A Bengaluru wealth advisor opens her inbox on a Monday to find the same message from three clients. Their SIPs into an international fund of funds have stopped. The fund house has paused fresh subscriptions, and nobody can say when they will reopen.
One client asks the question she has been expecting: "Should I just move it all to GIFT City?"
The honest answer is "it depends". GIFT City funds are one of five routes Indian clients can use to invest abroad in 2026, and each suits a different client. The rupee has hit record lows against the dollar this year, and more clients are asking about global diversification and dollar assets than at any time in recent memory. This guide explains how GIFT City mutual funds work, why domestic international funds keep closing, and how to match each route to the right client.
Why International Funds Keep Closing
SEBI caps the whole Indian mutual fund industry's overseas investment at USD 7 billion, with a separate USD 1 billion limit for overseas ETFs, as Anand Rathi explains. When the industry nears the cap, fund houses pause fresh investments. Several, including Axis, Kotak and Nippon India, paused or restricted subscriptions in 2026, and there is no announced plan to raise the limit.
For advisors, the practical effect is that a client's global allocation can stall without warning. A plan built on a single domestic international fund is only as reliable as that fund's access to the cap.
What GIFT City Mutual Funds Are
GIFT City mutual funds are funds based in the International Financial Services Centre at Gujarat International Finance Tec-City. They are regulated by the International Financial Services Centres Authority (IFSCA), not SEBI, so the domestic USD 7 billion cap does not apply to them. That is why they have stayed open while many international funds have closed, and why searches for them have grown sharply this year.
Many GIFT City funds are feeder funds: they collect investors' money and invest it into an established global fund run elsewhere. Investments are usually denominated in US dollars.
How Resident Clients Invest in GIFT City
Resident Indians invest in GIFT City funds under the Liberalised Remittance Scheme, according to Finnovate's guide to the route. That means the investment counts towards the client's LRS limit of USD 250,000 a year, and TCS on foreign remittance can apply above ₹10 lakh (see our TCS on foreign remittance guide). Minimum investments are set by each fund and are typically higher than for domestic funds, and the product range, while growing, is still narrower.
The Five Global Routes Compared
| Route | What the client owns | Uses LRS and TCS | Liquidity | Reporting effort |
|---|---|---|---|---|
| Indian international funds | Units of an Indian scheme | No | High, but most closed to new money | Low |
| GIFT City mutual funds | Units of an IFSC fund | Yes | Varies by fund | Varies by product |
| US stocks and ETFs, held directly | Listed US shares | Yes | High | Moderate |
| US-listed REITs | Shares of a listed property company | Yes | High | Moderate |
| Fractional private US commercial real estate | An interest in one specific property | Yes | Low | Higher |
Indian international funds suit clients who already hold units and want the simplest reporting, while the scheme is open. US stocks and ETFs held directly suit clients who want full control and daily liquidity, and bring US withholding tax on dividends, Schedule FA disclosure and possible US estate tax. US-listed REITs give property exposure with stock-market liquidity, but their prices move with the stock market, not only with property values. For a fuller comparison, see our article on REITs vs fractional real estate.
Fractional private US commercial real estate gives a client a share of one property, such as a net lease building, a self-storage facility or a multifamily community. It suits clients who can hold for the full holding period, and it depends heavily on the sponsor (see our guide to US commercial real estate investment for advisors).
Matching a Route to a Client
| Client priority | Routes that usually fit | Routes to question |
|---|---|---|
| Needs to sell at short notice | US stocks and ETFs, US-listed REITs | Private real estate |
| Wants the least paperwork | Indian international funds, where open | Direct US holdings |
| Wants fund-based global exposure now | GIFT City mutual funds | Closed domestic schemes |
| Wants a real asset, not a daily market price | Fractional private real estate | US-listed REITs |
| Has estate planning concerns | Indian international funds | Direct US holdings, until the structure is checked |
Most clients end up with a mix: liquid exposure through listed or fund routes, with a smaller allocation to private real estate for clients who can accept illiquidity.
Tax and Reporting Across Routes
Clients holding foreign assets directly disclose them in Schedule FA of their ITR, whether or not the assets earned income that year. Where US tax is withheld, the India-US tax treaty may allow credit, claimed through Form 67 before filing. Non-resident, non-US-citizen investors can face US estate tax on US-situs assets; Raveum's US estate tax guide explains how it works. GIFT City fund taxation varies by product and should be checked fund by fund.
Five Questions for Every Global Allocation
- Is the route open? Check whether the fund or platform is accepting new money today.
- Does it use LRS? If so, plan the remittance around the client's ₹10 lakh TCS threshold.
- How quickly can the client sell? Match liquidity to the client's likely need for cash.
- What will the client report? List the Indian and US tax forms the route creates.
- What happens on death? Check US estate tax exposure before recommending US holdings.
How Raveum Fits
Raveum offers the fifth route: fractional private US commercial real estate. Through the Raveum US real estate partner program, advisors introduce eligible clients to net lease, self-storage and multifamily property. Clients invest directly with Raveum under LRS, and Raveum handles KYC, agreements and US tax forms. For clients who want a real asset alongside their listed holdings, it sits naturally next to GIFT City funds rather than replacing them.
Frequently Asked Questions
GIFT City mutual funds are funds based in India's International Financial Services Centre at Gujarat International Finance Tec-City. They are regulated by IFSCA rather than SEBI, are usually denominated in US dollars and are open to resident Indians through the Liberalised Remittance Scheme. Many invest into established global funds as feeder funds.
Yes. Resident Indians invest in GIFT City mutual funds under the RBI's Liberalised Remittance Scheme. The investment counts towards the LRS limit of USD 250,000 per person per financial year, and TCS on foreign remittance can apply above ₹10 lakh a year. Each fund sets its own minimum investment.
SEBI caps the Indian mutual fund industry's total overseas investment at USD 7 billion, plus USD 1 billion for overseas ETFs. As the industry approaches that cap, fund houses pause fresh subscriptions into international funds. In 2026, several large fund houses paused or restricted new money, with no announced plan to raise the limit.
No. The USD 7 billion overseas cap applies to SEBI-regulated domestic mutual funds. GIFT City funds are regulated by IFSCA, so the cap does not apply to them. That is why GIFT City funds have remained open to resident investors while many domestic international funds have closed to new money.
A feeder fund is a fund that pools investors' money and invests most or all of it into another fund, called the master fund. Many GIFT City funds work this way, giving Indian investors access to established global funds. Investors should check the fees charged at both the feeder and master level.
Only Indian international mutual funds, because the fund house makes the overseas investment, not the client. Every other route, including GIFT City funds, direct US stocks, US-listed REITs and fractional US real estate, uses the client's own LRS limit and can attract TCS above ₹10 lakh a year.
Resident Indians disclose foreign assets held directly in Schedule FA of their income tax return, whether or not those assets earned income that year. Where US tax has been withheld, they may claim credit under the India-US tax treaty by filing Form 67 before the return. A CA should confirm the details for each client.
No. Private US real estate is illiquid, so it suits clients who can hold for the full holding period and meet the offering's eligibility rules. It works best as one part of a global allocation, alongside more liquid routes such as funds, stocks or listed REITs.
A Global Allocation That Does Not Stall
The closure of international funds has taught advisors and clients the same lesson: a global allocation that depends on one route can stop without warning. GIFT City funds reopen the door for fund-based exposure, and direct stocks, REITs and private US property each add something different. An advisor who knows all five routes, and the rules that come with each, can keep a client's plan moving whatever happens to the cap. For the private real estate route, see the Raveum partner program.
About the author: Miya Israni is Chief Marketing Officer at Raveum, where she leads marketing for the company's sponsor, partner and investor programs.
This guide is for general education for professional advisors and is not tax, legal or investment advice. Each route carries risk, including loss of capital and currency movements, and private real estate is illiquid. Offerings on Raveum are available to eligible investors only and are not open to the general public.