DSP Mutual Fund has implemented a temporary suspension on specific international schemes to prevent exceeding regulatory limits on overseas investments. To adhere to these regulations, the fund house is currently not accepting lumpsum investments, new registrations for Systematic Investment Plans (SIPs), and Systematic Transfer Plans (STPs) in certain funds.
These funds are:
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
DSP World Mining Fund
Existing SIPs and STPs in these funds will continue as usual.
As a preventive step, this action was taken to prevent exceeding the DSP Mutual Fund level limit as of February 01, 2022. Designated employees must follow clause 6.10 of the SEBI Master Circular when making additional investments, opting for schemes with risk values equal to or greater than the current schemes as per the risk-o-meter.
According to SEBI, the total industry limit for overseas investment is set at US $7 billion and the limit for overseas Exchange Traded Funds (ETFs) is set at US $1 billion. SEBI, in an email dated January 28, 2022, and AMFI, in an email dated January 30, 2022, have instructed Asset Management Companies (AMCs) to temporarily limit subscriptions in schemes that plan to invest in overseas securities starting from February 2, 2022. This measure is to ensure compliance with the industry-wide overseas investment limits allowed by the RBI.
In compliance with directives from SEBI and AMFI via emails dated March 19, 2024 and March 20, 2024 respectively, AMCs have been instructed to temporarily limit subscriptions in schemes investing in overseas Exchange Traded Funds (ETFs) starting April 01, 2024 to prevent exceeding industry-wide investment limits in overseas ETFs.
As a precautionary measure to prevent breaching the DSP MF level limit as of February 01, 2022, temporary restrictions have been implemented by DSP Mutual Fund. Any requests for lump sum subscriptions, switch-ins, new SIP/STP/IDCW Transfer Plan registrations in the DSP Mutual Fund’s international schemes after the cut-off time on October 1, 2024, will not be accepted.
Nevertheless, SIP/STP installments for existing SIP/STP registrations in designated schemes as of October 1, 2024, will continue until further notice.
Union Budget 2024
The Budget 2024 has brought about changes to the tax implications and holding periods for Short Term Capital Gains (STCG) and Long Term Capital Gains (LTCG) in the context of international fund of funds. Under the amended regulations, STCG now requires a minimum holding period of 24 months, with taxes applied at slab rates. On the other hand, LTCG is taxed at a rate of 12.5% if the holding period exceeds 24 months.
Investors are showing increased interest in international fund of funds due to the simplicity and consistency they offer in this investment category, which previously fell under debt funds and were subject to slab rates.
For foreign ETFs, the holding period and tax rate for LTCG mirror that of Indian equities, at 12.5% after 12 months, while STCG is taxed at slab rates.
