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Ajmera Law   →  Indian Taxation
June 2, 2021
June 2, 2021

Global Mutual Funds – Financial Integration

Author By ajmeralawim Categories Global Financial Markets, Global Investing How & why?, Global Mutual Funds, Headlines, World

INTRODUCTION

There has been a paradigm shift in the mindsets of people that have existed for centuries which has switched dramatically. As record-high inflation rates have surpassed, lifestyles that have been built over decades can no longer be sustained by the current existing income levels. Investors today are weighing their alternatives to building a luxurious and comforting lifestyle

Todays’ twenty-first-century Investor is well versed and cognizant about the functioning and performances of markets around the globe. Geographic blockades no longer seem to be a hindrance for pursuing contemporary and advanced investment prospects and for generating exceptional returns for the investors. Investors are now switching to Global Funds, which enables and permits them not only to expand but also diversify their portfolio and invest globally

A Global Mutual fund is one that invests in businesses all over the world, including those in the investor’s home country. It aims to find the best investments for the investor from a large pool of securities around the world. A global fund can be either engaged in a single asset class or can be spread over many.

Structure of Global Mutual Funds

  • Direct Investment

There are assets that are managed directly by a local fund manager. Rather than relying on an offshore investment manager, the local fund manager ensures that your portfolio is well-managed and orchestrated

  • Indirect Investment   

They are referred to as Feeder Funds which pool money from local investors and then transfer the corpus to the parent fund, which is administered offshore, OR pure fund of funds, which invest the investor’s money in a portfolio of offshore funds,

  • Mix Investment (Foreign + Domestic)

These funds have a mix of both domestic and international mutual funds. As a result, they are a safer option for moderate risk-takers because they have reduced exposure to global equities while keeping an emphasis on the domestic market, which improves and enhances the tax efficiency of the portfolio.

  • Specific Region Investment

While selecting the Global Mutual Funds, the investor can invest in a specific country or region of her/his choice. The Investor needs a thorough understanding of the region/country she/he chooses to analyze the growth potential, returns, and exit at the appropriate time

These funds are more versatile because they are not limited and restricted to a specific region or country and it can provide investors with a more diversified exposure. These are usually managed by Fund managers, who have the requisite skills and proficiency in managing an investor’s portfolio and can identify and analyze prospects from all different parts of the world

  • Specific Theme Investment

These funds invest globally in particular themes or growth prospects. The Investor may invest in minerals, oil, gold, agriculture, mines, and other diverse themes or sectors. These funds are perfect to invest in during a growth cycle because they give investors access to segments that aren’t present in the domestic market. But the Investor must make that their portfolio isn’t overburdened by these types of assets, as limited exposure to a single theme will put investors at risk

Why Invest in Global Mutual Funds?

Diversification and Growth

It helps the investor to spread their Investment Portfolios among various foreign companies, markets, and securities in addition to their home country’s, as Global Mutual Funds invest into a wide range of securities in different parts of the world in different industries giving the Investors’ diversification in multi-folds (geographical, currency, industry). As a result, the risks that the volatility of a single security or the uncertainty in a single country or currency would have an adverse impact on the portfolio’s overall performance are reduced.

Hedge against Currency 

When we look at the rupee’s pattern in relation to the dollar, It is evident that it has just declined greatly. The Indian rupee which was worth Rs. 45 in 2000, is now worth Rs. 75. There are a variety of reasons for this depreciation, varying from global turbulence to growing inflation to venal bureaucracy to poor fiscal policies. Today, Investing in Global funds will help you take advantage of the rupee’s depreciation. By investing in rupees, you gain exposure to foreign exchange as you invest in these global funds. Any increase in the value of the foreign currency, as well as any decrease in the value of the domestic currency, would increase the investor’s returns. Since they offer a hedge against currency fluctuations, they must be included in the Investor’s Portfolio

 Taxation

For tax purposes, all mutual funds that invest in global markets are referred to as Non-Equity funds. As a result, Tax levied on Global Funds are in the following manner:

– The Investor sells the units within three years of the time when she/he bought them, the gains are credited to her/his taxable income and charged according to the slab rate. (Short Term Capital Gains)

The Investor sell the units after three years from the date of acquisition, the gains are levied at a rate of 20%, and indexation advantages (Long Term Capital Gains)

CONCLUSION

Investors should treat global mutual funds as a tactical allocation and keep a close eye on them while they are investing in the same, as the returns from these funds are not necessarily in line with those from Indian Mutual funds. Effectively, once the investor invests in those accounts, be mindful of both the advantages and disadvantages. Begin with small investments to get a better understanding of how those investments function before committing to larger investments in a foreign mutual fund. Invest only after you’ve developed a well-diversified exposure to mutual fund investments in India, and give yourself 5-7 years to do so.

This article is contributed by: Ms. Dishita Sheth, Intern at Ajmera Law Group 

 

 

 

March 23, 2021
March 23, 2021

Indian Supreme Court Prohibits Practice Of Law By Foreign Lawyers/Law Firms In India

Author By ajmeralawim Categories Headlines, Indian Regulatory Updates

Indian Supreme Court Prohibits Practice Of Law By Foreign Lawyers/Law Firms In India

(This judgment has a direct effect on foreign immigration lawyers, immigration consulting firm, and  real estate developers who wish to attract Indian HNI for residency and/or citizenship of respective country) 

The Hon’ble Supreme Court of India recently passed a crucial verdict that foreign lawyers/firms are not entitled to practice law in India either on the litigation or non-litigation side unless they fulfill the requirement of the Advocates Act, 1961, and the Bar Council of India Rules.

This was very high-profile case and global law firms, associations and many foreign entities were involved in this case which went on for 4 years.

This judgment has a far-reaching effect on the immigration industry and in particular Residency and Citizenship by investment practice in India.

As per the judgment foreign law firms/companies or foreign lawyers do not have an absolute right to practice law in India and they will be governed by the code of conduct applicable to the legal profession in India.

One of the arguments made was that lawyers means who are arguing cases before court, but the Supreme court made it clear that practicing of law includes not only appearance in courts but also giving of opinion, drafting of instruments, participation in conferences involving legal discussion. This regulatory mechanism of India for the conduct of advocates applies to non-litigation work also.

The Advocates Act of India 1961 and the Scheme in Chapter-IV of the Act makes it clear that advocates enrolled with the Bar Council of India “alone” are entitled to “practice law”, except as otherwise provided in any other law.

This means if any person or company or entity in India if is involved in the practice of giving advice of law whether foreign or local law are not entitled to do the same unless they are having license to practice as a lawyer in India and regulated by the Bar Council of India.

In my opinion, immigration agents and consultants in India who are not licensed and regulated and if they are giving legal advice of foreign immigration law are in violation of the Advocates Act of India.

Further observation and clarification made by the supreme court are more crucial.

  • First observation made by the court was, the prohibition not only applicable to any “person in India”, other than advocate enrolled under the Advocates Act, but certainly applies to any “foreigner” also.

 

  • Visit of any foreign lawyer on fly in and fly out basis may amount to practice of law if it is on regular basis. A casual visit for giving advice may not be covered by the expression ‘practice’. This means if the foreign lawyer is visiting in India on a regular basis to give advice to clients in India is likely to be in violation of the Act and subject to prosecution.

 

  • The third and final remarks made by court say all “If in pith and substance the amount of the service to practice of law, the provisions of the Advocates Act will apply and foreign law firms or foreign lawyers will not be allowed to do so.”

In view of the above, not only foreign lawyers but Indian or foreign immigration firm and companies,  registering as a company India and establishing the presence in India and if giving and advise on foreign or Indian law inducing immigration law are also in violation of the Advocates Act of India and subject to prosecution.

Based on this judgment, central bank of India including, the Reserve Bank of India (RBI) also came out with a special notification

“Establishment of Branch Office (BO) / Liaison Office (LO) / Project Office (PO)
or any other place of business in India by foreign law firms” which provided as follows.

  • No fresh permissions/ renewal of permission shall be granted by the Reserve Bank/ Indian banks to any foreign law firm for the opening of the Liaison Office in India.

 

  • The Hon’ble Supreme Court has while disposing of the case, held that advocates enrolled under the Advocates Act, 1961 “alone” are entitled to practice law in India and that foreign law firms/companies or foreign lawyers cannot practice the profession of law in India.

As such, foreign law firms/companies or foreign lawyers or any other person resident outside India, are not permitted to establish any branch office, project office, liaison office or another place of business in India for the purpose of practicing the legal profession.

 

In view this all Banks in India are directed not to grant any approval to any branch office, project office, liaison office or other place of business in India under FEMA for the purpose of practicing legal profession in India.

  • Further, the Indian bank shall bring to the notice of the Reserve Bank in case any such violation of the provisions of the Advocates Act comes to their notice.

The action by the central bank of India is also the first time I have seen and it has a far-reaching effect on residency and citizenship by investment practice in India.

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