How Are International Mutual Funds Taxed?

 How Are International Mutual Funds Taxed?

Financial planning is essential for anyone who wishes to achieve their life’s financial goals. Be it short term or long term, one needs to plan their investments wisely if they want to taste financial success. It is really difficult to save these days. We are in the digital era where one can purchase everything from cheap to super expensive with just one click. Ordering restaurant meals, booking movie tickets, buying apparels can all be done from the comfort of your smartphone or laptop. In such times, one hardly pays attention to saving or investing. But investing is essential especially because it helps you attain financial freedom in the long run.

A lot of time we find ourselves in a position where our monthly income tends to not suffice our life’s financial goals. This is the main reason why several individuals turn to investment avenues like mutual funds. To achieve long term financial goals like retirement corpus, or a destination wedding for your daughter, buying a weekend home or to build wealth for financial stability one needs to start investing. If you start investing at an early stage in life it may help you get closer to your ultimate financial goal.

International equity funds have been around for a while but they have immediately caught the eye of the Indian investor. Global players are already dominating the Indian market. They have products and services that are far more modern or way better than locals. They have already entered India. There are several products and services that we as Indians consume on a day to day basis. Be it a search engine, a smartphone, an apparel or a home appliance, we consumer brands that are recognised globally. Wouldn’t it be natural for someone to invest in a company whose products or services you have been availing for many years bows? Due to advent in technology and positive progress in investment methods it has made possible for us to invest globally from the comfort of our homes. Now you can invest in your favourite brand’s parent company by investing in global funds. These are funds of fund mutual funds which invest in international funds that invest in international markets.

Most equity funds available for investment in India target funds that invest in US equities. Apart from the USA, Asia and European markets too have some overseas funds directly or indirectly investing in these economies. If you are keen on adding a dash of international securities to your investment portfolio then you can consider investing in global funds. If you have made the decision of investing in these funds then you can consider starting an SIP. A systematic investment plan is an easy and hassle free way to invest in international equity funds.  All you have to do is complete a onetime mandate with their bank following which every month on a fixed date a predetermined cash is debited from your savings account and electronically transferred to the global fund.

How are capital gains from global funds taxed?

Global funds in India are not taxed as equity funds. On the contrary they are taxed as debt funds. This means that if you remain invested in your overseas funds for less than 36 months or three years then your capital gains will be taxed depending on the tax bracket your income falls under. If you hold on to your international equity funds for more than three years then your gains will be charged 20 percent with indexation benefit.

Keeping this in mind investors should decide whether they need to hold on to their global equity funds for the short term or long term. They can also consult their financial advisor for better understanding about taxation on international equity funds.

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