Published Jun 29, 2026 4 Min Read

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Introduction

An offshore fund invests primarily in securities listed outside India. It helps you diversify your portfolio across international markets, industries and currencies, although returns depend on market performance and currency movements.

  • Offshore funds invest in overseas stocks, bonds or other global assets. 
  • Indian investors can access offshore funds through international feeder funds or other permitted investment routes. 
  • These funds provide geographical diversification beyond the Indian market. 
  • Returns are affected by both investment performance and exchange rate movements. 
  • Taxation depends on the applicable rules in India at the time of redemption. 
  • The Bajaj Broking website offers 4,000+ mutual fund schemes through SIP and lumpsum investment options for investors seeking diversified portfolios. 

If you are planning your investments, you can complete your KYC and explore 4,000+ mutual fund schemes on the Bajaj Broking website, with SIP investments starting from Rs. 100 per month, subject to scheme availability.

How does an offshore fund work in India?

An offshore investment fund invests mainly in securities outside India. Instead of investing directly in foreign companies, many Indian investors gain international exposure through offshore mutual funds or international feeder funds.

A feeder fund collects money from investors in India and invests it in an overseas mutual fund managed by the respective asset management company. The value of your investment depends on both the performance of the overseas assets and changes in foreign exchange rates.

Investments in offshore funds must comply with the applicable regulations issued by Indian regulators.

Which types of offshore funds can you invest in?

There are different types of offshore funds available to Indian investors.

Type of Offshore FundWhat it invests inSuitable for
International Equity FundShares of overseas companiesInvestors seeking global equity exposure
International Feeder FundUnits of an overseas mutual fundInvestors looking for simplified international investing
Global Index FundInternational market indicesLong-term passive investors
Regional FundCompanies from a specific regionInvestors focusing on selected economies
Sector FundGlobal companies from one industryInvestors seeking sector-specific opportunities

Each type offers different levels of diversification, risk and return potential.

Why do investors choose offshore funds?

Offshore funds can help you diversify your investments beyond the Indian market. They also provide access to industries and companies that may not be widely available in India.

Some common advantages include:

  • Exposure to international markets. 
  • Better geographical diversification. 
  • Access to global businesses and emerging industries. 
  • Opportunity to benefit from growth in overseas economies. 
  • Reduced dependence on a single country's market performance. 

Although diversification may reduce concentration risk, offshore funds remain market-linked investments and returns are not guaranteed.

What are the risks associated with offshore funds?

Offshore funds can help diversify your investments, but they also come with risks that you should understand before investing.

RiskHow it affects your investment
Market riskOverseas markets may fall due to economic or political events.
Currency riskExchange rate changes can increase or reduce your returns when converted to Indian rupees.
Country riskChanges in laws, regulations or economic conditions in another country may affect investments.
Liquidity riskSome overseas investments may be difficult to sell quickly.
Concentration riskFunds focused on a single country or sector may experience higher volatility.

Before investing, review the fund's investment objective, portfolio allocation and the SEBI-mandated Riskometer, which classifies schemes as Low, Low to Moderate, Moderate, Moderately High, High or Very High risk.

How are offshore funds taxed in India?

The taxation of offshore mutual funds in India depends on the applicable tax rules at the time of redemption and the structure of the fund.

Generally, you should consider the following factors before investing:

Tax factorWhy it matters
Holding periodTax treatment may vary depending on how long you hold the investment.
Capital gainsProfits from redemption may be subject to capital gains tax under applicable laws.
Dividend incomeTax treatment depends on prevailing tax regulations.
Double taxationTax treaties may affect taxation in certain cases.

Tax rules can change over time. You should refer to the latest tax provisions or consult a qualified tax adviser before investing.

What should you consider before investing in an offshore fund?

Choosing an offshore fund requires careful evaluation of your investment goals, risk tolerance and time horizon.

Before investing, consider the following:

FactorWhat to evaluateWhy it matters
Investment objectiveIncome or long-term growthHelps you select the right fund.
Geographic exposureCountries or regions invested inDiversifies your portfolio internationally.
Currency exposureForeign exchange riskAffects overall returns.
Fund strategyActive or passive managementDetermines how the portfolio is managed.
Risk levelCheck the SEBI RiskometerHelps match the fund with your risk appetite.

If you decide to invest in offshore mutual funds, you can complete your KYC, which is mandatory under SEBI regulations. The Bajaj Broking website provides access to 4,000+ mutual fund schemes across equity, debt, hybrid, ELSS, thematic funds and NFOs. You can invest through SIP or lumpsum, with SIP investments starting from Rs. 100 per month, subject to scheme availability.


Conclusion

An offshore fund allows you to invest in international markets and diversify your portfolio beyond India. It can provide access to global companies, sectors and economies that may not be available through domestic investments. However, offshore funds also carry market, currency and regulatory risks that should be evaluated carefully.

If you are looking to build a diversified investment portfolio, the Bajaj Broking website offers access to 4,000+ mutual fund schemes across equity, debt, hybrid, ELSS, thematic funds and NFOs. After completing your KYC, you can invest through SIP or lumpsum according to your financial goals.

Frequently asked questions

What is an offshore fund and how does it differ from a domestic mutual fund?

An offshore fund primarily invests in assets outside India, while a domestic mutual fund invests mainly in Indian securities. Offshore funds provide international exposure and may benefit from global market opportunities, but they are also affected by foreign market performance and currency movements. The Bajaj Broking website allows you to explore 4,000+ mutual fund schemes, including international investment options where available.


How do offshore mutual funds work in India?

Offshore mutual funds in India generally invest in overseas securities through international feeder funds or similar investment structures. A feeder fund collects money from Indian investors and invests it in an overseas mutual fund managed by the respective AMC. Returns depend on both the performance of the overseas investments and movements in foreign exchange rates.


Are offshore funds high-risk investments?

Offshore funds can carry higher risks than some domestic investments because they are affected by international market conditions, currency fluctuations and country-specific events. The level of risk depends on the countries, sectors and asset classes in which the fund invests. Before investing, always review the SEBI-mandated Riskometer to understand the scheme's risk level.


What is the tax rate on offshore mutual funds in India?

The tax treatment of offshore mutual funds depends on the applicable Indian tax laws, the holding period and the nature of the gains at the time of redemption. Since tax rules may change, you should check the latest regulations or consult a qualified tax adviser before making an investment decision.

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