DSP Mutual Fund Temporarily Pauses New Subscriptions to Global Schemes
DSP Mutual Fund has temporarily closed fresh investment into seven of its international schemes that accrue earnings from global assets. These include the DSP Global Innovation Fund of Fund, DSP Global Allocation Fund of Fund, DSP Global Clean Energy Fund of Fund, DSP World Agriculture Fund, DSP US Flexible Equity Fund of Fund, DSP World Gold Fund of Fund, and DSP World Mining Fund.
It is a step in the direction of ascertaining that DSP Mutual Fund adheres to the overseas limits on investment as mandated by SEBI. As per the latest guidelines by SEBI, there is an overall industry limit of US$ 7 billion for overseas investments and US$ 1 billion for overseas Exchange Traded Funds for Indian mutual funds that invest into foreign assets. Since February 2022, such regulations have been undertaken to reduce such expenditure not to surpass the set limits from the Reserve Bank of India.
For FY-2022, The Association of Mutual Funds in India allowed mutual fund houses to increase further investment in overseas funds under existing headroom till 1st February 2022. However, SEBI and AMFI declined the new subscriptions to accept money into schemes, which would make an investment in overseas ETFs from 1st April 2024.
To avoid the breach of these limits, DSP Mutual Fund has placed a ban. From October 1, 2024, no additional new lump sum subscriptions, switch-ins or registrations of the Systematic Investment Plans (SIPs), Systematic Transfer Plans (STPs), and IDCW Transfer Plans with regard to the affected global schemes are accepted. But the current SIP and STP plans will continue because they would not have breached the said limits.
Budget 2024 has altered the tax treatment for an international fund of funds with changes in tax rules. For holding periods of up to 24 months, the capital gain would be considered as STCG and would attract income-tax rates applicable to the slab rates. For LTCG, a tax rate of 12.5% would be applicable for holding periods exceeding 24 months.
Of late, these international funds, especially foreign ETFs, have gained popularity based on simplicity in providing an avenue to investors for tapping global markets along with uniformity of tax.
