What is the main difference between a mutual fund and PMS at GIFT City?

In a mutual fund, you own units of a pooled fund - the fund manager buys and holds securities on behalf of all investors. In a PMS (Portfolio Management Service), you own the underlying securities directly in your own demat account. This means each PMS transaction is a taxable event in your hands. Mutual funds are simpler, have lower minimums (from USD 5,000), and tax accrues only when you redeem. PMS starts at USD 25,000 (advisory) or USD 75,000 (discretionary) and offers greater customisation.

How is a Category III AIF different from a mutual fund at GIFT City?

Both are pooled vehicles where you own units, not direct securities. The key difference is that Category III AIFs are exempt from Indian capital gains tax for non-resident investors - which makes them highly attractive for NRIs. AIFs also have a higher minimum (USD 75,000 post-IFSCA's February 2025 reduction), may have lock-in periods, and are less liquid than open-ended mutual funds. For resident Indians, the tax treatment at fund level simplifies compliance compared to PMS.

Which GIFT City product has the lowest minimum investment?

Retail mutual funds have the lowest entry point: USD 5,000 for the PPFAS S&P 500 and Nasdaq 100 FoFs, and for active funds like DSP Global Equity and Marcellus Global Equities. Some inbound retail funds start even lower. PMS advisory starts at USD 25,000 (Phillip Ventures advisory). Discretionary PMS and most AIFs start at USD 75,000.

For NRIs, which GIFT City product is most tax-efficient?

Category III AIFs are the most tax-efficient structure for NRIs. Capital gains earned inside the fund are fully exempt from Indian tax. NRIs investing in mutual funds at GIFT City are also generally exempt from Indian tax (check DTAA with your country of residence). PMS is the least tax-efficient for NRIs because each transaction creates a taxable event in India, requiring an ITR filing.

Can resident Indians invest in all three product types at GIFT City?

Resident Indians can invest in outbound products across all three structures (MF, PMS, AIF), subject to LRS limits of USD 250,000 per financial year. They cannot invest in inbound products (India equity direction). The choice between MF, PMS, and AIF for residents comes down to minimum investment size, desired level of customisation, and whether direct security ownership (PMS) or pooled structure (MF/AIF) fits better.

PMS vs AIF vs Mutual Fund at GIFT City: Which Product Is Right for You?

GIFT City offers three distinct product structures for global investing. Each serves a different investor profile. Choosing the wrong one means either paying for complexity you do not need or missing out on tax efficiency you are entitled to.

This is a direct comparison of the three structures: mutual funds, PMS, and Category III AIFs.

Structure 1: Retail Mutual Funds

Who owns what: You own units of a pooled fund. The fund manager holds the underlying securities.

How it works: Standard open-ended fund with daily NAV. You subscribe and redeem in USD. The fund manager runs the portfolio.

Minimum: USD 5,000 for most outbound GIFT City MFs.

Tax for residents: LTCG at 12.5% if held over 24 months. STCG at applicable slab rates.

Tax for NRIs: Exempt from Indian capital gains tax (check DTAA with home country for any residency-side obligations).

Lock-in: None for open-ended funds.

Best for: Investors who want straightforward global exposure without complexity. The passive options (PPFAS S&P 500 and Nasdaq 100 FoF) are the lowest-cost, lowest-minimum route to global equities from India.

Live outbound MF options: PPFAS S&P 500 FoF · PPFAS Nasdaq 100 FoF · DSP Global Equity Fund · Edelweiss Greater China Equity Fund · Marcellus Global Equities Fund

Structure 2: Portfolio Management Services (PMS)

Who owns what: You own the underlying securities directly, held in your own demat/custody account at a GIFT City broker.

How it works: The portfolio manager operates under a discretionary mandate (full decision authority) or advisory mandate (recommends, you approve). Your portfolio is individual, not pooled.

Minimum:

Advisory PMS: USD 25,000 (Phillip Ventures)
Discretionary PMS: USD 75,000 (Marcellus GCP, PPFAS PPGIS, Phillip Ventures)

Tax for residents: Each buy and sell within the portfolio is a taxable event. You receive a transaction statement and must compute and file your own ITR. LTCG at 12.5% (>24 months), slab rate for STCG.

Tax for NRIs: Each transaction is taxable in India. NRIs must file an ITR if PMS income exceeds the basic exemption. This is the least tax-efficient structure for NRIs.

Lock-in: None at most GIFT City PMS products.

What you get that MFs do not offer: A portfolio built to your specific entry point, direct ownership of named global stocks or ETFs, and a transparent transaction-level audit trail.

Live outbound PMS options: Marcellus GCP · PPFAS PPGIS · Phillip International Pioneer

Structure 3: Category III AIFs

Who owns what: You own units of the fund, not the underlying securities. The structure is pooled, like a mutual fund.

How it works: The fund pools capital from investors and deploys it according to its stated strategy. Category III AIFs can use derivatives, leverage, and complex strategies that retail MFs cannot.

Minimum: USD 75,000 (IFSCA reduced the minimum from USD 150,000 in February 2025 for most products; some older funds still require USD 150,000+).

Tax for NRIs (most important difference): Capital gains inside a Category III AIF are fully exempt from Indian tax for non-resident investors. This is the defining advantage of the AIF structure for NRIs. There is no ITR filing obligation in India if the investor's only Indian income comes from IFSC funds.

Tax for residents: Tax accrues at the fund level. Resident investors receive a post-tax distribution and do not need to track individual transactions. LTCG rate of 12.5% applies at the fund level.

Lock-in: Varies. Some AIFs are close-ended (Mirae Asset Global Allocation Fund, ABSL Global Bluechip), meaning capital is locked for the fund's tenure. Others are open-ended (Baroda BNP GIFT US Small Cap).

Live outbound AIF options: Mirae Asset Global Allocation Fund · Baroda BNP GIFT US Small Cap Fund · ABSL Global Bluechip Equity Fund

Direct Comparison Table

	Mutual Fund	PMS	Category III AIF
Ownership	Fund units	Direct securities	Fund units
Min. investment	USD 5,000	USD 25,000-75,000	USD 75,000+
LTCG for residents	12.5% (>24 months)	12.5% (>24 months)	12.5% at fund level
Tax for NRIs	Exempt (check DTAA)	Taxable, ITR required	Fully exempt
Lock-in	None (open-ended)	None (typically)	Varies (some close-ended)
Liquidity	Daily (open-ended)	Within days	Varies
Customisation	None	High (PMS)	None
Complexity	Low	Medium	Medium-High
ITR filing (NRI)	Not required	Required	Not required

Which Structure Fits Which Investor

You should consider a mutual fund if:

You are a first-time investor in global equities
Your investment size is USD 5,000-50,000
You want passive index exposure (S&P 500, Nasdaq 100)
You prefer simplicity over customisation
You are a resident Indian or NRI who wants clean, low-paperwork global exposure

You should consider PMS if:

You want a dedicated portfolio manager running a named strategy on your behalf
Your investment size is USD 75,000 or more (USD 25,000 for advisory)
You want direct ownership and full transparency into individual positions
You are a resident Indian comfortable with annual ITR reporting on individual transactions
You want active stock-picking with a specific mandate (quality global compounders, value, thematic ETFs)

You should consider a Category III AIF if:

You are an NRI or foreign national and want zero Indian tax on capital gains
Your investment size is USD 75,000 or more
You are comfortable with a pooled structure and possible lock-in period
You want exposure to strategies not available in retail MF format (leveraged, ETF-of-ETFs, thematic)

A Note on LRS for Resident Indians

All three structures are accessible to resident Indians via LRS (Liberalised Remittance Scheme), up to USD 250,000 per financial year. The 20% TCS on LRS remittances above INR 10 lakh is a cash flow item, not a permanent tax cost. It is credited against your income tax liability and refunded if you have lower liability.

For resident Indians, the choice between MF, PMS, and AIF is primarily about investment size and complexity preference. Tax treatment differences are minor compared to the NRI scenario.

If you are evaluating which structure fits your situation, speak to Tequity. The decision depends on your tax residency, investment size, and what you want the portfolio to actually do.