#thefynprint

The investor is gone. But their portfolio of stocks and mutual funds is still there, all sitting in a demat account that no one can touch. There is no nominee. There is no will. So now, a grieving family is tasked with getting a transmission request form, a death certificate, officially valid ID proof, a notarised indemnity bond, a notarised affidavit from every legal heir, and much more.

There is only paperwork, and more paperwork, and a system that was never designed with this, and many more grieving families in mind. For families trying to claim their deceased's securities, this has been the reality for far too long. 

SEBI has finally decided to do something about it, by releasing two consultation papers, one targeting the inheritance process itself, and one targeting the nomination system that should have made all of this unnecessary. Here is a breakdown of the proposals on the table.

Can't nomination help investors avoid the entire problem in the first place?

Not really. However, a big chunk of securities-related inheritance issues start with the fact that there was no nominee in the first place. And as per SEBI's own data, that is not changing anytime soon.

Per a January 2025 SEBI circular, investors could add up to 10 nominees for their demat account and mutual fund folios. But data suggests that those who nominated two people never crossed 1% in any month, falling from 0.8% in January to 0.3% in December.

Those who nominated three people were negligible throughout, from 0.2% in January, to zero from August onwards. In total, the share of accounts with any nomination at all fell from 29.3% in January to 17.9% in December. In fact, across 2025, the share of new demat account holders opting out of nomination only inched up every month, from 70.7% in January to 82.1% as of December 26, 2025. 

So, SEBI has now proposed that the maximum number of nominees for demat accounts and MF folios be restricted at 4, and the maximum number of joint holders in demat accounts/MF folios will continue to remain 3. In fact, the paper also proposes to make nomination optional for jointly held demat accounts/folios

The bigger issue, however, is not how many nominees investors can add. It is what those nominees are actually entitled to. 

There is a long-standing confusion on the difference between a nominee and a legal heir, and how they're not the same. It's not just individuals, but the law as well. Experts note that Section 72 of the Companies Act, 2013 offers nominees nearly all major powers on the deceased individual's securities.

As representatives from LegaLogic consulting, a pan-India full service law firm highlight, "Section 72 of the Companies Act, 2013 provides that a nominee shall be entitled to "all the rights" in respect of the securities upon the death of the holder. On a literal reading, this provision appears to grant nominees near-absolute ownership rights".

However, the Supreme Court has, time and again, highlighted that the nominees are only a custodian or trustee of the deceased investor's securities. The actual question of who owns the securities is decided by succession law, either by the will, or in its absence, by personal law. In any case, nomination does not override succession and does not confer beneficial ownership.

"This apparent conflict was conclusively resolved by the Supreme Court in Shakti Yezdani v. Jayanand Jayant Salgaonkar. The Court held that the rights granted to a nominee under Section 72 are limited to the administrative and operational domain. A nominee is entitled to deal with the company or its records, including receiving and holding securities, but such entitlement does not translate into beneficial ownership. The nominee holds the securities in a representative capacity and remains accountable to the legal heirs. Thus, Section 72 facilitates efficient transmission of securities but does not override succession law or testamentary intent", they add.

SEBI has also separately eased the process of nominees transmitting securities to the rightful legal heirs, so that nominees may not be required to pay income tax on such transmission.

But, what legal remedy does the legal heir have in situations where a person names different individuals in their will and in their demat nomination, and the RTA transfers securities to the nominee? "Legal heirs can approach a civil court seeking a declaration of their ownership rights based on the will. They may also seek recovery of the securities or their monetary value from the nominee. The nominee, in such cases, is treated as holding the securities in a constructive trust for the benefit of the rightful heirs”, LegaLogic representatives say. 

“If the nominee has already disposed of the securities, the remedy may extend to recovery of proceeds or damages. However, this remedy is reactive rather than preventive. The RTA, having acted in accordance with regulatory requirements, is discharged of liability once the transfer is made. The burden of enforcement thus lies entirely on the legal heirs", they add. 

What other changes related to nomination are being proposed?

SEBI's January 2025 circular had introduced a facility allowing incapacitated investors, those who were unable to manage their accounts but still had the capacity to enter legal agreements, to empower a nominee to operate their account or folio on their behalf. It is now proposing to walk that back. Now, instead, such investors would be directed to use the existing mechanism of a Power of Attorney.

Also, the January 2025 circular required 7 details of each nominee, like name, percentage share, relationship with investor, address, mobile, email etc. Clearly, seeing how cumbersome it can be, SEBI is now proposing that only name and nature of relationship will be mandatory. 

All remaining details like address, mobile number, email address and percentage share etc, will be optional. In cases where percentage share is not specified, assets in the account/folio will be divided among nominees equally. 

Another change that is being proposed by SEBI is that nomination would be the default choice when opening a new account. An investor who does not wish to nominate would have to actively choose to opt out, after which a pop-up message on the benefits of nomination would be displayed. The investor would need to consent to that message before proceeding without a nominee. Previously, investors who did not wish to nominate had to record a video declaration for opting out. 

How is SEBI proposing to overhaul securities transmission for cases of no will/nomination?

SEBI is proposing three tiers for transmission claims where there is no nomination or will present. Here's all that you need to know about them.

Tier 1: Straight Through Processing (STP)

This will deal with the smallest holding amounts i.e. up to Rs. 10,000 for physical securities and Rs. 30,000 for demat. Claimants will only need to submit an undertaking on plain paper along with a duly signed transmission request form, a Client Master List of the demat account not older than two months attested by the DP, a verifiable death certificate, and officially valid ID proof. No indemnity bond, no NOC, no court documents will be needed.

Tier 2: Simplified Documentation

This deals with holdings above the STP limit but below Rs. 10 lakhs for physical securities and Rs. 30 lakhs for demat. Here, claimants will need all documents from Tier 1, plus a notarised indemnity bond No Objection Certificate from all legal heirs or a copy of a family settlement deed executed by all legal heirs and duly attested by a notary public or gazetted officer. 

However, in case the legal heirs are already named in a Succession Certificate, Letter of Administration or Legal Heirship Certificate, a notarised affidavit from those claimants alone is sufficient.

Tier 3: Above Threshold, No Disputes

This is the highest tier, dealing with holdings above Rs. 10 lakhs for physical securities and Rs. 30 lakhs for demat, where there are no disputes. No need for a probated will here, all that the claimants need is: 

A transmission request form

Attested Client Master List

Verifiable death certificate

Officially valid ID proof

Notarised affidavit from all legal heirs on non-judicial stamp paper establishing legal ownership. 

Along with this, one of the following documents will also be required:

A copy of the Succession Certificate/Letter of Administration

Court Decree Copy of the Will under the Indian Succession Act, 1925, along with a notarised indemnity bond

Legal Heirship Certificate or its equivalent, along with a notarised indemnity bond

Along with this, a No Objection Certificate from all non-claimants, duly attested by a notary public or gazetted officer will also be needed. 

As for what a verifiable death certificate means, it means either the original death certificate; or copy attested by a nominee subject to verification with original, or copy attested by notary public or gazetted officer, or death certificate with QR code. 

Also, the legal heirship certificate will only be valid if it is issued by a revenue authority not beneath the rank of tehsildar. 

What happens if the investor dies outside of India? 

When an investor dies outside India, the death certificate comes from a foreign authority. Currently, entities accept a certified copy of that document if it has been verified through one of three modes:

By a Court Magistrate, Judge or Notary Public in the country where it was issued

By the Indian Embassy or Consulate General in that country

Through an apostille (a certificate that authenticates the origin of a public document, can only be issued for documents issued in one country party to the Hague Apostille Convention). 

SEBI is proposing to add two more options to this list: certification by authorised officials of overseas branches of Scheduled Commercial Banks registered in India, and certification by authorised officials of any foreign bank.

What will the processing timelines be?

Once a family submits all required documents, the entity has 21 calendar days to process the transmission claim. If the claim is delayed or rejected, the entity must inform the claimant in writing, with reasons. If the delay is the entity's fault, SEBI may take regulatory action. 

When documents are first submitted, the entity must acknowledge their receipt and flag anything that is missing, incomplete or incorrect at that point itself, not later. Once all documents are in order, a second confirmation must be issued to the claimant that the claim is now being processed.

Entities may also offer an online submission facility with a claim tracking option. Any deviation from SEBI's prescribed procedure must be communicated to the claimant in writing, within a specified time.

The deadline for public comments on the transmission paper is April 2, 2026. The nomination paper closes April 7, 2026, so nothing is final yet. SEBI has diagnosed the problem correctly. Whether the cure holds depends on what gets finalised, how consistently it is implemented, and whether the entities processing these claims follow the rules. For bereaved families, the difference between a good regulation and a good outcome has always lived in that gap.

We were told withdrawals through UPI, faster settlements, and no more endless paperwork. Months later — nothing has changed.

An RTI revealed ₹340 crores spent on the EPF website… and it still barely works. Two portals, constant errors, and zero reforms. Is this how we treat India’s retirement savings system?

It’s time for real reform, not just announcements.

Kotak Mahindra Mutual Fund has launched the Kotak Quality Overseas Equity Omni FOF, a new fund offer (NFO) aimed at providing Indian investors access to high-quality global companies through a fund-of-funds structure. The NFO is open from 6th March to 20th March 2026 and will invest in overseas equity mutual funds and ETFs that follow a quality-focused investment strategy.

In a recent interview, Kotak Mutual Fund CEO Nilesh Shah said the AMC currently has an ₹800 crore limit left for the new feeder fund. He stressed the importance of geographical and commercial diversification for long-term investors, noting that offshore investments, particularly in deep-tech sectors, can offer unique opportunities.

Could you tell us more about this fund?

There’s value in geographical diversification, such as offshore investments. For an ordinary investor, it may be difficult to diversify across everything, especially if the investment size is limited.

We often have dreams of traveling abroad for vacations, sending children abroad for education, or even seeking medical treatment overseas. Having a separate investment pool to manage these aspirations makes sense. 

Geographical diversification is also critical, especially considering our regional neighbors, with whom we don't always have the best relationships. A low-probability, high-impact event could affect us, and having geographical diversification in place could help mitigate such risks.

From a commercial diversification standpoint, there are companies like Amazon, Google, and Nvidia, which are not present in India. So, when combining aspirations, geographical diversification, and commercial diversification, it makes sense to invest in offshore asset classes.

The underlying fund is tech-focused, but there are concerns about the valuations of tech companies. How do you address those concerns?

Despite concerns over tech valuations, the focus is on investing in companies that are not available in India, especially in deep tech. While we are strong in services, we lack strong representation in product-based technology. So, this investment offers both geographical diversification and exposure to unique companies.

We are not the right people to take a call on valuations. Despite doing due diligence, we have faced situations where our decisions did not work as expected. For example, our global innovation fund did not perform well in the first 2-3 years after launch.

On the other hand, other funds, like the Pioneer Fund, which invests both in India and globally, have performed well. The decision to invest in this particular fund is based on the pedigree of the fund manager and the process they follow. The fund is from GMO (Grantham, Mayo, Van Otterloo & Co. LLC), a respected fund house with a value-oriented investment process, and it has a strong long-term track record.

This fund isn’t suitable for every investor. If you’re looking to travel abroad next year, this isn’t the fund for you. But if you have long-term goals, such as sending someone abroad in five years, this could be a good option.

Why not just invest in the MSCI World Index as a passive fund?

While a passive fund like the MSCI World Index might seem like a simple solution, it comes with limitations. ETFs have their limits because they are packed, whereas active funds have no such limitations. Managing a passive fund is not easy, especially if you're unable to invest in a fund of funds structure. You would have to manage everything yourself, which presents challenges like execution, taxation, and registration issues.

In our experience, managing a passive fund across multiple markets is complicated, especially when it comes to FPI (Foreign Portfolio Investor) registration and other regulatory hurdles.

Additionally, we believe that in today’s complex investment world, it's better to go with a fund manager who can add value. Over the long term, those who have created value with their investment process have been more successful.

Why the focus on quality in the underlying fund?

There are many different stock strategies globally, such as momentum stocks and quality stocks. While momentum and quality stocks are not perfect opposites, their magnitude differs. When you’re starting your investment journey, it’s generally safer to go towards quality rather than momentum. Quality investments tend to be more stable and better for long-term investors.

The expense ratio of the underlying fund is 1%. What is the expense ratio for this fund?

1.59% (Includes the underlying fund)

What is the current limit at AMC level for feeder funds?

The limit for the fund changes daily based on subscriptions and redemptions in other funds. At the moment, the limit is around ₹800 crore, which is quite substantial.

Any plans regarding the GIFT City?

Yes, we have set up our office in the GIFT City, and a team is now functional. We recently held the branch inauguration ceremony. We're looking to launch a fund from that entity to manage LRS (Liberalized Remittance Scheme) money that can be invested abroad. We're also considering carrying feeder funds into our fund from this entity.

You have spent 30 years building your wealth, but have you spent 30 minutes deciding who will protect it and how it will be passed on? If your answer is no, you're not alone. Most people haven't. A nomination here, a joint account there, maybe a will. But what if nominations are not timely updated, or the wills get contested? Suddenly, the wealth you built fragments.

Three legal structures do more than just list your assets' names. They hold your wealth intact across generations: a will, a trust, and an HUF. Which one fits your family? Read on.

What is a will? When does it work best?

A will is a legal document in which you state how you want your assets distributed after your death. It has no legal effect while you are alive — it only kicks in after you are gone. While not compulsory, a recent SC judgement has highlighted that getting your will registered gives it a presumption of genuineness, putting the onus to prove that the will is fraudulent on the individual contesting it.

A will works best when your estate is relatively straightforward. Typically, in the case of salaried individuals, there are no HUFs, businesses, or complex assets to bequeath, and you preferably have adult beneficiaries who can immediately manage what they inherit. It also works best if you are someone who wants to retain full control of your assets until you die.

However, if your beneficiaries include minors, if your family relationships are complicated, if you own a business, or if tax efficiency on income from assets matters to you, a will alone is not enough. That is where a trust, an HUF, or a Section 8 company can come in.

What is an HUF? When does it work best?

A Hindu Undivided Family is a distinct tax entity that can be utilised by Hindu, Buddhist, Jain, and Sikh families to reduce the tax liabilities of individual family members. It works best in cases where the family lives together and jointly holds ancestral property or income, and members have significant individual income of their own.

Says Kunal Savani, Partner, Cyril Amarchand Mangaldas: "Typically, HUFs are best for the joint Hindu families with ancestral properties or gifted assets when family members have high personal income, and the HUF income qualifies for certain deductions or lower tax liability."

The HUF can own property, run a business, invest in mutual funds, and even receive gifts. As for income tax benefits, the annual income of the HUF is tax-exempt until Rs 2.5 lakh (old tax regime) and Rs 3 lakh (new tax regime).

The deductions available to an HUF mirror those available to individuals under the old regime, such as Section 80C, which allows up to Rs 1.5 lakh for HUFs' investments in life insurance, PPF, NSC, ELSS, tuition fees, and home loan principal repayment; and Section 80D, which covers health insurance premiums for HUF members (Rs 25,000 for members below 60 and Rs 50,000 for those above 60), with an additional Rs 5,000 within these limits for preventive health check-ups.

Similar to individual taxpayer deductions under the old regime, if a senior citizen HUF member has no health insurance, medical expenditure up to Rs 50,000 is also deductible. Section 80TTA also allows a deduction of up to Rs 10,000 on HUFs' savings account interest, and Section 24(b) permits the full actual interest paid on a home loan for HUFs' let-out property with no upper cap.

However, under the new default regime, none of the Chapter VI-A deductions apply. HUF can only claim a deduction under Section 24(b) for a let-out property.

The head of the HUF is called the 'Karta' and is typically the senior-most member of the family. The other members are called coparceners, and they have a birthright share in HUF property.

Savani highlights that while forming HUFs promotes a legitimate split in the tax liability, there still exist challenges like the clubbing of taxes, compliance, non-alignment of coparceners for establishing such an HUF, the role of the Karta, and partition risks. Notably, once a partition takes place, the HUF dissolves. The Supreme Court also recently ruled that after joint family properties are partitioned, the shares received by each party become their self-acquired property, and the owner does not need anyone's approval to sell, transfer, or bequeath it. 

What happens to the HUF if Karta dies?

Explains Keshav Singhania, Head, Private Client, Singhania & Co., "Upon the demise of the Karta of a Hindu Undivided Family (HUF), the role is ordinarily assumed by the senior-most coparcener in the family. Under Hindu law, only a coparcener is eligible to act as the Karta of an HUF."

However, the new Karta needs to inform the relevant authorities, like the Income Tax Department, banks, etc., about his being the new Karta of the HUF. Alternatively, on the death of a Karta, an HUF can be dissolved by preparing/executing a 'partition deed' amongst all the coparceners of an HUF.

Though, as Singhania suggests, under Hindu law, both partial partitions and complete/full partitions are allowed. "The income tax laws only recognise a complete or full partition to consider an HUF as dissolved, the reason being that in case of a partial partition, the HUF continues to be in existence as a person, rendering it a tax assessee," he adds.

The division of assets does not necessarily have to be in equal proportions. If all members of the family mutually agree, the assets may be distributed in unequal shares as part of the arrangement. Once a full partition of the HUF has been completed, it is important to formally record this with the tax authorities. An application should therefore be submitted to the Assessing Officer, requesting that an order be passed acknowledging that a full partition of the HUF has taken place. This ensures that the partition is recognised for income tax purposes.

What is a trust? When does it work best?

A trust is a legal arrangement where you transfer ownership of assets to a trustee, a person or institution, to hold and manage those assets for the benefit of your chosen beneficiaries, on terms you set out in a trust deed. Unlike a will, a trust can take effect during your lifetime, does not go through probate, and is significantly harder to contest.

Savani notes that trusts are good for having flexible control of the assets, succession planning, and/or for ring-fencing the family wealth from any potential family disputes and personal risks. You can also opt for a Section 8 company, but it is best suited for charitable purposes with specific goals and not for personal wealth or family tax planning.

A will and a trust are not competing. They are complementary.

In case your estate is relatively modest, a will is often the most practical and cost-efficient way to set out how those assets should be distributed. But the two instruments need not be alternatives. They can work together.

As per Singhania, "A will and a trust can also operate alongside one another. For instance, if certain assets are not transferred to a trust during a person's lifetime, they may still be subject to probate upon death. In such circumstances, a will ensures that these remaining assets are distributed in accordance with the person's wishes."

"Using both instruments can therefore provide a more comprehensive framework for estate planning. While a will acts as a safety net for assets that do not form part of the trust, the trust structure can help facilitate smoother asset management and transfer, potentially reducing administrative complexities and allowing for a greater degree of privacy in the handling of the estate," he adds.

In fact, Singhania suggests that a testamentary trust, a trust formed through testamentary instruments such as a will, is a middle ground that amalgamates the solutions extended by both a will and a trust. A testamentary trust takes effect only upon the death of the testator, and the deceased's estate is bequeathed to such a trust via a will. In this case, the testator provides directions in their will for a designated executor, outlining how their assets are overseen by trustee(s) and distributed to beneficiaries.

"For structuring your wealth for post-death protection, wills mainly help in hassle-free distribution of the self-acquired assets, but trusts/HUFs also provide for smooth transfer of ancestral properties. One can consider setting up a private trust (determinate & irrevocable) for having the assets settled for the lifelong care of beneficiaries, including a disabled child, post the death of the parents," says Savani.

Which structure is right for you? A quick guide

No single structure fits every family. If you are a salaried individual with a straightforward estate and adult beneficiaries, start with a will. If your family has ancestral property, high individual incomes, and members willing to function as a unit, an HUF can reduce your tax burden significantly. If you want control over how and when beneficiaries receive assets, need to protect wealth from disputes, or are planning for a dependant with special needs, a trust or a combination of a will and a trust is the stronger choice. And if your goal is channelling wealth toward a social cause with structure and accountability, a Section 8 company is the right vehicle.

For NRIs, a trust is a better structure. An NRI cannot be a Karta of an HUF, though they can remain a coparcener and retain their rights in the HUF. If the existing Karta of an HUF becomes an NRI, it does not dissolve the HUF. But the tax impact on HUFs is decided based on whether the control or management of their affairs is being undertaken from India or abroad. So, if the karta, who is at the helm of managing the HUF's affairs, becomes an NRI, it could significantly impact the HUF's tax status. 

On wills, NRIs holding assets in India are advised to have a separate Indian will for Indian assets and a separate will in their country of residence for assets held abroad, since a single will trying to cover both jurisdictions can create legal complications during execution. Hence, trusts are increasingly the structure of choice for NRI families with significant India-based assets as well, particularly because they allow a resident trustee to manage assets on behalf of beneficiaries living abroad and can be structured to handle both Indian and foreign assets with clarity. However, one must keep in mind FEMA regulations govern how NRIs can hold, transfer, and repatriate assets in India

Have a child with special abilities? A trust works better

Experts recommend establishing a private trust to protect assets for a child who, due to disability, may be unable to manage finances independently. Through such a structure, assets contributed by the parents are held and managed by a trustee, while the child is named as the beneficiary. The trustee's responsibility is to safeguard the assets and ensure that any income generated is used for the child's benefit.

In this case, parents may also choose to act as the trustee during their lifetime and appoint other family members, trusted individuals, or professionals as co-trustees or successor trustees. This ensures that the trust can continue to function if you are no longer able to act in that role.

Singhania states that to ensure smooth functioning, "The trust deed should clearly set out how the trustees must manage the assets." For example, limiting investments to relatively safe options and directing that the income be used for your daughter's medical and personal needs. Also, assets may be transferred to the trust during the parent's lifetime or through a will, depending on what is most appropriate in your circumstances."

In short, a will tells people what you want after you're gone. A trust makes sure they get it. An HUF keeps the family's income together. A Section 8 company gives your wealth a purpose beyond the family. None of these structures is complicated to understand, but what is complicated is doing nothing and leaving your family to figure it out after you are gone. The best time to choose the right structure was ten years ago. The second-best time is now.

Imagine two investors. One has ₹5 lakh invested, roughly a few months of income. The other has ₹2 crore, built patiently over decades and meant to support their future. If markets fall 30%, both portfolios drop by the same percentage. But the experience is very different. Losing ₹1.5 lakh is uncomfortable; losing ₹60 lakh can feel devastating.

You may soon be able to build your retirement nest egg in dollars and invest it across global markets, all from India’s offshore financial hub. The International Financial Services Centres Authority (IFSCA) is set to roll out a new pension framework at GIFT IFSC that will allow NRIs, PIOs and even resident Indians (via LRS) to invest in globally diversified, USD-denominated retirement products. 

In an interaction with Thefynprint, Mahipal Shetty, Executive Director at IFSCA, explains how the new regime will work, who can launch products, what investment flexibility fund managers will have.

Q: What new pension framework is being introduced at GIFT IFSC?

A: With the new pension fund regulations, which have been approved by the IFSCA Board and are awaiting Gazette notification, pension will become a distinct and strong pillar within IFSC. Given the long-term nature of retirement savings, pensions naturally complement the other three verticals.

Q: How will the structure work?

A: Pension Fund Manager (PFM) will manage the scheme. Individuals will be subscribers and participation is voluntary.

Eligible subscribers include Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and resident Indians investing under the LRS route.

Q: Will there be separate pension plans for NRIs/PIOs and resident Indians?

A: Yes, products will be different. All schemes will be USD-denominated, not INR.

They are not meant to compete with domestic pension products but to complement them. There will be separate schemes depending on what each Pension Fund Manager proposes and gets approved under the regulatory framework.

Q: Who can launch these pension offerings and what are the eligibility criteria?

A: Only entities registered under IFSCA’s dedicated pension regulations will be allowed to launch these products. These rules are separate from the existing Fund Management Entity (FME) framework and are awaiting formal notification.

To qualify, an applicant must have a minimum net worth of USD 1 million, which must be maintained at all times. In addition, the entity should have at least 10 years of experience in pensions or related areas such as life insurance annuity products, retirement-focused financial services, or similar long-term investment businesses.

The idea is to ensure that only experienced and credible players manage what is essentially a long-term retirement product, especially in the initial phase.

Q:What about existing FME licence holders who already meet the net worth requirement?

A: The USD 1 million requirement must be earmarked specifically for the pension fund activity.

Within the same legal entity, pension can be undertaken as an additional activity. However, operations must be ring-fenced. That means separate staff and clear operational separation for the pension business. Separate physical space is not mandatory, but functional segregation is.

Q: How will contributions work under this pension plan? Are there any minimum or maximum limits?

A: The regulations do not set any fixed minimum or maximum contribution amounts. Since the scheme is voluntary, IFSCA has chosen not to be overly prescriptive.

Instead, pension fund managers will decide the contribution structure based on their target investors, whether NRIs, PIOs or resident Indians, and lay it out in their Scheme Information Documents (SIDs). IFSCA will review these to ensure basic prudential safeguards and investor protection.

Q: Where can these pension funds invest, and how does this differ from NPS?

A: Equity exposure can go up to 100% of the portfolio. Within equities, there will be sub-limits across large-cap, mid-cap and small-cap segments to manage risk, especially in the early phase. 

For global equity exposure, up to 100% is allowed, with geographical caps, up to 50% in the US as the largest investable market, and lower caps for other geographies, typically around 20% per country.

Debt exposure can also go up to 100% if a fund manager chooses a debt-only strategy.

Alternatives, such as private equity, venture capital, REITs and commodities, are permitted up to 15% of the overall portfolio. Within that 15%, no single alternative asset class can exceed 5%.

This means fund managers can design 100% equity schemes, 100% global schemes, or 100% debt schemes, subject to prudential caps on alternatives and geography.

Q: Can investors decide their own equity and debt allocation, like in NPS?

A: It will depend on how each pension fund manager designs its scheme. Some may offer multiple allocation choices, while others may run a single investment strategy.

Q: What is the vesting and withdrawal framework?

A: The vesting period is 10 years. Subscriber then becomes eligible for withdrawal. There is also a six-year reference in the regulations as a normal post-vesting period, depending on how the scheme is structured.

The maximum continuation age is 75 years, with or without continued contributions.

At or after vesting, the subscriber must opt for a Systematic Withdrawal Plan (SWP). Broadly, around 80% of the corpus is intended to be drawn down through SWP, while up to 20% may typically be taken as lump sum, subject to the scheme structure.

Q: Will subscribers have the option to buy an annuity?

A: Not for now. The pension product will offer payouts only through a Systematic Withdrawal Plan (SWP).

In India, life insurers can currently only offer annuities under existing laws. Allowing pension fund managers at IFSC to provide annuities would require legal changes, which are not yet in place.

Q: Will the same pension scheme apply to both residents and NRIs? Can the money be invested in India and abroad?

A: No, there will be separate schemes for residents and NRIs/PIOs. Their funds cannot be mixed, mainly for regulatory and compliance reasons.

A resident-focused scheme will typically invest outside India, in line with the Liberalised Remittance Scheme (LRS) and IFSC’s offshore nature. An NRI scheme, on the other hand, can invest in both Indian and global markets, subject to limits.

If a subscriber’s residency status changes, they can continue in the system, but their investments may need to be shifted to the appropriate scheme.

Portability is also planned. Investors will be able to move their corpus from an IFSC pension product to the National Pension System (NPS). The reverse move, from NPS to IFSC, is being considered, though the details are still evolving

Q: What about taxation during accumulation and withdrawal?

A: Taxation is not yet finalised. We are proposing that IFSC pensions receive treatment similar to NPS or long-term mutual fund investments. However, the final decision rests with the Government and revenue authorities.

Q: Is there any health insurance feature linked to the pension product?

Despite the mutual fund industry hitting its collective limit of USD 7 billion there are some feeder funds with individual limits left. The list is less than ideal compared to the range of ETFs available in the US market if you open a US broking account. However, for those who do not want the hassle of LRS, we decided to dive into the feeder fund list as it stands. After eliminating Edelweiss funds for their ₹5,000/day SIP cap, removing Franklin for its deeply disappointing US Opportunities performance, and setting aside high-correlation US-focused schemes that offer no real diversification from your existing Indian equity, three names emerge from the overseas feeder fund universe. This is not a buy list. It is a starting point for serious due diligence.

Why these three, and not the obvious US funds?

Passive funds tracking the Nasdaq have either a cap (such as the Rs 2 lakh cap in ICICI Nasdaq FoF) or they often trade at a premium (as is the case with Motilal Nasdaq ETF). Within the active and open fund universe these funds have built a reasonably good track record. Also, diversification has to mean something. The three funds above have correlations ranging from -0.1 to 0.6 with Indian indices. That is a meaningfully different risk profile.

Axis Global Equity Alpha 

This is the only fund in the shortlist with a credible 5-year track record that holds up under scrutiny. A 5yr CAGR of 16% against a volatile global backdrop — including the 2022 rate shock that crushed most global equity funds — is genuinely impressive. The 3yr return of 22% shows consistency, not a one-year spike driven by a single macro tailwind.

The correlation of 0.6 with Nifty is moderate. Not as clean a diversifier as the EM funds below, but the trade-off is quality and consistency of returns. Axis runs an active global mandate here, and unlike their domestic funds which have faced headwinds, this one has navigated multiple cycles. The expense ratio is on the higher side for a feeder, so keep watching whether alpha justifies the cost as the fund ages.

The underlying fund is the Schroder ISF Global Equity Alpha. It runs a high-conviction portfolio of 40–60 stocks, unconstrained by benchmark, region, or sector. The philosophy is built around what Schroders calls the “growth gap” — the persistent tendency of markets to under-price companies whose earnings growth will exceed consensus expectations. Do note though that the portfolio is largely dominated by US tech stocks.

Also worth noting: Axis MF itself is about 25% owned by Schroder Singapore Holdings, which means the feeder-underlying relationship here is closer and more operationally integrated than most comparable arrangements in the Indian market.

The underlying fund, Schroder ISF Global Equity Alpha, is managed with a high-conviction portfolio of 40-60 stocks, unconstrained by region, benchmark, or sector. According to Axis AMC, the fund focuses on identifying companies that are underpriced relative to their expected future earnings growth, a strategy that has proven successful in navigating different market cycles. However, it's worth noting that the portfolio is heavily dominated by US tech stocks, including major players like Alphabet Inc., NVIDIA Corp., and Microsoft Corp.

In their response, Axis AMC emphasized the fund’s ability to deliver long-term capital appreciation, particularly with an active, unconstrained approach to investing. They also mentioned that the fund considers environmental, social, and governance (ESG) factors, which could add another layer of appeal for socially conscious investors.

PGIM India Emerging Markets 

A Nifty correlation of 0.4 is the second-lowest in the eligible universe after Franklin Asian Equity — and we have already explained why Franklin does not make the cut. PGIM's parent, Prudential Financial, runs one of the world's largest dedicated EM investment operations. When you invest in this feeder, you are accessing that infrastructure at a retail ticket size.

The honest caveat is the 5-year return of just 2%. Emerging markets had a genuinely brutal 2021-2023 period — China's regulatory crackdowns, dollar strength, and geopolitical risk all hit simultaneously. The 3yr recovery to 24% and 1yr surge to 33% suggest the cycle is turning. But buy it for the diversification, not because you think EM will replicate last year's returns every year.

The PGIM SIP cap of ₹5 lakh per month per PAN is generous enough for most investors to build a meaningful position systematically.

The underlying fund is PGIM Jennison Emerging Markets Equity Fund. The strategy runs a concentrated portfolio of 35–45 stocks, entirely benchmark-agnostic in terms of country, sector, and market cap. The investment thesis is straightforward: identify companies in early-stage earnings acceleration within emerging markets — businesses driving structural shifts in their industries or riding secular demand curves that are underappreciated by consensus. Portfolio managers Mark Baribeau, Albert Kwok, and Sara Moreno collectively bring decades of dedicated EM experience. The high active share this generates — a natural consequence of 35–45 stock concentration — means the fund will look nothing like its MSCI EM benchmark in any given year. This is both an opportunity, and a risk.

PGIM India AMC highlighted the fund's strategy of identifying companies in early stages of earnings acceleration, providing investors with exposure to businesses driving structural shifts in their respective industries. With top holdings including Taiwan's TSMC, China's Tencent, and South Korea's Samsung, the fund offers solid exposure to leading emerging market companies.

PGIM's investment strategy has seen some setbacks, notably the underperformance over the past five years, where the fund posted only a 2% return. However, the recent rebound suggests that the fund could be poised for stronger returns going forward, especially for those looking to diversify into emerging markets.

Kotak Global Emerging Market 

The lowest correlation in the shortlist — 0.1 with Nifty, -0.1 with BSE 500 — makes this theoretically the most powerful diversifier of the three. And that 48% 1-year return will catch your eye. The 3 year return of 21% is also quite impressive and it manages to hold up at 7% even for a 5 year period, weathering the worst of the emerging market (mostly China) correction of 2021 quite well. The underlying fund is the CI Emerging Markets Fund. 

What investors should keep in mind

All three funds operate within the RBI's overseas investment cap framework. They can intermittently close or restrict fresh inflows if the industry-wide limit tightens further — this has happened before and could happen again. Check subscription status before placing orders. Invest in a basket of 2 out of the 3 funds if you are unable to decide between them. You can pair Axis (with its heavy US tech exposure) with one of the EM funds – Kotak or PGIM. Out of the two, Kotak has held up better over a longer timeframe. 

Tax treatment for feeder funds follows residual fund taxation — gains taxed at slab rate before 2 years and 12.5% after 2 years. Finally, none of these funds is a substitute for direct LRS investing or GIFT City routes if your ticket size justifies it. At larger allocations, the combination of lower cost and wider investment flexibility through direct overseas brokers often makes more sense. These feeders work best for investors who want managed global exposure within a familiar Indian mutual fund wrapper — without the compliance overhead of foreign account reporting.

The bottom line: Own Axis Global Equity Alpha as your core global feeder. Add Kotak Global EM as your diversifier. Watch PGIM Emerging Markets before committing.