The Union Minister of Finance and Corporate Affairs Arun Jaitley met representatives from banks and financial institutions in the pre-budget consultation meeting held on Friday evening in Delhi where NS Venkatesh, CEO, AMFI represented the mutual fund industry.
An AMFI board member told Cafemutual that AMFI has requested the Ministry of Finance to introduce mutual fund linked retirement plans (MFLRP) under Section 80 CCD. He said that AMFI believes that a long term product like mutual fund retirement plans with tax incentive can play a significant role in channelizing household savings to capital markets.
If implemented, fund houses can launch these retirement products directly by getting approval from SEBI. Currently, fund houses need to take approval of Central Board of Direct Tax (CBDT) to provide tax benefits to investors in retirement funds.
Secondly, AMFI has asked the government to consider extending the tax benefits provided under 80CCD of the Income Tax Act (just like National Pension Scheme) to mutual fund retirement plans. This act provides tax benefits over and above the 80C limit which is currently Rs. 1.5 lakh annually (including an additional Rs. 50,000). Investors get tax deduction of up to 10% of salary, subject to up to Rs.1 lakh on contribution towards pension funds. Also, Budget 2016 has exempted NPS subscribers from paying tax on 40% of accumulated corpus.
Currently, NPS does not come under EEE (exempt, exempt and exempt) status. However, AMFI has proposed that the investments under mutual fund retirement plans be categorized under EEE status. Simply put, the investment in these schemes will be subjected to tax exemption during all three phases i.e. investment, accrual phase and redemption.
AMFI also sought an additional tax benefit over and above 80 C for investments in equity mutual funds.
Among other key demands of the financial services industry are increase in TDS limit for bank interest from the current Rs.10,000 for senior citizens and pensioners and exemption on income tax on premium of up to Rs. 1 lakh on life Insurance policies.
