offer document and ideally confirmed with a tax professional before you invest, not after.

If you’d like help thinking through how this fits into your broader NRI tax picture, our NRI tax planning resources cover related areas like DTAA claims and NRE/NRO tax treatment that often intersect with GIFT City investments.

GIFT City Fund: Benefits & Risks

Benefits

• USD-denominated investment route — no need to convert currency yourself before or during the investment
• Access to Indian market growth without opening a separate INR-based demat/MF setup
• One professionally managed route instead of picking and monitoring individual schemes
• Diversification across multiple asset categories (equity, debt, hybrid, gold/silver, SIFs) in a single vehicle

Risks

• Market risk the underlying Indian mutual funds and ETFs are still subject to normal equity and debt market volatility, and Indian markets can move sharply. It’s worth understanding what typically happens to NRI wealth during Indian market crashes before allocating a large share of your portfolio here.
• Fund and management fees layered on top of the underlying scheme’s own expense ratio, since this is a fund-of-funds structure
• Liquidity and redemption conditions specific to an AIF — this is not a daily-liquidity product like a standard mutual fund
• Performance depends on the underlying funds the manager selects, which you don’t control directly
• Tax and regulatory treatment at the IFSC level can evolve, and today’s incentive structure isn’t guaranteed to stay unchanged

Is the GIFT City Fund Better for NRIs?

There’s no universal answer here — it genuinely depends on what you’re optimizing for.

This fund may suit you if:

• You already hold and manage your wealth primarily in USD
• You want Indian market exposure without setting up a separate rupee-based investment infrastructure
• You’d rather have a professional manage scheme selection and rebalancing for you

Direct Indian mutual fund investing may suit you better if:

• You want to choose individual schemes based on your own research or risk appetite
• You already have an NRE/NRO account and MF investment setup running smoothly
• You prefer more direct control over entries, exits, and fund switches

If you’re weighing this against putting money directly into Indian equities instead of a fund structure altogether, our comparison on GIFT City investment vs. direct Indian equities for NRIs walks through that decision in more detail.

Conclusion

For NRIs who’ve been sitting on the sidelines of Indian equity and debt markets simply because of the currency-conversion hassle, this new GIFT City fund is a genuinely useful addition to the toolkit. It’s not automatically the “best” route for everyone — cost-conscious investors who don’t mind managing INR conversions themselves may still find direct Indian mutual funds more efficient — but for USD-holding NRIs who want one clean, professionally managed entry point into India, it’s worth serious consideration.

Before you commit capital, get clarity on two things specifically: the fund’s actual tax treatment for your residency, and its redemption terms. Both can materially change your real, after-tax, after-fee return.

Need help figuring out how a GIFT City investment fits into your overall NRI tax and compliance picture — including DTAA claims, ITR reporting, and how it interacts with your existing NRE/NRO holdings? Get in touch with our NRI tax team for a personalised review before you invest.