SBI Funds Management Limited

About SBI Funds Management Limited

63 55. Changes in tax laws or interpretation of tax laws could adversely affect the tax treatment of mutual fund investments and investor demand for our products. The tax treatment of mutual fund investments is a significant factor influencing investor decisions and product preferences. Currently, equity-oriented mutual fund schemes benefit from favourable tax treatment including long-term capital gains tax of 12.5% (plus applicable surcharge and cess) on gains exceeding INR 125,000 per annum for units held for more than one year, short-term capital gains tax of 20% (plus applicable surcharge and cess) for units held for one year or less, subject to satisfaction of prescribed conditions. Debt-oriented mutual fund schemes purchased up to 31st March 2023 are subject to capital gains tax at applicable slab rates for short-term gains (units held for up to 24 months for unlisted funds and up to 12 months for listed funds) and cess, and 12.5% (plus applicable surcharge and cess) for long-term gains (units held for more than 24 months for unlisted funds and more than 12 months for listed funds). Capital gains on specified mutual funds (i.e., funds having 65% or more allocation in debt and money market instruments or which invests 65% or more of its total proceeds in such specified mutual funds) acquired on or after April 1, 2023, shall be treated as short term capital gains irrespective of holding period and will be taxable at normal tax rates applicable to the investor. Funds other than equity-oriented funds and specified mutual funds (such as multi asset allocation funds or certain conservative hybrid funds or gold/silver funds) are subject to capital gains tax at applicable slab rates for short term gains (units held for up to 24 months for unlisted funds and up to 12 months for listed funds) plus applicable surcharge and cess, and at 12.5% (plus applicable surcharge and cess) for long term gains (units held for more than 24 months for unlisted funds and more than 12 months for listed funds). Any adverse changes in these tax provisions, including increases in capital gains tax rates, or changes in the definition of long- term versus short-term holding periods, could reduce the attractiveness of mutual fund investments and affect investor demand. Additionally, changes in tax treatment of competing investment products such as bank deposits, insurance products, or direct equity investments could affect the relative attractiveness of mutual funds. The government periodically reviews tax policies as part of budget exercises and tax reform initiatives, and there can be no assurance that future changes will not adversely affect mutual fund investments. Any material adverse changes in tax treatment could result in investor redemptions, reduced new inflows, and shifts in investor preferences across product categories, which could adversely affect our AUM, revenues, and profitability. 56. Global economic conditions, international capital flows, and foreign exchange rate fluctuations could adversely affect Indian capital markets and our business. Indian capital markets are increasingly integrated with global financial markets and are significantly influenced by global economic conditions, international capital flows, and foreign exchange rate movements. Foreign institutional investors and foreign portfolio investors play a significant role in Indian equity and debt markets, and their investment decisions are influenced by global factors including economic conditions in major economies, monetary policies of major central banks, global risk appetite, relative attractiveness of emerging markets versus developed markets, and geopolitical developments. Adverse global economic conditions, tightening of monetary policy by major central banks, strengthening of the US dollar, or increased global risk aversion could result in capital outflows from India, which could negatively impact Indian equity and debt markets and consequently affect our scheme performance and AUM. During 2025, foreign portfolio investors withdrew from Indian equities, the highest annual outflow on record, driven by elevated valuations in Indian markets relative to other emerging markets, subdued earnings visibility, tariff uncertainties affecting Indian exports, and shifts in global capital allocation favouring artificial intelligence and technology stocks in developed markets. The US Federal Reserve’s monetary policy stance, including interest rate decisions and quantitative tightening measures, significantly influences global capital flows. Any resumption of aggressive rate hikes by the Federal Reserve or other major central banks in response to persistent inflation could trigger further capital outflows from emerging markets including India. Additionally, significant depreciation of the Indian rupee against major currencies could result in imported inflation, current account pressures, and potential monetary policy tightening by the Reserve Bank of India, which could adversely affect economic growth and capital market performance. Conversely, significant appreciation of the rupee could affect export competitiveness and corporate earnings, particularly in sectors such as information technology and pharmaceuticals that derive substantial revenues from exports. Our schemes with international investments or our GIFT City funds serving international investors are also directly exposed to foreign exchange rate fluctuations. The rupee has experienced periods of significant volatility, and any sharp movements in either direction could affect scheme performance and investor sentiment. Global economic fragmentation, including the reshaping of supply chains, trade blocs, and investment flows in response to geopolitical tensions between major powers, could also affect India’s economic prospects and capital market performance. The shift in global manufacturing and investment patterns, while potentially benefiting India as companies seek alternatives to China, also creates uncertainty regarding the pace and sustainability of such shifts. Additionally, any global economic recession, financial crisis, or sovereign debt crisis in major economies could trigger risk-off sentiment and capital flight from emerging markets. The increasing correlation between global equity markets means that sharp declines in US, European, or Chinese 64 markets often result in corresponding declines in India