Meghna Barik, Pune
In a recent move, DSP Mutual Fund has temporarily restricted subscriptions to seven of its schemes that hold international assets in their portfolios. The affected schemes include DSP Global Innovation Fund of Fund, DSP Global Clean Energy Fund of Fund, DSP World Mining Fund, DSP World Agriculture Fund, DSP US Flexible Equity Fund of Fund, DSP Global Allocation Fund of Fund, and DSP World Gold Fund of Fund.
This development comes in response to regulatory guidelines set by the Securities and Exchange Board of India (SEBI) and is aimed at ensuring compliance with the overseas investment limits imposed on mutual funds. These funds, which invest in foreign assets such as equities, bonds, or gold on behalf of Indian investors, are subject to an industry-wide limit for overseas investments. SEBI’s regulations, introduced on February 2, 2022, cap the industry’s overseas investment at $7 billion and set a $1 billion limit for investments in overseas Exchange Traded Funds (ETFs).
In June 2022, the Association of Mutual Funds in India (AMFI) advised mutual fund houses to resume investments in overseas funds and securities within the limits available as of February 1, 2022. However, in March 2024, both SEBI and AMFI issued directives mandating fund houses to temporarily halt subscriptions to schemes investing in overseas ETFs effective April 1, 2024, to prevent breaching the prescribed limits.
As a precautionary measure to comply with these guidelines, DSP Mutual Fund has implemented temporary restrictions. As of October 1, 2024, any new lump sum subscriptions, switch-ins, or registrations for SIP (Systematic Investment Plan), STP (Systematic Transfer Plan), or IDCW (Income Distribution cum Capital Withdrawal) transfers in the affected schemes are being halted. However, existing SIP/STP instalments will continue uninterrupted until further notice.
Additionally, the Budget 2024 introduced new tax regulations for overseas funds. Short-term capital gains (STCG) will now apply for holding periods of up to 24 months and are taxed at slab rates, while long-term capital gains (LTCG) are taxed at 12.5% for holdings beyond 24 months. For foreign ETFs, the LTCG tax rate remains aligned with domestic equity, at 12.5% after 12 months, while STCG is taxed at slab rates.
These adjustments reflect DSP Mutual Fund’s commitment to adhering to regulatory standards while navigating global investment complexities.