AMFI releases industry recommendations for Union budget 2024-25

To deepen the Indian bond market, AMFI proposes the introduction of a Debt Linked Savings Scheme (DLSS), providing tax incentives similar to ELSS.

As Finance Minister Nirmala Sitharaman gets ready to present the Union Budget on July 23, the Association of Mutual Funds ( AMFI) has released a document with 13 proposals from the Mutual Fund Industry.

Here are some of the key recommendations:

1. Tax Concessions in Debt Mutual Funds:

Capital gains on redemption of debt-oriented mutual funds held for more than three years should be taxed at 10 percent without indexation, similar to debentures. This aims to promote retail investor participation in the bond market.

2. Amend Definition of Equity-Oriented Funds:

It is proposed that the definition of Equity-Oriented Funds be revised to include Fund of Funds (FoFs) that invest at least 90 percent of their corpus in units of Equity-Oriented Mutual Funds. This ensures parity in tax treatment for FoFs investing in equities.

3. Uniform Tax Treatment for Pension-Oriented MF Schemes:

AMFI suggests that all SEBI-registered mutual funds be allowed to launch pension-oriented schemes with the same tax benefits as the National Pension System (NPS), under Section 80CCD of the Income Tax Act.

4. Notification of Mutual Fund Units as Specified Long-Term Assets:

To encourage long-term investments, AMFI recommends that mutual fund units be notified as ‘Specified Long-Term Assets’ qualifying for exemption on long-term capital gains under Section 54 EC of the Income Tax Act.

5. Parity in Taxation on Gold and Gold ETFs:

The proposal seeks to align the tax treatment of Gold ETFs with that of physical gold, ensuring a level playing field and encouraging investments in Gold ETFs.

6. Simplify Taxation of Offshore Funds:

AMFI is proposing further simplification of the taxation provisions for offshore funds managed by Indian portfolio managers, to make India an attractive destination for fund management activities.

7. Extend Section 10(23D) Exemption to CDMDF:
The exemption provided under Section 10(23D) for mutual funds should be extended to Capital Development Mutual Funds (CDMDF) to promote capital formation.

8. Uniform Rate for NRI Surcharge on TDS:

AMFI suggests prescribing a uniform rate for deduction of surcharge on Tax Deducted at Source (TDS) in respect of Non-Resident Indians (NRIs) to simplify compliance.

9. Increase TDS Threshold on Income Distribution:

The threshold limit for withholding tax on income distribution by mutual fund schemes should be increased to reduce the compliance burden on investors.

10. Taxability of Long-Term Capital Gains under Section 112A:

A clarification is sought on the taxability of long-term capital gains under Section 112A, ensuring that the gains from equity-oriented mutual funds are taxed uniformly.

11. Amendment to ELSS Rule 3A:

An amendment to permit any amount to be invested in Equity-Linked Savings Schemes (ELSS), instead of restricting investments to multiples of Rs 500.

12. Introduction of Debt Linked Savings Scheme (DLSS):

To deepen the Indian bond market, AMFI proposes the introduction of a Debt Linked Savings Scheme (DLSS), providing tax incentives similar to ELSS.

13. Relaxation in TDS for Inoperative PAN Cases:

A relaxation for mutual funds in cases where TDS is required to be deducted for investors with inoperative Permanent Account Numbers (PANs), to streamline processes and reduce administrative hurdles.

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