Three fund houses have decided to roll-over their existing schemes having a maturity of over a year.
In a bid to provide relief to investors who had invested in FMPs having tenure of 12 to 18 months and affected due to the new tax regime of debt mutual funds, some fund houses have decided to roll-over their FMPs.
Three fund houses – HDFC, L&T and ICICI Prudential have proposed to extend the maturity of their FMPs having maturities over a year. These fund houses have decided to roll-over in such a way that it would mature just after three years, giving benefit of indexation to the investors. Meanwhile, SBI MF is also planning roll-over of its FMP.
While HDFC Mutual Fund has proposed to roll-over HDFC MF FMP 371 D to 763 days extending its maturity to August 31, 2016, ICICI Prudential Mutual Fund has decided to extend the maturity period of ICICI Prudential Fixed Maturity Plan - Series 68 - 368 Days Plan G to 743 days. The revised maturity date of the latter scheme would be August 2, 2016.
Similarly, L&T Mutual Fund has proposed to roll-over its L&T FMP – VII (February 511D A) for a further 678 days. In its addendum, the fund house said, “In light of the current business and operating environment, it is proposed to roll-over the investments made under the scheme for a further 678 days i.e. the scheme will now mature on May 30, 2016. As a result of the aforesaid roll-over, the new name of the scheme will be L&T FMP VII (July 1189D A) and all other terms and conditions of the scheme shall remain unchanged.”
The collective AAUM of these three schemes is Rs.1,376 crore as on June 2014.
SEBI rule allows fund houses to roll over their close ended schemes if they get investors consent. Investors who don’t want to continue with the scheme can redeem their investments at the prevailing NAV. However, AMCs need to maintain 20-25 rule (minimum of Rs.20 crore and 25 investors). A compliance officer from a large fund house confirmed that investors would not suffer any tax consequences if they agree to continue with the existing scheme.
“Though the fund houses are allowed to extend the maturity period of schemes, many fund houses didn’t prefer to utilize this facility due to operational constraints. Instead, AMCs preferred launching a new FMP which coincides with the maturity period of a few FMPs. Now, since the tenure of long term capital gain in debt mutual fund has increased from 12 months to 36 months, AMCs are keen to roll-over their schemes,” says a national sales head of foreign fund house.
DP Singh, Chief Marketing Officer, SBI Mutual Fund told Cafemutual that his fund house is also going to roll-over a few schemes having maturity of over a year. “I believe all AMCs will roll-over their FMPs. This will give an opportunity to investors to extend their holding without attracting any short term capital gain tax. Also, it helps them to take benefit of indexation after three years. As a result, the actual tax outgo will reduce to a greater extent,” he added.
Suresh Sadagopan of Ladder7 Financial Advisories is of the view that investors should remain invested in such funds if they can lock-in money for two more years to take indexation benefit. Also, investors should take decision on the basis of performance of the fund, he advised.
However, some advisors have a different view, Hemant Rustagi of Wiseinvest Advisors, “Investor should keep in mind their tax slab and time horizon before taking any decision. If an investor falls under 10.30% tax slab, it doesn’t make sense to continue with such scheme. Another factor is time horizon. Investing money just to save tax is not a good idea. Investors should understand that if they remain invested in such schemes, the money will get locked-in for two more years.”
