What GIFT City and the Mauritius Feeder Route Mean for Indian AIF Investors

NRIs have spent years routing capital into India through structures that came with real friction: multiple jurisdictions, layered compliance, and offshore entities that took months to set up. GIFT City is changing that calculus. Alongside it, the older Mauritius feeder route hasn't gone anywhere; it's still very much in use. What NRIs actually need before allocating capital is a clear read on how these two paths differ, not just that they exist side by side.

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GIFT City, short for Gujarat International Finance Tec-City, is India's first International Financial Services Centre, and what really sets it apart is who's watching over it. It's on Indian soil, but it doesn't answer to SEBI. It has its own regulator, the International Financial Services Centre Authority. That single fact shapes everything else about it. Funds built here run in foreign currency by design, aimed squarely at NRIs, OCIs, and global investors who want India exposure without stacking offshore entities on offshore entities just to get there.

For someone asking what is a GIFT City feeder fund, the answer is straightforward. It is a pooling vehicle set up within the IFSC that collects capital from NRIs and other eligible non-resident investors in US dollars, then channels that capital into underlying Indian mutual funds, AIFs, or other asset classes. Instead of an NRI selecting and monitoring multiple Indian schemes individually, the feeder structure gives them a single, professionally managed entry point.

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The mechanics of how NRIs invest through GIFT City are simpler than most offshore routes NRIs have historically used. The process typically involves:

• Opening a foreign currency account with an IFSC banking unit or through a registered GIFT City intermediary

• Completing KYC using standard documentation: passport, PAN, and overseas address proof

• Transferring funds in foreign currency directly into the IFSC structure, without conversion friction

• Selecting a product, an IFSC mutual fund feeder, a Category II AIF for private credit or real assets, or a Category III AIF for equity strategies

Minimum ticket sizes vary meaningfully by product. IFSC mutual fund and feeder structures can start in the low thousands of dollars, while AIFs typically require a higher commitment, often in the range of USD 150,000 or above depending on the fund's category and strategy. This tiered access is part of what has made offshore AIF investment India increasingly viable for a wider band of NRI wealth, not just ultra-high-net-worth investors.

Tax Benefits of GIFT City AIF Structures

The tax benefits of GIFT City AIF products are a central reason for the shift in NRI preference. IFSC-regulated structures offer:

• No capital gains tax for eligible non-resident investors on income from specified securities, subject to conditions

• No Securities Transaction Tax and no Commodities Transaction Tax, unlike investments made through the domestic Indian market

• No GST on financial services rendered to non-residents

• Sovereign tax exemptions without the treaty-shopping scrutiny that has increasingly complicated older offshore structures

Category I and II AIFs in GIFT City also benefit from a complete tax pass-through, meaning income is taxed in the hands of the investor rather than at the fund level, avoiding the layered taxation that made some legacy offshore vehicles inefficient. That said, Indian tax exemption is only half the picture. NRIs still need to evaluate their tax obligations in their country of residence, along with any applicable Double Taxation Avoidance Agreement, since Indian exemptions do not automatically extend to how income is treated abroad.

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Before GIFT City existed, the Mauritius route for Indian AIF investors was the default structure for decades, and it remains active today. Here is how the Mauritius feeder route actually works: The mechanics are worth walking through plainly. Global investors put capital into a feeder fund incorporated in Mauritius. That feeder then invests into an Indian AIF, usually a Category I or Category II fund, which deploys the money into Indian securities, private credit, or real assets. The AIF itself answers to SEBI. The Mauritius entity sits above it, drawing on the benefits of the India-Mauritius Double Taxation Avoidance Agreement.

This structure historically offered a genuine tax arbitrage. Mauritius never taxed capital gains at home, and for years the DTAA meant Indian securities largely escaped tax here too; that was the whole appeal. Then in 2016 India went back to the table and renegotiated the treaty. Since April 2017, Mauritius-resident entities have owed tax on capital gains from Indian shares, with only pre-2017 investments grandfathered in and spared. The edge Mauritius once had has shrunk quite a bit since, though it still runs a mature, well-regulated funds industry and holds treaties with plenty of jurisdictions beyond India.

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The GIFT City vs. Mauritius fund structure comparison increasingly favors GIFT City, and not just on paper. Three differences stand out.

Regulatory distance. A Mauritius feeder investing into an Indian AIF is a two-jurisdiction structure, with compliance obligations on both sides. A GIFT City AIF is a single-point IFSCA-regulated structure, set up in less than 60 days in many cases, with no second jurisdiction to reconcile.

Tax certainty. Mauritius's advantage was built on treaty benefits that have been renegotiated once already and remain subject to global base erosion and profit shifting (BEPS) scrutiny. GIFT City's sovereign tax exemptions are not treaty-dependent in the same way, which reduces the risk of the benefit eroding again.

Cost and operational simplicity. Plenty of NRIs are sitting on Mauritius or Singapore structures they built ten or fifteen years ago, and a fair number of them are now asking a hard question: does the compliance overhead still pay for itself? GIFT City has given that question real weight. It's matured into an option that's harder to dismiss, cheaper to run, and simpler to explain to a family office back home.

None of this makes the Mauritius route obsolete. Global fund managers who need broader international treaty access, or who are running structures that predate GIFT City's expansion, continue to use it. But for an NRI evaluating a fresh allocation into Indian AIFs today, the comparison has shifted meaningfully toward GIFT City.

Conclusion

GIFT City started out as a promising idea and has turned into something NRIs are actually choosing over Mauritius and Singapore, not just considering as an alternative. It offers dollar-denominated access, one regulator instead of two jurisdictions to track, and tax exemptions that aren't sitting on the same treaty-renegotiation risk that already caught up with Mauritius once before. That doesn't retire the Mauritius route. Investors already inside it, or ones who need broader global treaty access, still have good reason to stay. But for an NRI building a fresh allocation into Indian AIFs, GIFT City is where that conversation starts now, not where it eventually lands.

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