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Budget 2018
Feb 03, 2018 01:24 PM IST | Source: Moneycontrol.com

This week in MFs: FM proposed 10% dividend distribution tax in equity MF

This move may prompt mutual fund houses to promote growth option of equity mutual funds over dividend option offered by equity schemes.

Himadri Buch @himadribuch


Finance Minister Arun Jaitley proposed in the Union Budget for 2018-19 that mutual fund houses will have to pay a Dividend Distribution Tax (DDT) of 10 percent on dividends declared under equity schemes.

This will make dividend payout and capital gains equitable in terms of tax for equity funds.

Currently, mutual funds already pay DDT of 28.84 percent on dividends declared under debt schemes, while there is no DDT on equity-oriented mutual fund schemes. Also, DDT is not applicable for mutual fund schemes that invests at least 65 percent of its assets in equities.

This move may hit dividend seekers or senior citizens who largely rely on dividends. DDT will reduce the in-hand return to investor, if unit holder opts for dividend options. The fund houses will have to deduct DDT before declaring dividend.

Industry experts said that this move may prompt mutual fund houses to promote growth option of equity mutual funds over dividend option offered by equity schemes to defer the tax liability.

Standoff between SEBI and mutual funds on scheme name change

SEBI in a formal meeting has asked them to drop names like “Prudence” and “Balanced” from schemes which have 65 percent exposure to equities.

Similarly, SEBI has suggested that the word “Monthly” should be dropped from MIPs (Monthly Income Plans). MIPs are hybrid products that invest predominantly in fixed income securities and generally take equity exposure of 10-30 percent.

The market regulator has one more directive for the fund houses. Not more than one scheme of a fund house can have the word “Focussed,” even though the investment philosophy may be ‘focussed’ for all the schemes. For instance: Motilal Oswal Mutual Fund is known for its schemes which has the stamp of ‘Focused’ across most of their funds. For instance, one scheme is ‘focussed’ on 35 multicap scrips. Now the name will have to change.

Edelweiss MF launched a scheme that invests in recently listed and upcoming IPOs

Edelweiss Mutual Fund on Feb 2 launched Edelweiss Maiden Opportunities Fund – Series 1. The fund will remain open for subscription until February 16 and will invest in recently listed companies and upcoming initial public offerings (IPOs).

The three-year, close-ended equity scheme will invest across large, mid and small cap stocks.

The fund will predominantly invest in maiden ideas from recently listed universe, and some portion shall be invested in upcoming listings to capture listing and potential future gains.

Mahindra Mutual Fund seeks SEBI fund nod to launch Rural Bharat Yojana

The open-ended equity scheme will deploy at least 80 percent of its corpus in equity and equity related instruments in companies having exposure towards rural India, while up to 20 percent can be deployed in companies other than having exposure to rural India.

The scheme also has the provision to deploy up to 20 percent in debt and money market instruments collaterised borrowing and lending obligation, reverse repo. It can also invest up to 10 percent in real estate investment trusts and infrastructure investment trusts.

This scheme will be managed by Ratish Varier.

India Union Budget 2018: What does Finance Minister Arun Jaitley have up his sleeve? Click here for live Budget 2018 news, views and analyses.
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