In its budget proposal, AMFI has requested the Union Finance Minister Nirmala Sitharaman to consider doing away with the capital gain tax on transfer of units from regular plan to direct plan and vice versa and growth plan to dividend plan and vice versa within the same scheme.
AMFI said that there is no inflow/outflow of money involved in such switches. AMFI also pointed out that there is no such tax implemented on ULIPs.
In a press release, NS Venkatesh, Chief Executive, 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 MF industry, not only to the next level of growth, but also help in contributing to making economy stronger, especially with deepening of 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.’’
Here are the other key AMFI budget proposals
- Introduce Debt Linked Savings Scheme (DLSS) to channelize long term savings of retail investors into corporate bond market through mutual funds
- Uniform tax treatment between mutual funds and ULIPs. AMFI has requested for the exclusion of equity funds from the ambit of LTCG tax. Also, AMFI has requested for abolition of dividend distribution tax on equity funds
- Removal of securities transaction tax (STT) at redemption
- Doing away with dividend distribution tax from equity funds.
- Reduction of DDT rate in debt funds from 25% to 22% to bring it at par with corporate tax
- Introduction of mutual fund linked retirement plans in line with the National Pension Scheme (NPS). This act provides tax benefits over and above the 80C limit, which is currently Rs. 1.50 lakh annually and an additional Rs. 50,000 under Section 80 CCD
- Inclusion of mutual funds both equity funds and debt funds with 3 year lock-in under section 54 EC i.e. investment from sale of immovable proceeds can be invested in such mutual funds to defer LTCG tax
- A separate section wherein investors can reinvest their mutual fund redemption proceeds in mutual funds again to save LTCG
- Creation of segregated portfolio under side pocketing norms should not attract capital gains tax
- Bring uniformity in tax treatment between debt funds and direct investment to listed debt securities. Currently, investors can avail LTCG benefits if they hold listed debt securities for one year. However, in mutual funds, the holding period to avail LTCG is three years. AMFI has requested FM to allow availing of LTCG in debt funds (at least 65% holdings in listed debt) after 1 year
- Reduction of TDS on NRIs in debt funds from 30% to 15% (at par with equity funds)
- Inclusion of equity fund of fund (FoF) under equity funds for taxation
- Reduce threshold limit of equity funds from 65% to 50% to quality for equity fund taxation
- No DDT to institutional investors investing in infrastructure debt funds
- Holding period for LTCG in gold ETFs reduced from 3 years to 1 year
- According pass-through status to Category III AIFs in line with Category I & II AIF
