Amfi seeks uniform tax breaks for pension schemes
The Association of Mutual Funds in India (Amfi) has called for all mutual funds to be allowed to launch pension-oriented MF schemes with uniform tax treatment as the National Pension Scheme. This is among a set of innovative and growth-oriented proposals sent by the association to the Ministry Of Finance ahead of the February Union Budget.
Currently, only a handful of Mutual Fund Retirement Benefit Pension Schemes notified by the CBDT qualify for tax benefit under Section 80C of the Income Tax Act.
"Sebi, in its Long Term Policy for Mutual Funds, published a few years ago, had proposed that MFs be allowed to launch pension plans, namely, Mutual Fund Linked Retirement Plan’ (MFLRP) akin to popular 401(k) Plan in the United States which would be eligible for tax benefits,” the Amfi said.
Allowing MFs to launch MFLRS would bring pension benefits to millions of Indians in the unorganised sector, it said.
The Amfi has also proposed introduction of debt-linked savings scheme (DLSS) to help deepen the Indian bond market.
"Mutual fund units should be notified as ‘Specified Long-Term Assets’ qualifying for exemption on LTCG (Long Term Capital Gain) under Sec. 54 EC," the association has proposed..
It has also proposed lower minimum holding period for LTCG purposes in the case of gold & silver ETFs from three years to one year, as in the case of listed debt securities, as the units are listed on the stock exchanges.
"The launch of sovereign gold bonds (SGB) has made gold ETF and gold linked MF scheme less attractive, resulting in lack of interest in gold ETFs and gold linked MF scheme. From liquidity perspective, gold ETFs are superior as compared to SGB, as gold ETFs provide continuous liquidity to investors," it said.
"Lowering the holding period in respect of of gold ETFs for LTCG purposes from 3 years to 1 year will provide an incentive to retail investors to invest in gold ETF and help expand retail investments in ETFs," it added.
AMFI has also proposed to permit insurance companies to outsource the fund management activities to Sebi-registered MFs and AMCs.
The Amfi also called for partial modification of equity linked saving scheme (ELSS) to allow investment of any amount instead of multiples of Rs 500.
It also called for uniform tax treatment on capital gains from mutual fund investments and Ulips of insurance companies.