GIFT City is not abroad. It is in Gandhinagar, Gujarat.

Yet the funds based there let you invest in foreign markets, in US dollars, under an Indian regulator.

Moneyplus can now help clients invest in GIFT City funds. Here is what you need to know, in seven short answers.

What is GIFT City?

GIFT City is India’s international finance centre. It is regulated by IFSCA, India’s regulator for GIFT City.

Funds based there are priced in US dollars. You buy them from your normal Indian bank account, under the RBI’s Liberalised Remittance Scheme, or LRS. No separate GIFT City bank account is needed. Most of the paperwork is digital.

Why would I want to invest through it?

Two reasons.

The first is a future expense in a foreign currency. A child’s education abroad is the common one. A big family trip that is still years away is another. Today that saving sits in rupees, while the bill will come in dollars.

On average, over the long run, the rupee has lost roughly 3% a year against the dollar. It does not move in a straight line, and it can go the other way. But if the bill is in dollars, keeping part of the saving in dollars reduces that currency risk. It does not remove it. A dollar fund matches dollar costs; for fees in pounds, or in Canadian or Australian dollars, the match is only partial.

The second is simpler. Some people want part of their money outside one country, so everything does not depend on India alone.

I already have an international fund. What changed?

Indian fund houses can invest abroad only up to an industry-wide limit of $7 billion, set by the RBI. That room has been full for some time.

This year several fund houses stopped taking fresh money into international funds. Some paused new SIPs too. Existing investors can still redeem. Not every fund is shut, but the door is narrow.

GIFT City funds sit outside that industry limit. Each person’s own LRS limit applies instead: $250,000 per person per financial year, counted across everything you send abroad.

What can I invest in?

Two kinds of funds.

Index funds follow a market index: an index of large US companies, or developed markets, or emerging markets. Costs are low, and no manager’s judgement can go wrong. The flip side: you get the whole market as it is, even when a few big companies make up a large share of it.

Active funds have a manager who picks the shares. The cost is higher. The manager can do better than the market, or worse, and you need patience to find out.

Neither is better on its own. It depends on the goal.

And these funds are new. The oldest has been investing for about a year.

How much do I need, and is there a limit?

Once your total foreign remittances in a year cross ₹10 lakh, all purposes counted, your bank collects 20% TCS (tax collected at source) on the money you send to invest above that. It is not an extra tax. You adjust it against your tax, or get it back, when you file your return.

What about tax?

If you redeem within two years, a higher short-term tax applies inside the fund, and most options, though not all, charge an exit load.

Who should not do this?

Anyone who may need the money in the next few years. Foreign markets can fall just when you need to sell.

And anyone hoping to replace their Indian portfolio. GIFT City funds are an addition, for one reason: a dollar goal, or some money outside one country. Your core investments in India stay where they are.

For a side-by-side with international funds in India, and more of the questions clients ask, see our GIFT City funds explainer.

What happens next

Nothing, unless it fits.

If you have a goal with a foreign-currency bill, or have been waiting since an international fund closed its door, tell us. We will look at whether one of these funds fits a goal you already have.