Keen to invest globally? GIFT City funds vs overseas platforms – Costs, taxes and compliance rules explained

As Indian investors look beyond domestic markets, overseas investing has become a mainstream portfolio choice. While several routes exist, the method chosen can significantly impact costs, taxation, compliance and ease of investing. Two approaches that are dominating discussions are direct investment in overseas stocks or exchangetraded funds (ETFs) through overseas brokers under the Liberalised Remittance Scheme (LRS), and investing via funds domiciled in GIFT City’s International Financial Services Centre. Though both provide global exposure via the LRS route, they differ meaningfully in structure, ownership and operational complexity.

Investing via an overseas broker vs GIFT city

Do-It-Yourself LRS versus GIFT City

Do-It-Yourself (DIY) overseas investing under the LRS framework involves remitting money abroad and buying international stocks or ETFs directly on overseas platforms in one’s own name. While this offers full control over security selection, it also brings multiple layers of costs, including a 20% tax collected at source on remittances, foreign exchange conversion spreads, brokerage charges and platform or custody fees. Capital gains taxation depends on holding period: investments sold within two years are taxed at the investor’s marginal tax rate, making frequent churn tax-inefficient. Investors must also comply with additional reporting requirements, such as disclosing foreign assets on Schedule FA of their income tax returns.


By contrast, investing through a GIFT City-domiciled fund under the LRS route involves allocating capital to a pooled, professionally managed vehicle based in India’s international financial hub. Assets are not held in the investor’s name but through a master–feeder structure that enables institutional-style portfolio construction and better diversification. “Direct ownership of US securities exposes investors to US estate and inheritance taxes, whereas investments routed through GIFT-domiciled funds are exempt from these liabilities,” says Ankita Pathak, Head – Global Investments, Ionic Asset. Operationally, GIFT City funds also reduce compliance burdens, making them better suited for investors seeking scale and convenience.

Three ways to invest abroad

Investing overseas via mutual funds

Overseas mutual funds registered in India offer a third route for global exposure by investing in foreign stocks, ETFs or feeder funds. Investing in global mutual funds typically involves an expense ratio of around 0.9% to 2%, along with an exit load for certain funds if redeemed within one year. “Unlike other overseas investing routes, investors do not bear brokerage charges, currency conversion costs, or annual maintenance fees directly. However, a key limitation of global funds is that they often suspend fresh inflows when overseas investment limits are reached, restricting new investments for some period. From a tax perspective, global funds are also taxed similarly to LRS or GIFT City investments,” said Feroze Azeez, Joint CEO, Anand Rathi Wealth.