Most GIFT City tax commentary you find online is sourced from general blogs and secondary research. This guide is different. Every data point below is drawn from official GIFT City fund factsheets, AMC presentations, and product documents that Tequity has reviewed and indexed.

Where fund documents contain conflicting information or flag ambiguity, we say so rather than pretending there is a clean answer.

Tax Touchpoint 1: LRS TCS on Remittance

When you send money via LRS to invest in a GIFT City fund, your bank deducts TCS.

The rule (confirmed in multiple official fund documents):

This is confirmed in the official documents of: Mirae Asset Global Allocation Fund (March 2026 IFSC presentation), Marcellus GCP PMS deck (May 2026), PPFAS PPGIS discretionary PMS factsheet (March 2026), Baroda BNP GIFT US Small Cap fund page, and the Edelweiss Greater China Equity Fund official leaflet.

This is a credit, not a permanent cost. All fund documents describe TCS as refundable via ITR. The 20% collected by the bank appears as a tax credit in your 26AS. You adjust it against income tax payable in your ITR, and any excess is refunded.

The cash flow gap is real: the refund arrives only after you file your ITR and it is processed. Plan for a 6-12 month window between remittance and refund, depending on your filing timeline.

Tax Touchpoint 2: Capital Gains on Returns

The 24-Month Holding Period

For GIFT City outbound funds (both mutual funds and AIFs), the long-term capital gains holding period is 24 months. This is confirmed in six separate official fund documents in our intelligence base:

Fund Document LTCG Holding Period
Edelweiss Greater China Equity Fund Official fund leaflet >24 months
Mirae Asset Global Allocation Fund IFSC presentation March 2026 >24 months
Baroda BNP GIFT US Small Cap Fund Official fund page >24 months
Marcellus GCP PMS Investor deck May 2026 >24 months
PPFAS PPGIS Discretionary PMS factsheet March 2026 >24 months
Marcellus Global Equities Fund Retail MF pitch deck >2 years

LTCG rate: 12.5% plus applicable surcharge. This rate is consistent across all fund documents reviewed.

STCG Rate: A Note on What Fund Documents Say

For gains on GIFT City outbound funds held under 24 months, the picture from fund documents is:

The consistent message from fund documents is that STCG is taxed at the applicable slab rate, with a maximum of 30%. Because no STT (Securities Transaction Tax) is levied at GIFT City, these investments do not qualify for the concessional STCG rate available on listed Indian equity (which requires STT payment).

Consult your CA for the rate applicable to your specific income bracket and product type.

How Tax Is Paid: MF vs PMS vs AIF

This is the most practically significant difference between product types.

Mutual Funds: Tax at Fund Level

In GIFT City mutual funds, the fund trustee discharges the tax liability as a representative assessee. This means the fund itself computes and pays the tax; what you receive is a post-tax distribution or post-tax NAV.

This is confirmed in:

Practical implication: as an investor in a GIFT City mutual fund, you do not need to compute tax on individual portfolio transactions. Your tax obligation at the fund level is handled. You still need to declare the holding in Schedule FA of your ITR.

PMS: Tax in Your Hands

In a GIFT City PMS, every buy and sell transaction within your portfolio is a taxable event in your hands.

This is confirmed in:

You will receive detailed transaction statements from your PMS provider. You or your CA must compute the applicable gain or loss per lot and aggregate in Schedule CG of your ITR. This is the most filing-intensive structure of the three.

One additional point for PMS investors holding US equities: The PPFAS PPGIS factsheet (March 2026) notes that US dividend withholding applies at source on US equities at the standard India-US DTAA rate of 25%. This withholding tax is claimable as a foreign tax credit in your Indian ITR. No other fund document in our DB covers this point at this level of detail.

Category III AIFs: Tax at Fund Level for Residents, Exempt for NRIs

For resident Indian investors in Category III AIFs:

For NRI and foreign national investors in Category III AIFs:

Schedule FA: The Annual Filing Requirement for All Residents

Regardless of product type, resident Indians must declare GIFT City investments in Schedule FA (foreign assets) of their annual ITR. GIFT City is treated as "outside India" for FEMA and tax purposes, so all holdings qualify as foreign assets.

The PPFAS PPGIS factsheet is the most explicit source in our DB on this requirement, noting that Schedule FA disclosure applies to all PMS investors. The same applies to mutual fund and AIF unit holdings.

Your fund manager or PMS provider will issue the statements needed for Schedule FA. Ensure your CA files this section accurately each year.

Summary Table

Mutual Fund PMS Category III AIF
LTCG holding period 24 months 24 months 24 months
LTCG rate 12.5% + surcharge 12.5% + surcharge 12.5% at fund level
STCG rate Slab rate (max 30%) + surcharge Slab rate (max 30%) + surcharge Slab rate at fund level
Who pays the tax Fund trustee (representative assessee) Investor files own ITR Fund trustee (representative)
ITR complexity for residents Low (fund handles it) High (transaction-level) Low (fund handles it)
Tax for NRIs Not required if income from IFSC only Taxable, ITR required Fully exempt
Schedule FA required Yes Yes Yes
LRS TCS 20% above INR 10 lakh 20% above INR 10 lakh 20% above INR 10 lakh

This article is based on information from official GIFT City fund factsheets and AMC presentations reviewed by Tequity. Tax laws change and individual circumstances vary. Always consult a qualified CA before making investment or tax decisions. Tax rates cited are exclusive of surcharge and cess unless otherwise stated.

If you have questions about how these apply to your specific situation, speak to Tequity.