SEBI’s $7 Billion Mutual Fund Overseas Cap and the PMS Route
Why in the news
Since the mutual fund overseas ceiling has been used up, investors seeking global exposure are looking at portfolio management services (PMS) funded through LRS.
Key facts
- PMS minimum: $75,000 (about ₹66 lakh).
- LRS limit: $250,000 per financial year.
- Example product: Marcellus Global Compounders Portfolio: 75% US, 20% Europe, 5% Canada.
- US sector mix: industrials 39%, technology 26%, financials 11.6%, consumer discretionary 9.5%, healthcare 7.8%.
Why emerging markets are avoided
- Uneven returns over two decades, excluding India.
- Unpredictable regulation, such as China’s crackdowns.
- Indian investors already hold some EM exposure at home.
- Stable, high-quality firms are mainly in developed markets.
How to invest
- Upload ID proof, PAN and a cancelled cheque or bank statement.
- Marcellus opens an account with Interactive Brokers in about two days.
- Remit at least $75,000 via LRS to its overseas pool account.
- The whole process takes about 3 to 4 working days.
Tax treatment
| Item | Treatment |
|---|---|
| Structure | Tax pass-through; liability is the investor’s |
| Dividends | 25% US withholding; taxed in India too, with foreign tax credit under DTAA |
| Capital gains (held over 24 months) | 12.5% LTCG plus surcharge and cess; no indexation |
| TCS | 20% above threshold, proposed to rise from ₹7 lakh to ₹10 lakh; adjustable or refundable |
| Reporting | Schedule FA, Schedule TR, Form 67 |
Exam angle
- Acronyms: PMS, LRS, DTAA, LTCG, TCS.
- LRS annual limit: $250,000.