I recently started investing in ICICI Prudential US Bluechip Equity Fund, which invests directly in US Stocks, and Franklin India Feeder US Opportunities Fund and JPMorgan Europe Dynamic Offshore Fund, which are feeder funds. All these funds are registered in India with the Sebi and I am also liable to pay capital gains tax in India. I am a resident Indian citizen. I am KYC complaint. My PAN is linked with these funds. My questions are:
- Are investments in these funds regarded as foreign assets?
- Should I disclose to income tax department or the RBI or any other government agency about my investments in these funds or any fund which invests in foreign equity specifically? If so, how to do that?
- What about funds which invest less than 35 percent of their portfolios in foreign equities?
Investments in India-registered funds are not considered as investments in foreign assets. In the direct US equity fund, you are an investor in the fund, which in turn takes exposure to foreign stocks. When you invest via feeder funds, your money is in turn redirected to a foreign fund which invests in stocks. Since these funds are a part of your domestic investment portfolio, you need not make any special disclosures.
From taxation point of view, all funds which directly invest over 65 percent of their portfolios in domestic equities are treated as equity funds and they enjoy concessional rates of capital gains tax. All other funds, including international funds, investing overseas or investing in feeder funds are treated as non-equity funds for taxation purposes. If you hold them for less than three years, your capital gains will be taxed at your slab rate. Long-term capital gains (on units held for more than 36 months) will be taxed at 20 per cent after indexation.
This article was originally published on September 30, 2015.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
