Ahead of Budget 2025, the Association of Mutual Funds in India (AMFI) has made a set of demands to favour the mutual fund industry. One key demand is to restore indexation benefits for debt mutual funds.
Most of the other key expectations include addressing tax-related concerns. The mutual fund houses (represented through the AMFI) have also demanded the rationalisation of the capital gains tax regime.
In July last year, the Budget phased out indexation benefits retrospectively for all old long-term investments in debt funds made before March 2023.
“We anticipate a Union Budget that prioritises investor confidence and deepens participation in mutual funds by addressing key tax-related concerns. Restoring indexation benefits for debt funds and rationalizing the capital gains tax regime, as well as the introduction of a Debt-Linked Savings Scheme, can significantly bolster long-term savings and develop the Indian bond market,” says Venkat Chalasani, Chief Executive, AMFI.
Key expectations of the mutual fund industry body:
1 Restoring long-term indexation benefits for mutual funds debt schemes, which were withdrawn in Budget 2024. The industry body has requested to review the withdrawal of indexation benefits on all investments in debt funds up to March 31, 2023.
2. Debt funds: The AMFI has also demanded that capital gains on redemption of Units of debt-oriented mutual funds held for more than 1 year be taxed at the rate of 12.5 per cent as applicable in respect of listed bonds.
3. Scope of equity funds: Expanding the scope of equity-oriented funds to include fund of funds investing in equity-oriented funds.
4. Pension funds: All mutual funds should be allowed to launch pension-oriented mutual fund schemes with uniform tax treatment as NPS and similar tax benefits applicable to NPS under Sec. 80CCD (1) & 80CCD (1B) of Income Tax Act, 1961.
5. Exemption under long-term capital gains: Mutual fund units should be notified as specified long-term assets qualifying for exemption on LTCG under section 54EC.
The other proposals include further simplifying taxation provisions of offshore funds managed by Indian portfolio managers, prescribing a uniform rate for deduction of surcharge on TDS in respect of NRIs, making amendments to ELSS rule 3A to permit any amount to be invested and not only in multiples of 500, raising threshold limit of withholding tax on income distribution by mutual fund scheme and taxability of long-term capital gains under section 112.
The AMFI has also proposed introducing a debt-linked saving scheme to help expand the bond market.
