Foreign or local? Investors at lossover GIFT funds

The asset management industry is divided over whether investments in GIFT City IFSC funds should be disclosed as foreign assets in Income Tax Returns (ITRs). Fund houses Parag Parikh and DSP hold opposing views, while tax experts from Deloitte and other firms remain split on the regulatory dichotomy, where GIFT City is treated as foreign territory under FEMA but domestic under the I-T Act. The lack of clarity could discourage investor participation in GIFT-based mutual funds, alternative investment funds, and portfolio management services, since misreporting foreign assets invites penalties.