Asset management companies (AMCs) have resumed investments in their international funds ahead of new debt taxation rules. While Edelweiss Mutual Fund has re-opened seven international funds for subscription, Mirae Asset has re-opened six overseas funds for lumpsum transactions from March 27 and existing Systematic Investment Plans (SIPs) from March 29. Franklin Templeton Mutual Fund has also started accepting lump sum subscriptions in some of its funds.
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The trigger
This move by the different fund houses comes in the wake of new debt fund rules which will come into effect from April 1, 2023. As per the changes, gains from mutual funds where not more than 35 percent is invested in equity shares of Indian companies will now be deemed to be short-term capital gains w.e.f. April 1, 2023. Also, debt funds held for more than three years will no longer enjoy indexation benefits. Additionally, they won't be eligible for a 20 percent tax rate.
This will be applicable to all debt mutual funds, international funds, gold funds, target maturity funds, fixed maturity plans like Bharat Bonds, as well as funds of funds (FoFs).
Window available till March 31
With only a few days left for the new rule to come into effect, fund houses have opened up subscriptions to maximise inflows. Experts have been asking investors to use this window available till March 31, 2023, to claim indexation and long-term capital gain (LTCG) benefits.
Indexation helps investors to bring down taxes as it calculates the taxes after accounting for inflation.
"With interest rates near peak, it makes even more sense now to deploy monies in debt funds before March 31, 2023," said Arihant Bardia, CIO and Founder at Valtrust while speaking to CNBC-TV18.com.
The tax advantage of debt funds before March 31, 2023
(Source: Arihant Bardia, CIO and Founder at Valtrust. Note: This data is available for representational purposes only)
The push by AMCs
Edelweiss Mutual Fund has re-opened international funds for lumpsum and switch in transactions from March 27. This includes Edelweiss ASEAN Equity Offshore Fund, US Tech Equity FOF, Greater China Equity FOF, Emerging Market Opportunities FOF, Europe Dynamic Offshore Equity, MSCI India Domestic and World Healthcare 45 Index Fund.
Mirae Asset Mutual Fund has allowed lump sum and switch-in transactions with no upper limit in its NYSE FANG+ ETF FoF, S&P 500 Top 50 ETF FoF, and Hang Seng TECH ETF FoF.
"We have opened subscription in lumpsum manner for our three international ETFs and three fund of fund based on these ETFs. The existing SIPs and STPs will reopen from March 29 onwards. Fresh SIPs and STPs will not be allowed. Since we have limited room available to take fresh inflows, these funds are likely to get closed again in future for subscription in order to comply with the current regulatory limit and applicable guidelines for the overseas funds," said Siddharth Srivastava, Head - ETF Product & Fund Manager at Mirae Asset Investment Managers (India) Pvt. Ltd.
Franklin Templeton Mutual Fund, on the other hand, has announced switch-in and lump sum subscriptions in Franklin India Asian Equity Fund, Franklin India Feeder - Franklin US Opportunities Fund and Franklin India Feeder - Templeton European Opportunities Fund.
ALSO READ | Finance Bill 2023: From angel tax to new debt MF rules, know what all changes from April 1
First Published: Mar 27, 2023 10:42 AM IST
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