1Indian investors (through LRS)
Taxed on their share or gain
How are Indian residents taxed when they invest through a GIFT IFSC fund?
Your bank collects 20% TCS on LRS remittances above ₹10 lakh in a year. It is not an extra tax: you claim it back in your return.
In a Category I or II fund you are taxed every year on your share of what the fund earns, foreign gains included. Where tax was paid abroad, you can usually claim credit for it.
Show the law
Section 224(1)
224. (1) Irrespective of anything contained in any other provision of this Act and subject to the provisions of this section, where a person, being a unit holder of an investment fund, out of investments made in the investment fund, receives any income or any income accrues or arises to him, such income shall be chargeable to income-tax in the same manner as if, it were the income accruing or arising to, or received by, such person, had the investments made by the investment fund been made directly by him.
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
2GIFT IFSC fund
Pass-through or trust
How is the fund itself taxed?
Category I or II: pass-through. The fund is not taxed on what it passes to you.
Category III with Indian residents: it is not a specified fund, so it is taxed as a trust. The trustee pays tax on your share inside the NAV.
What to check: A resident’s gain on redeeming units of such a Category III fund is the resident’s own capital gain, taxed under the general rules.
Show the law
Schedule VI, Note 1(g)(C)
[(C) of which all the units other than the unit held by a sponsor or manager are held by non-residents except,–– (I) where such non-resident becomes resident under section 6(2) or (3) or (4) or (5) or (6) or (7) in any tax year subsequent to that tax year; and (II) the number of units held by such resident unit holder or holders do not exceed 5% of the total units issued and shall fulfil such other conditions as may be prescribed; or]
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
Section 303(1)(d)
(d) in respect of income which a trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise [including any wakf deed which is valid under the Mussalman Wakf Validating Act, 1913 (6 of 1913)] receives or is entitled to receive on behalf or for the benefit of any person, such trustee or trustees;
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
Section 307(1)
307. (1) The income or any part thereof, in respect of the person mentioned in sections 303(1)(c) and (d) shall be chargeable to tax at the maximum marginal rate, if— (a) such income or such part thereof is not specifically receivable on behalf or for the benefit of any one person; or (b) the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown.
Income-tax Act, 2025 as amended by the Finance Act, 2026 · text as notified, amendment footnote numbers omitted · checked 24 October 2026 · Official text
3Overseas investments
Taxed abroad
Who taxes the overseas investments?
Taxed where they are, under that country’s rules. In India, what matters is how the fund and you are taxed, above.
