Investors in mutual funds in India were greatly disappointed when the government withdrew indexation benefits from debt funds with effect from April 1, 2023. With just about 10 days before the budget on July 23, 2024, AMFI has urged the government to implement a host of tax changes for the benefit of the numerous mutual fund investors in the country.
Let’s see what the major points are.
Debt mutual funds
The mutual fund body has urged that capital gains on redemption of units of debt mutual funds that an investor has held for more than 3 years should be taxed at 10% without indexation, as applicable in the case of debentures. This would create a uniform playing field between the two instruments.
This would boost retail investor participation in bond markets, AMFI has said.
The budget for FY24 enjoined that gains from sale of debt funds be added to the income of the investor which would be taxed at their income slab rate.
Long Term Capital Gains tax reform
AMFI has sought that Long Term Capital Gains (LTCG) on equity-oriented fund schemes or equity shares held for more than one year but less than 3 years by subjected to LTCG tax at 10% on the capital gains of more than Rs 2 lakh in any financial year. The current threshold limit of Rs 1 lakh in a financial year is low.
Moreover, AMFI has sought that capital gains tax on units held for more than 3 years be exempted from LTCG.
Pension-oriented schemes
The government should allow all MFs to introduce pension-oriented schemes (MFLRS). Moreover these should enjoy the same income tax treatment as the National Pension System (NPS).
AMFI has sought tax benefits as applicable to NPS under Sec. 80CCD (1) & 80CCD (1B) of Income Tax Act, 1961, with EEE (Exempt-Exempt-Exempt) status on all such schemes.
Debt-linked savings scheme
MFI has also proposed that a new fund category similar to ELSS (equity-linked savings scheme be created. These could be called debt-linked savings scheme (DLSS). Investors would be eligible for equal tax deduction benefits under Section 80C of the Income Tax Act 1961 as enjoyed in case of investments in ELSS funds.
Besides, there should be parity on taxation on gold and gold ETFs, AMFI has said.
The Association for Mutual Funds in India has pleaded for a number of tax changes for the impending Union Budget. These would concern almost everyone investing in mutual funds in India. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
