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Budget wishlist for Mutual Funds

Considering the current economic scenario it is expected that the finance minister will roll out a balanced and an event based budget inorder to give a boost to the economy especially the financial sector. One could even expect a populist budget with reforms intended to target the vote bank politics. However considering the mutual fund industry which has seen significant growth and benefits especially during the last budget; have certain concerns, which if addressed could boost the investor confidence and also encourage additional investment; which is the need of the hour to take GDP at a higher level.

Following are the concerns and the expectations of the Indian Mutual Fund industry from the upcoming budget 2013 – 14

Capital Gain Tax on Scheme change

Recently many schemes have merged with new schemes. However on merging of the scheme it is considered that the old scheme has been sold and the money is invested in the new one. This implies capital gain tax if there is a profit on sale. The burden of such tax incidence is borne by the investors; MF industry expects to do away with such tax incidence since it is a mere switch/swap without any actual sale

STT to be levied on single side

Presently securities transaction tax is levied on both the sides i.e. on buying and selling of shares; however this increases the cost borne by the investor. Mutual fund industry expects that the STT should be levied only on one side of the transaction; this will also help to enhance investors profitability and confidence

Tax benefit on investment

Equity Linked Savings Scheme (ELSS) comes with a tax benefit u/s 80 C. The assets under management of these schemes have crossed Rs. 25,000 Cr, highest level since April 2011. However if any additional benefit schemes are introduced under the income tax act then it will further encourage the investors to invest in mutual funds

Foreign investment in MF

Presently foreign investors are not able to invest in mutual fund schemes. However opening the avenue to foreign investments will help to get in more funds inform of FII (Foreign Institutional Investors). It will provide a new investment opportunity for investments to foreign investors wherein they can participate at diversified levels

Considering the current economic scenario the complete focus of the MF industry is to enhance the level of penetration w.r.t. investment especially from first time investor. This will enhance the investments in the economy thus helping to boost the growth

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