Summary of this article
Edelweiss suspended fresh SIPs across seven international mutual funds.
The mutual fund industry reached its overseas investment limit.
Investors can still utilise LRS or GIFT City platforms.
Investing in securities outside India is becoming more and more popular as domestic investors look at new ways of diversifying their portfolios. Amid Nifty and Sensex’s relatively lacklustre performance, investors are looking at hedging their bets by investing in foreign markets, which have delivered better returns in 2026. Doing so can potentially shield their portfolios from volatility in the domestic market and provide access to global investment themes such as artificial intelligence.
However, in the past few days, multiple fund houses have temporarily suspended subscriptions to overseas schemes which invest in foreign markets.
On July 9, Edelweiss Mutual Fund also notified that it is suspending subscriptions for some of its schemes, adding to the growing list of restricted funds. Amid these ongoing scheme suspensions, retail investors are left wondering about alternative ways to gain exposure to foreign markets.
What Edelweiss MF Said In Its Notice
According to a notice issued by Edelweiss Mutual Fund, the asset management company has suspended fresh monthly Systematic Investment Plans (SIPs) and monthly Systematic Transfer Plans (STPs) in seven of its designated overseas schemes. This restriction is set to come into effect today, July 10.
The seven schemes include the Edelweiss ASEAN Equity Offshore Fund, Edelweiss Greater China Equity Offshore Fund, Edelweiss US Technology Equity Fund of Fund, Edelweiss Emerging Markets Opportunities Equity Offshore Fund, Edelweiss Europe Dynamic Equity Offshore Fund, Edelweiss US Value Equity Offshore Fund, and the Edelweiss MSCI India Domestic & World Healthcare 45 Index Fund.
Prospective investors who are looking to invest in overseas schemes will not be able to initiate new systematic investments in the seven funds. On the other hand, existing investors will be able to continue their ongoing SIPs. Lump-sum investors who want to invest their money in these schemes will also not be able to do so.
Investors must note that the temporary suspension has taken place because the fund house is nearing its threshold for overseas investment headroom. The specific limit for overseas investment is based on the mutual fund level limit set for the industry, which stands at USD 7 billion for the entire industry. Once the limit is crossed, fund houses temporarily halt fresh subscriptions till they get more headroom, once existing investors redeem their schemes.
How Can Investors Invest Abroad Now?
While there are a select few schemes in which investors can invest, the overall basket of available schemes is shrinking at the moment. This is expected to go on till fresh redemptions take place, freeing up fund houses to resume subscriptions. However, investors can still diversify their portfolios effectively through other methods.
The two methods which can be used by investors include either the direct route for overseas investing through the Liberalised Remittance Scheme (LRS) or investing through specialised funds in Gujarat’s GIFT City. While the direct route gives investors full ownership of specific international securities, the GIFT City route offers a professionally managed fund framework. Here’s a look at how investors can invest through these methods and the tax-related ramifications they must keep in mind before investing.
Liberalised Remittance Scheme
To invest via the LRS route, investors must open a foreign brokerage account with an international platform. Following this, they have to instruct their domestic bank to transfer capital abroad while declaring the purpose under the Reserve Bank of India’s (RBI) remittance guidelines.
Once the funds land, investors can manually convert their rupees into foreign currency to purchase global stocks or index-tracking exchange-traded funds (ETFs). However, investors must track every single transaction they make under this method to report their capital gains and foreign assets for filing their annual Income Tax Return.
As per RBI guidelines, investors can only remit up to USD 250,000 per financial year for international investments. The limit is cumulative; any overseas spending directly reduces the investable amount. Manasvi Garg, Sebi-Registered Investment Advisor (RIA), CFA, told Outlook Money that investors are forced to look at the LRS option amid the shrinking availability of overseas mutual fund schemes.
"The RBI's USD 7 billion industry-wide overseas investment limit for domestic mutual funds has significantly reduced the availability of one of the simplest routes for Indian investors seeking global diversification," Garg said.
Garg mentioned that several brokers provide avenues for international investing, such as Charles Schwab and Interactive Brokers.
"Investors can open accounts with international brokers such as Charles Schwab, Interactive Brokers, or Indian platforms offering global investing, and purchase overseas stocks, ETFs and mutual funds directly in their own name," Garg said.
He added that while this approach offers flexibility to investors, it can also add cash-flow challenges due to Tax Collected at Source (TCS) rules. Commenting on the regulatory shifts governing these outward remittances, the advisor notes the adjusted exemption limits.
"Effective 1 April 2025, the threshold for Tax Collected at Source (TCS) on overseas remittances under LRS was increased from Rs 7 lakh to Rs 10 lakh. For instance, if an investor remits USD 15 lakh overseas to purchase foreign equities, TCS is collected only on the Rs 5 lakh exceeding the threshold, resulting in an upfront deduction of Rs 1 lakh," Garg said.
Beyond the immediate liquidity block, LRS investors must also assume full responsibility for the regulatory workload. Garg mentioned that under the LRS route, an extensive compliance overhead falls on the investor’s shoulders.
"Since securities are held directly in the investor's own name, compliance with FEMA and LRS regulations becomes the investor's responsibility. Furthermore, holding foreign assets directly in your own name exposes your portfolio to a critical and often overlooked international tax risk,” Garg said.
Investing Via GIFT City
To invest via the GIFT City route, investors need to open a dedicated account with an International Financial Services Centres Authority (IFSCA) registered broker or platform in India. Then they must transfer their investment capital from their domestic bank account into a dedicated dollar-denominated account within the tech city.
However, this also counts in the total LRS quota of the individual. Once funded, investors can deploy this money as a lump sum into actively managed portfolios or passive global index funds. Notably, the taxation for the GIFT city route is relatively simpler as the investor only has to pay capital gains taxation upon final redemption.
"Although investments are still made under the investor's overall USD 250,000 LRS limit, GIFT City enables continued access to professionally managed global portfolios without being constrained by the mutual fund industry's overseas allocation limit," Garg said.
By pooling capital into a localised dollar-denominated fund rather than holding foreign stocks directly, investors can also bypass overseas inheritance liabilities. Comparing the operational benefits of the localised structure to direct investing, TGarg outlined the reduction in risk.
"Investors gain access to institutional portfolio management and diversified global portfolios without directly holding overseas securities in their own name, thereby optimising concerns such as U.S. estate tax exposure while simplifying portfolio administration," Garg said.
Most passive index funds operating within GIFT City require a minimum initial investment of USD 5,000. However, this minimum amount is a deliberate feature designed to allow investors to deploy a substantial lump sum while staying comfortably under the Rs 10 lakh threshold, avoiding any upfront Tax Collected at Source deductions.
However, Garg highlighted that since the GIFT City mechanism is still nascent, trading volumes and total assets are relatively smaller than India's multi-trillion-rupee domestic industry. Garg explained how this scale can influence transaction costs and asset pricing, leading to risks for investors during volatile periods.
"Lower scale may translate into lower liquidity, wider bid-ask spreads and potentially higher transaction costs, particularly during periods of market volatility," Garg said.
As a result, choosing the right international investment avenue is a key decision which investors must make amid a shifting landscape for overseas investing. Investors must factor in the taxation rules and other regulatory guidelines they may need to comply with before choosing one method.
