The Securities and Exchange Board of India (SEBI) has issued a new time limit for disclosing mutual fund schemes investing overseas’s net asset value (NAV), effective July 1, 2023. This decision addressed the challenges in computing the NAV for schemes that invest in overseas markets, which arise from variations in time zones and market hours.
Under the new rule, mutual funds must disclose the NAV of all schemes within a given outer time limit. The regulator has set an outer time limit of 9 am on T+1 day to declare NAV for schemes exposed to exchange-traded commodity derivatives (ETCDs) and Fund of Funds (FoFs) schemes.
In addition, SEBI has set a time limit for schemes investing at least 80% of their total assets in permitted overseas investments and index funds and ETFs investing at least 80% of their total assets in permitted overseas investments at 10 am on T+1. Currently, it is limited to 11 pm on T-Day.
All other schemes’ time limit remains unchanged at 11 pm on T day. SEBI has granted permission for schemes that cannot disclose NAV as per the given timeline due to their inability to capture the same-day valuation of underlying investments. Such schemes can reveal NAVs according to the disclosure made in Scheme Information Document (SID), along with reasons for the delay.
It is important to note that the new debt fund tax rule, effective from April 1, 2023, will also affect international mutual fund schemes that are treated as debt funds for taxation purposes and non-equity funds. If debt funds have less than 35% exposure to Indian equities, they will be taxed as per the investor’s tax slab, and gains on investments made on or after April 1, 2023, will be fully taxable.
However, this new tax rule will not affect international funds with more than 35% exposure in equities. Investors need to understand the impact of this change on their investment portfolio, as some international funds have 100% exposure to foreign equities, while some have limited exposure to global equities. The new rule will also affect gold funds, gold ETFs, and fund of funds.
