Fund houses open up international funds ahead of tax changes

Mirae Asset Mutual Fund and Edelweiss Mutual Fund announce subscriptions for investors to take advantage of recent changes in the tax treatment of debt funds

Debt fund tax rule: Fund houses open up international funds

Mirae Asset Mutual Fund and Edelweiss Mutual Fund have opened some of their international funds for investment through lump sums and switch-in transactions, taking advantage of the recent changes in the tax treatment of debt funds. As of April 1, 2023, gains from mutual funds with less than 35 per cent equity exposure (effectively debt funds, gold funds and international funds), will no longer be subjected to indexation. Instead, all gains will be added to the investor's income in the year of redemption and taxed at their tax slab.

Investors who invest in these funds before April 1 will still be eligible for indexation benefits, regardless of whenever they redeem them. Mirae Asset Mutual Fund has announced subscriptions in a lump-sum manner for several funds, including the Mirae Asset NYSE FANG+ ETF, Mirae Asset S&P 500 Top 50 ETF, and Mirae Asset Hang Seng TECH ETF. Edelweiss Mutual Fund has opened up seven schemes, including the Edelweiss ASEAN Equity Off-shore Fund and the Edelweiss Greater China Equity Off-shore Fund. Existing SIPs and STPs will reopen from March 29, 2023, but fresh SIPs and STPs are not allowed.

What should you do?
Although fund houses have expanded their international offerings and the recent dip in global equities presents an enticing opportunity for investors, rushing to invest in these schemes solely for the purpose of capitalising on a change in taxation is not advisable. Investors should not alter their long-term investment plan based solely on changes in taxation. However, if investors had already planned to allocate funds to international equities within the next four to six months, they may consider taking advantage of the current opportunity, provided they have the lump sum amount readily available.

It's important for investors to resist the urge of 'fear of missing out' (FOMO) and avoid investing solely for the sake of investing. Instead, it's crucial to stick to long-term investment plans and avoid succumbing to impulsive decisions.

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