Home / Mutual Funds / News /  Amfi seeks measures to boost mutual funds in budget

With the Union budget just a fortnight away, the Association of Mutual Funds in India (Amfi) has floated a pre-budget memorandum that prods the government to roll out investor-friendly measures for growing the mutual fund (MF) industry.

The elaborate 17-point charter prepared by the nodal association of mutual funds in India includes the introduction of a debt-linked savings scheme (DLSS), along the lines of equity-linked savings schemes (ELSS); recognizing mutual funds as specified long-term assets; and bringing unit-linked insurance plans (ULIPs) and equity mutual funds schemes on a par.

To make gold and commodity exchange traded funds (ETFs) more attractive, it said the holding period for long-term capital gains should be lowered from three years to one year, as in the case of listed debt securities.

N.S. Venkatesh, chief executive officer of Amfi said: “Amfi’s suggestions have been in the budget proposal list for a few years. We are hoping this time our long-pending submissions get addressed, which would help take the Indian mutual fund industry, not only to the next level of growth, but also help in contributing to making the economy stronger, especially with deepening of the bond market, making long-term availability of funds for infrastructure growth, and reducing the fiscal deficit by shifting investments from pure gold to gold ETFs.’’

Amfi said that investments of up to 1.5 lakh under DLSS should be eligible for tax benefits, subject to a lock-in period of five years (just like tax-saving bank fixed deposits).

“DLSS will help small investors participate in bond markets at low costs and at a lower risk, as compared to equity markets. This will also bring debt-oriented mutual funds on a par with tax-saving bank fixed deposits, where deduction is available under Section 80C," it added.

The industry also proposed uniform tax treatment for investments in mutual fund units and ULIPs of life insurance companies.

It sought to lower the dividend distribution tax (DDT) on debt mutual funds to at least 22%. Less DDT will attract fresh flows into debt mutual fund schemes, especially from retirees and can help stable inflow into bond market through the mutual fund route, it said in a press statement.

Amfi proposed to accord pass-through status to Category III alternative investment funds (AIFs) for income tax purposes, along the lines of Category I and II AIFs.

It also sought clarity on creating a segregated portfolio for mutual fund schemes, on the capital gains tax treatment upon the sale of units with regard to the treatment of the units allotted consequent on segregation of portfolio.

It added that Employees’ Provident Fund Organization, National Pension System, insurance companies, non-profit Section-8 companies, which invest on behalf of their investors, contributors or policyholders, in mutual fund schemes or infrastructure debt funds of mutual funds, should be exempted from DDT under Section 115R of the IT act.

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