In a landmark development for India’s financial ecosystem, DSP Mutual Fund has launched the country’s first retail offshore fund directly from GIFT City, Gujarat—ushering in a new era of global investing for resident Indians. With a minimum investment threshold of $5,000 (approximately ₹4.2 lakh), this fund allows Indian investors to bypass the complexities of Liberalised Remittance Scheme (LRS), while gaining direct exposure to global equities spanning the U.S., Europe, China, Japan, Korea, and more.
The innovation comes at a time when traditional Indian mutual funds have hit regulatory ceilings on overseas investments, pushing wealth managers and retail investors alike to seek alternative routes for portfolio diversification.
Background and Context
Historically, Indian investors looking to diversify internationally have had to navigate RBI’s LRS framework, open foreign brokerage accounts, and report assets under Schedule FA in their income tax filings. Moreover, Indian mutual funds operate under SEBI-imposed caps on foreign asset allocations, which have already been breached by many leading AMCs.
Enter GIFT City—a tax-neutral International Financial Services Centre (IFSC)—which offers a middle path: enabling foreign investment opportunities without requiring a foreign bank account or overseas fund structure. The DSP Global Innovation Fund of Fund is structured as an India-domiciled fund but sources its investment capabilities from global managers, with end exposure to roughly 30–50 international equities.
Fund Structure and Highlights
| Feature | Details |
|---|---|
| Minimum Investment | $5,000 (approx. ₹4.2 lakh) |
| Portfolio Composition | 30–50 stocks across U.S., Europe, Japan, China, Canada |
| Taxation | Taxed at fund level; gains exempt post-redemption |
| TDS | Not applicable |
| Currency of Investment | USD |
| LRS Reporting | Not required |
| Schedule FA Reporting | Not applicable (GIFT City treated as Indian jurisdiction) |
| Investment Strategy | Focus on resilient global businesses for long-term growth |
What Makes This a Game-Changer?
Bypasses Investment Limits: Indian mutual funds have reached their global investment limits under SEBI rules. This offshore route offers a new pipeline for global exposure.
Simplified Taxation: Since the fund pays tax at the fund level, investors do not face capital gains tax post-redemption, and there’s no TDS deduction.
No LRS, No Foreign Bank Account: The product operates outside FEMA’s Indian jurisdiction (for forex purposes) but inside Indian tax territory—eliminating the need for foreign account disclosures under Schedule FA.
Currency Exposure: Investments and returns are in USD, offering a natural currency hedge.
Expert Viewpoints
Kalpen Parekh, MD & CEO, DSP Mutual Fund:
“GIFT City lets us break regulatory silos. This fund creates access to global opportunities without the operational and tax complexities that traditionally come with offshore investing.”
Nilesh Shah, Member, PM’s Economic Advisory Council:
“This move aligns with India’s aspiration to become a global financial hub. GIFT City-based funds could become the go-to option for HNIs and retail investors seeking international exposure.”
Tax & Legal Perspective – KPMG India:
“Since GIFT City is not treated as a foreign jurisdiction for tax purposes, the fund avoids the regulatory burden of overseas asset declarations, making compliance significantly easier.”
Market and Policy Implications
Retail Financial Inclusion: Opens international equity markets to a broader spectrum of Indian investors—not just HNIs or family offices.
Strengthens GIFT City’s Role: Positions India’s IFSC as a global investment gateway, adding credibility and scale to its offerings.
Incentivizes Other AMCs: More mutual funds may now explore GIFT City structures to bypass overseas investment limits.
Capital Flow Management: Offers RBI a way to manage outbound flows in a controlled domestic environment without lifting LRS ceilings.
Conclusion
DSP’s offshore fund launch from GIFT City marks a watershed moment in India’s journey toward global financial integration. By combining ease of access, regulatory clarity, and global diversification within a domestic wrapper, the fund sets a powerful precedent for the future of Indian wealth management. As more AMCs eye GIFT City as a launchpad, Indian investors may finally enjoy a seamless, tax-efficient route to participate in global wealth creation.
