Amfi Seeks Pension-Focused Mutual Funds with NPS-Like Tax Benefits

The Association of Mutual Funds in India (Amfi) has urged the government to allow mutual funds to offer pension-focused schemes with similar tax benefits as the National Pension System. Amfi also proposed amendments to various sections of the Income Tax Act to align the tax treatment of debt-oriented mutual funds with debentures and government securities.

The Association of Mutual Funds in India (Amfi) has requested the government to permit mutual funds to offer pension-focused schemes, akin to the National Pension System's (NPS) tax benefits.

In its Budget proposals to the Finance Ministry, Amfi suggested alignments in tax treatment for NPS and Retirement/Pension oriented schemes by Mutual Funds under Section 80CCD of the Income Tax Act, 1961.

Amfi has also asked for capital gains on debt-oriented mutual funds held for more than three years to be taxed at 10 per cent without indexation, aligning it with debentures. The body proposed reconsideration of the short-term capital gains tax imposed on such funds with equity exposure of up to 35 per cent.

Additionally, they suggested amending Section 50AA of the Finance Act, 2023, to encourage retail investor participation in bond markets via debt funds.

Amfi also proposed a 'Debt Linked Savings Scheme' (DLSS) to mimic the Equity Linked Savings Scheme (ELSS), aimed at channeling long-term savings into high-credit-rated debt instruments.

(With inputs from agencies.)