In its budget wish list, AMFI has requested the Union Finance Minister Nirmala Sitharaman to introduce debt-linked savings scheme (DLSS) and mutual fund linked retirement plans and simplify taxation norms on offshore funds.
Debt linked savings scheme
AMFI has proposed introduction of Debt Linked Savings Scheme (DLSS) to channelize long term savings of retail investors into corporate bond market through mutual funds
In line with ELSS, DLSS will come with tax benefits, which might be eligible for the tax benefit up to Rs 1.50 lakh under section 80C of Income Tax Act.
Mutual fund linked retirement plan
AMFI has sought introduction of mutual fund linked retirement plans under Section 80 CCD.
AMFI believes that a long term product like mutual fund retirement plan with tax incentive can play a significant role in channelizing household savings to capital markets. It proposes to exempt taxation on transfer of investment from one mutual fund retirement plan to the other.
Presently, there are three broad investment avenues for pension income in India - National Pension Scheme, retirement /pension schemes offered by mutual funds, annuity plans offered by insurers.
Specified long-term assets
Another suggestion is inclusion of mutual funds - both equity and debt with 3 year lock-in under section 54 EC. The section essentially means that investment from sale of immovable proceeds can be invested in such mutual funds to defer LTCG tax.
Currently, investors have to invest in bonds issued by government companies like NHAI and REC to avail benefits of 54 EC.
Investment in the specified mutual fund schemes can provide an alternative investment avenue while easing the burden cost of borrowing for infrastructure funding on the government, said AMFI.
Simplify taxation provisions of offshore funds managed by Indian portfolio managers
AMFI has requested that income tax rules be eased for Indian portfolio managers to manage offshore funds. While the government had introduced a safe harbour regime (section 9A) for offshore funds for Indian fund managers, it has several strict conditions.
One requirement to avail tax benefits is that the monthly average corpus of the fund shall not be less than Rs.100 crore, which makes it difficult for some of the new funds to satisfy especially in covid times. Hence, AMFI has requested FM that do away with such norms.
Central Board of Direct Taxation has notified that the Indian fund management industry has not been able to take advantage of the safe harbour provisions in section 9A due to the stringent requirements. Consequently, only a handful of offshore funds have availed the safe harbour benefit.
Permit insurers to outsource fund management to AMCs
AMFI has recommended that all IRDAI registered insurance companies should be allowed to outsource their fund management activities to AMCs
This would result in both MF & insurance industry complementing each other and helping investors choose insurance products knowing investments of the insurers are managed by an established AMC.
This would, in fact, provide the insurance policy buyer multiple options on choosing insurance products with different asset managers. It would also bring about cost optimization across both industries, said AMFI.
CPSE investment of surplus funds
AMFI has requested that central public sector enterprises (CPSEs) be allowed to invest their surplus funds in private sector mutual funds as well.
Currently, CPSEs can invest only in public sector mutual funds.
Further, it recommends enhancing the current limit of 30% of available surplus funds for investments in mutual funds by CPSEs to 50% of available surplus funds.
