The mutual funds industry, with assets worth $800 billion, has called upon the government to introduce a more favorable tax regime for debt mutual funds in India ahead of the Union budget.
In an interview with businessline, Navneet Munot, Chairman of the Association of Mutual Funds in India (AMFI), emphasized the importance of restoring tax benefits for debt fund schemes in India. He highlighted that the development of bond markets is crucial for the overall financial ecosystem and that debt mutual funds would see renewed interest if the tax benefits that were withdrawn a few years ago are reinstated.
The recent removal of indexation benefits for debt funds has negatively impacted investor sentiment towards these schemes, as capital gains from the sale of debt mutual funds are now taxed at the investor’s income tax slab rate. Debt mutual funds are considered essential for investors looking to diversify their portfolios and generate steady income, especially during periods of market volatility.
Munot expressed optimism that the upcoming budget would focus on sustaining economic growth and supporting various sectors of the economy. He noted that while there has been a recent correction in equity markets, long-term investors who have chosen the SIP route are likely to remain committed to their investment strategies.
The AMFI has put forth several recommendations for the Budget, including the reintroduction of indexation benefits for debt funds, equalizing capital gains tax on debt funds with listed securities, and introducing a Debt Linked Savings Scheme (DLSS) similar to Equity Linked Savings Schemes (ELSS). Additionally, they have suggested extending all tax benefits available for National Pension System (NPS) to pension schemes offered by mutual funds.
Venkat Chalasani, Chief Executive of AMFI, shared the industry’s target of reaching an Asset Under Management (AUM) of ₹100 lakh crore by 2030 and attracting at least 10 crore unique investors by the same year. The industry is hopeful that the Budget will address their concerns and provide the necessary impetus for the growth of debt mutual funds in India.
