The key highlight of these amendments is the reinstatement of indexation benefits, which will now apply to these categories.
Additionally, long-term capital gains will only be charged if the funds are held for a specified period, further enhancing their appeal.
To explore the implications of these changes, CNBC-TV18 interviewed Nasser Salim, Managing Partner at Flexi Capital, and Nirav R Karkera, Head of Research at Fisdom.
Their insights illuminate how these amendments could impact the attractiveness of these funds for investors and bring changes for current holders.
Karkera emphasised that a significant development alongside the tax slab changes is the reduction of the holding period required to qualify for long-term capital gains.
He noted that the previous threshold of 36 months for most assets was too lengthy, while a one-year period was too short.
The new 24-month threshold strikes a favorable balance, encouraging investors to hold their investments longer to benefit from a more advantageous taxation regime.
He further explained that this change promotes a strong belief in long-term investing. As a country, it’s crucial to start valuing long-term investments, especially since short-term investments have become quite popular.
The growth trajectory of international funds has been remarkable. In 2024, there are 63 international funds with an asset under management (AUM) of ₹44,059 crore, compared to just 36 such schemes with an AUM of ₹13,143 crore in 2020.
This fourfold increase over five years highlights the growing interest and awareness among investors.
Salim pointed out that one of the significant impacts of the amendments is on international ETFs, which now qualify for long-term capital gains after just 12 months, whereas funds of funds will qualify after 24 months.
This change is expected to attract substantial investments through international routes, particularly into international ETFs. Consequently, stronger interest inflows are anticipated in international ETFs compared to FOFs.
Additionally, the reduction in the holding period is a welcome step that is likely to encourage longer-term investing in overseas markets.
For full interview, watch accompanying video
Also Read | India’s largest MF house launches Innovative Opportunities Fund: Should you invest
