In its budget proposals, AMFI has requested the Union Finance Minister Arun Jaitley to introduce Debt Linked Savings Scheme (DLSS) to channelize long term savings of retail investors into corporate bond market through mutual funds.
“To deepen the Indian bond market and strengthen the efforts taken by RBI and SEBI for increasing penetration in the corporate bond markets, it is expedient to channelize long-term savings of retail segment into corporate bond market through mutual funds on the same lines as ELSS,” said AMFI.
Like ELSS, AMFI wants DLSS investors to avail benefits of tax deduction under Section 80C on investments of up to Rs.1.50 lakh. However, AMFI has recommended that DLSS should have lock in of 5 years.
If implemented, this will also bring debt oriented mutual funds on par with tax saving bank fixed deposits, where deduction is available under Section 80C.
Further, it is proposed that DLSS should invest at least 80% of its corpus in the bonds issued by the listed companies as permitted under SEBI Mutual Fund Regulations. Further, the scheme is to be allowed to put another 20% of its corpus in short term money market instruments.
In the proposal, AMFI said that the introduction of DLSS would help small investors participate in bond markets at low costs and at a lower risk as compared to equity markets.
Earlier in 1992, the government had notified the ELSS to encourage investments in equity funds. Over the years, ELSS has been an attractive investment option for retail investors.
Over the years, several committees such as the R.H. Patil committee (2005), Percy Mistry committee (2007) and Raghuram Rajan committee (2009) have studied various aspects related to bond market and have made recommendations to the government to strengthen corporate bond market through effective retail participation.
