The Parag Parikh Flexi Cap Fund, formerly the Parag Parikh Long Term Equity Fund, with a corpus of nearly Rs 30,000 crore, is a hugely popular mutual fund scheme among Indian investors. The exposure to international equities sets the Parag Parikh Flexi Cap Fund (PPFCF) apart from other plans in the same category.
PPFAS investors are aware that international funds are taxed as debt funds. With the change in the taxation rules of the debt funds, the schemes with exposure to overseas equities will also get impacted. As per the new debt fund fund tax rules, units purchased of any debt fund on or after April 1, 2023 will no longer enjoy indexation benefit on long term gains arising after holding for over 3 years, if the exposure to domestic equities in them is less than 35%.
International funds were always treated as debt funds for tax purposes. Therefore, in the case of international funds holding less than 35% in Indian equities, the short term gains and even the long term gains will be added to investor’s income and taxed fully.
However, as far as PPFCF is concerned, although it has exposure to international equities, it was never considered as an international fund and not taxed as a debt scheme. Going forward, it remains a scheme which will be taxed as an equity scheme.
Parag Parikh Flexi Cap Fund (PPFCF) is an open ended equity oriented scheme with flexibility to invest a minimum of 65% in Indian equities and up to 35% in overseas equity security and domestic debt market securities.
Raj Mehta, Fund Manager, PPFAS Mutual Fund says, “Parag Parikh Flexicap Fund invests at least 65% in domestic equities and hence does not get impacted by this new debt fund tax rule. Given that a maximum of only 35% can be invested in international equities, it will continue to be a classified as an India equity mutual fund and enjoys LTCG concessional tax rate of 10% (above Rs 1 lakh in capital gains in a Financial Year) and STCG concessional tax rate of 15%.”