Lower ticket sizes, digital access push retail investors towards GIFT City

GIFT City

GIFT City has undergone many changes since inception, and now is more friendly for retail investors looking to diversify their portfolios. Speaking at a panel during Moneycontrol's Mutual Fund Summit, held in Bangalore on October 27, three market veterans Vaibhav Shah of Mirae Asset Investment Managers (India), Abhishek Tiwari of PGIM India Mutual Fund, and Neil Parikh of PPFAS discussed the buzz that retail investors could bring to a space dominated by HNIs and FIIs.

One of the key developments in GIFT City has been the introduction of retail fund structures. Earlier, minimum investment thresholds for international funds from GIFT City ranged between $75,000 and $250,000, which is the same as the Liberalised Remittance Scheme (LRS) limit of $250,000 per year. Now, fund managers can launch retail-oriented schemes with minimum ticket sizes as low as $5,000 to $10,000.

This change is crucial because tax collected at source (TCS) kicks in only after transfers exceed Rs 10 lakh in a financial year. Lower investment thresholds allow investors to participate without incurring the 20 percent TCS deduction. Onboarding has also become largely digital, and over time, industry participants expect the investor experience to become as seamless as domestic mutual fund onboarding.

For fund houses, GIFT City brings the advantage of attracting both retail and HNI investments into global themes. However, there are still operational frictions. Investments must be made under the LRS framework, and completing these transfers is more complex than a regular domestic mutual fund transaction, requiring substantial investor education.

The banking infrastructure in GIFT City is still evolving. Transfers are not yet as smooth or instantaneous as the domestic mutual fund payment systems. Strengthening this ecosystem will be key in enabling large-scale retail participation.

Retail investors aiming to diversify globally

As operational systems improve, GIFT City is expected to become a major channel for attracting retail capital into international investments. Further, retail investors are also aiming to expand their portfolios by tapping foreign markets.

Mirae Asset recently launched an outbound fund from GIFT City that has received strong interest due to its access to global innovation themes such as semiconductors, artificial intelligence, data centers, and digital infrastructure, which are exposures that are limited in the Indian market.

According to Neil Parikh of PPFAS, taxation remains a key area where GIFT City structures need improvement. Funds domiciled in GIFT City are taxed on every sell transaction (churn), making the structure less efficient for active portfolio management.

To address this, PPFAS plans to focus on feeder fund or fund-of-fund (FoF) structures, where churn is not subject to capital gains tax and dividend withholding tax is lower at 15 percent compared to around 25 percent in a direct overseas setup.

PPFAS will launch three such feeder funds over the next year—two passive and one actively managed. The passive funds will mirror large global indices such as the S&P 500 and NASDAQ. The active strategy will follow a flexi-cap, go-anywhere approach, investing across developed markets in businesses with global exposure.

Currently, PGIM (India) has three international FoFs: PGIM India Emerging Markets Equity Fund of Fund, PGIM India Global Equity Opportunities Fund of Fund, and PGIM India Global Select Real Estate Securities Fund of Fund. The cumulative AUM for these funds is Rs 2,344.72 crore as of the quarter ended September 30, 2025.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.