AMFI likely to knock govt doors again for restoring indexation benefits

The Association of Mutual Funds in India (AMFI) is likely to once again lobby with the government for bringing back indexation benefits for the fund industry as has been done for the real estate sector, said two board members of the mutual fund industry body.

The Association of Mutual Funds in India (AMFI) is likely to once again lobby with the government for bringing back indexation benefits for the fund industry as has been done for the real estate sector, said two board members of the mutual fund industry body.

This assumes significance since the government has decided to restore the indexation benefits for the real estate industry by giving individuals the flexibility to choose between the new regime with lower tax rate with no indexation benefits or the old regime with higher tax rate with indexation benefits.

However, no such rollback has been announced for the mutual fund industry, which has already written to the government seeking certain relaxations in the Budget announcements.

“While nothing concrete has been decided as yet, it would be a good thing for AMFI to once again knock on the government’s door since there is a precedent related to restoring the indexation benefits now,” said a board member of AMFI on conditions of anonymity.

Incidentally, soon after the Union Budget was presented, AMFI had submitted its feedback to the government, seeking a rollback of certain tax-related announcements.

One of the key asks was to reconsider the removal of the indexation benefit or providing indexing until July 23, 2024. The justification for this being that retrospective application of the new tax rates could harm investor confidence, deter new investors, and negatively impact those who invested based on previous tax rate.

Also Read: Bring back STT and capital gains to previous levels, AMFI suggests in post-budget recommendation

V N Chalasani, Chief Executive, AMFI, told Moneycontrol that the industry is still hopeful that the government will consider the request to reconsider the retrospective implementation of the changes related to capital gains taxes.

“We have passed on recommendations to the authorities and continue to remain hopeful,” he said.

Meanwhile, another board member of AMFI said that while real estate players enjoy a huge clout in the government circles, the banking industry is also lobbying against any kind of rollback for the mutual fund industry.

“It is an open secret that real estate and politics have a close working relationship and hence this rollback was possible. Mutual funds do not have a strong lobby but we are facing a challenge from the banking industry as well since many individuals are taking their deposits out of the banking system and investing in the market through mutual funds. Ultimately what is good for the investor should be good for the industry as well, right?” said the head of a leading mutual fund firm and also a board member of AMFI.

Also Read: Relief for property owners: Centre moves amendment for indexation proposal on real estate, will offer options to taxpayers

Among other things, the mutual fund industry has also requested the government to amend Section 50AA of the Income Tax Act – it was revised in the Budget – to prevent adverse tax implications for investors and align the definition with the actual investment strategies of specified mutual funds.

It also asked for reinstatement of earlier capital gains tax rates -- reducing the short-term capital gains tax back to 15 percent and the long-term capital gains tax to 10 percent.

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