Union budget 2025 is coming at a very significant moment. Finance minister Nirmala Sitharaman is facing the onerous task of balancing many things. She has to restore higher rates of GDP growth for which she needs to stoke aggregate consumption, which has suffered significant slackening. This has led to a slowdown in private sector capex that is needed for generating jobs, especially blue-collar employment. While in order to trigger consumption, she has to provide more disposable income in the hands of the common person, she also faces the task of shoring up revenues to invest in infrastructure which would pave the way for long-term economic growth as well as generate semi-skilled and unskilled jobs.
In this challenging climate, mutual fund industry is looking forward to restoration of income tax benefits for the investor. The inflow into debt funds has especially suffered since the investment into these funds have suffered after long-term benefits were withdrawn in budget 2024. Needless to emphasise, if the finance minister can breath life into the growth engine, the investment climate will improve.
Primary expectation
“As budget is approaching, the stock market and investors are keenly anticipating measures that will bolster economic growth and enhance investment opportunities. AMFI has released a 15-point proposal for the Budget to be presented by Finance Minister Mrs. Nirmala Sitharaman. One of the primary expectations from the mutual fund industry is the restoration of tax benefits for debt funds. The removal of long-term indexation benefits in budget 2024 has significantly impacted debt fund investors, leading to a decline in participation. Industry leaders argue that reintroducing indexation would help neutralize inflation’s impact on capital gains, making debt investments more attractive again. Also, there is a demand for rollback of recent capital gains tax hikes, which deterred retail investors from engaging with mutual funds,” Achin Goel, vice president of Bonanza was quoted in the media as saying.
Tax sops expectation for average Joe
“This budget holds great promise for the average Joe, the ordinary investor who has turned to MFs with a lot of hope. His wishlist primarily concerns tax sops (for both STCG and LTCG). Note, both have disappointed him lately. So he needs immediate rationalisation of tax rates, especially for long holding periods. LTCG was zero till recently. But by doing away with that convenience, the govt has not really helped the long-term saver. Clearly, a friendlier tax regime is warranted — STCG at 10% and LTCG at 5% may be a better, more meaningful structure,” said Nilanjan Dey, investment strategist and director, Wishlist Capital.
“At another level, I wish the market to focus a lot more on Section 80C of the Income Tax Act (for old tax regime adherents). It is a great but under-utilised tool for incentivising tax-savings via equity funds. Increasing the 80C benefit significantly beyond the Rs 1.5 lakh cap will immediately help savers (say to Rs 5 lakhs).
One of my most earnest requests — increase 80C benefit to Rs 5,00,000 from Rs 1,50,000 at this juncture. This will immediately help savers. Also the government can think of a limited but specific tax sop for the newly introduced SIF (New Asset Class with Rs 10 lakh minimum investment) and a special tax provision for retirement funds.
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds and crypto assets.)
The mutual fund industry is emerging as one of the favourite investment instruments of the middle class in India. Though the industry is going through a correction in NAVs in tandem with the correction in equity markets, flows into SIP (Systematic Investment Plan) is rising, indicating continued faith of common people in the mutual fund industry. In this environment, mutual fund experts expect that restoration of tax benefits is one of the things they are looking forward to. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
