Low-ticket Gift City funds are almost here. But what holds them back?
Subscribe to enjoy similar stories. Gift City is currently dominated by non-retail funds, requiring a minimum investment of $150,000 (about ₹1.3 crore). Over the past one year, the number of Category III (CAT-3) funds has more than doubled to 116, with investments in Indian markets increasing 2.5 times to $1.9 billion.
These funds primarily attract foreign and NRI investors; however, their widespread adoption is limited by the high minimum investment requirement. Retail funds, which can accept investments as low as $100, are yet to be launched. In the previous Union budget, the government extended favourable tax treatment to retail funds in Gift City, similar to what was earlier extended to non-retail funds.
However, no asset manager has launched a retail scheme so far, largely due to the confusion regarding its structure. Also Read: Budget 2024: How tax-free retail funds will benefit NRIs There’s a tax rule that says if a foreigner or NRI invests in a Gift City fund, India will levy zero tax. The exception is when these funds invest directly in equities, in which case the investment is subject to capital gains tax.
For instance, Mirae Asset has a Gift City AIF Cat-3 Fund, which feeds into its mutual fund schemes in India. Since the fund does not invest in direct equities, foreign investors or NRIs don’t have to pay any tax on it in India. Such funds are called inbound funds which invest in India and are meant for foreign investors who want to invest in the Indian markets.
The same structure could be replicated in the retail fund model where the ticket size is very low. However, the International Financial Services Centres Authority (IFSCA), the Gift City regulator, mandates two things for retail funds. -Retail funds in
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