New Delhi: Mutual fund industry body AMFI has made a big revelation that is likely to benefit taxpayers — the industry body is urging the government to provide tax benefits in Budget 2024 for MF schemes with NPS-like retirement benefits called Mutual Fund Linked Retirement Schemes.
MF-linked pension schemes and DLSS
AMFI has sought equal treatment for MF-linked retirement schemes with NPS and other schemes oriented towards retirement and pension benefits under Section 80CCD of the Income Tax Act, 1961.
The MF industry body also proposed the introduction of a debt-linked savings scheme (DLSS), on the lines of equity-linked savings scheme (ELSS), to mobilise investors’ long-term savings into debt instruments with a higher credit rating.
These schemes may offer tax benefits similar to the ones enjoyed on ELSS. This move is also expected to add depth to the bond market, according to the proposal.
What is AMFI’s Budget wishlist
The MF industry body also sought 10 per cent taxation on capital gains accrued from the redemption of debt mutual funds, aligning them with the tax policy on debentures. AMFI has sought this taxation without indexation benefits.
Short-term capital gains tax was another focus area for the AMFI as it urged the Centre to reconsider its decision to introduce STCG on debt MFs with up to 35 per cent exposure to equity.
Retail participation in bond markets via debt MFs can be encouraged by amending Section 50AA of the Finance Act, 2023, said AMFI. This would ensure similar tax treatment towards investment in bonds as that meted out to debentures as well as government securities, according to AMFI.
Will govt raise staff’s pension?
What is the current tax regime for debt MFs
Listed debentures are taxed without indexation benefits at 10 per cent when held for 12 months. Earlier, these MFs enjoyed indexation benefits and a lower rate of long-term capital gains tax with a 3-year holding period. Since the introduction of Section 50AA of the Finance Act, 2023, these instruments have been designated as short-term capital assets irrespective of the holding period.
Budget 2024 Expectations: Mutual fund industry body has urged the Centre to roll out tax benefits related to mutual fund linked pension schemes and a debt linked savings scheme. Here’s what it means. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
