The Association of Mutual Funds in India (AMFI) is planning to write to Finance Ministry regarding the impact on debt funds after the Finance Bill amendment, sources informed CNBC-TV18. As per the Finance Bill 2023, capital gains arising from debt mutual funds will be classified as only short-term capital gains from April 1, 2023. The government has said that investment in mutual funds where not more than 35 percent is invested in equity shares of an Indian company will now be deemed to be short-term capital gains.
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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.
As of now, debt mutual funds are treated as long-term investments if held for more than three years and taxed at the rate of 20 percent along with indexation benefits or 10 percent without indexation. Those with a holding period of less than three years are taxed according to their tax slab.
The same will be changed from April 1, 2023.
Experts feel that the amendments will impact gold, international funds, and funds of funds.
In an interview with CNBC-TV18, Radhika Gupta, MD and CEO at Edelweiss AMC had earlier said that this news is concerning for investors who have invested their money in these types of funds.
Gupta had expressed her hope that the decision will be re-evaluated in the future, as the effects of this decision may be far-reaching.
This decision will only impact long-term investments in debt funds. Nevertheless, the concern is warranted, as this decision could have a significant impact on the mutual fund industry.
Meanwhile, 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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