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Amfi submits 10-point budget wish list

AMFI reiterated its long-standing demand to bring parity in tax treatment of Mutual Funds and ULIPs (Bajaj Finserv)Premium
AMFI reiterated its long-standing demand to bring parity in tax treatment of Mutual Funds and ULIPs (Bajaj Finserv)

ULIPs enjoy more tax benefits as compared to mutual funds in various aspects like no capital gains on switching, no STT on the withdrawal proceeds from ULIPs, no income tax on the proceeds from ULIPs of Insurance companies (including early surrender / partial withdrawals), etc.

AMFI in its Budget Proposals for FY2021-22 has made various submissions under three key areas: 1) Need to bring parity in tax treatment for investments in different financial sectors, 2) Suggestions to mitigate hardship to retail taxpayers; and 3) Encouraging deepening of capital market through Mutual Funds. Read on for details:

AMFI reiterated its long-standing demand to bring parity in tax treatment of mutual funds and ULIPs, both of which are investment products and invest in securities. Currently, ULIPs enjoy more tax benefits as compared to mutual funds in various aspects like no capital gains on switching, no STT levied on the withdrawal proceeds from ULIPs, no income tax on the proceeds from ULIPs of Insurance companies (including early surrender / partial withdrawals) subject to certain conditions, etc.

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To mitigate hardship to retail taxpayers, AMFI requested that the threshold limit for withholding tax (TDS) on income distribution (dividend) on mutual fund units be increased from 5,000 to 50,000 p.a. and a cap of 15% on surcharge rate on income distribution on Units from equity mutual funds schemes in the hands of non-corporate taxpayers.

AMFI, making a case for CPSE investment of surplus funds in Mutual Funds, in its pre-budget proposals to Finance Ministry, has asked to revise the current Department of Public Enterprises (DPE) guidelines, and permit the Maharatna, Navratna and Miniratna CPSEs to invest their surplus fund in any SEBI registered Mutual Fund, irrespective of whether it is a public sector mutual fund or a private sector mutual fund; and enhance the current limit of 30% of available surplus funds for investments in mutual funds by CPSEs to 50% of available surplus funds.

AMFI has also submitted that let there not be any stipulation on any minimum corpus size in respect of the debt scheme as a pre-condition for investments by CPSEs and also rating of only one SEBI-registered Credit Rating Agency be accepted as adequate, instead of existing requirement of any two separate Credit Rating Agencies.

AMFI once again furthered its suggestion of introducing “Debt Linked Savings Scheme" (DLSS) on the lines of Equity Linked Savings Scheme (ELSS) to channelize long-term savings of retail investors into higher credit rated debt instruments with appropriate tax benefits which will help in deepening the Indian Bond Market.

Finance minister Nirmala Sitharaman on Wednesday concluded a series of pre-budget consultations with experts and business executives to prepare for the 2021-22 Union Budget. Sitharaman said her third budget presentation on 1 February under the shadow of the pandemic will be one like “never-before".

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