The Association of Mutual Funds in India (AMFI) has submitted a budget proposal to the Union Finance Ministry, advocating for tax exemptions in equity mutual funds. They have proposed that equity funds should be exempt from capital gains tax if the holding period exceeds 3 years. AMFI believes this exemption will encourage long-term investments in equities, channeling mored savings into the equity markets, ultimately benefiting the Indian economy.
Furthermore, AMFI has requested that the threshold limit for long-term capital gains (LTCG) tax in equity funds be increased from Rs.1 lakh to Rs.2 lakh for holding periods between 1 to years. Currently, LTCG in equity funds is taxed at 10% on income exceeding Rs.1 lakh if the units are held for over 1 year.
AMFI has also made proposals regarding taxation in debt funds. They have requested that LTCG in debt funds should be applicable after 3 years, with a tax rate of 10% without indexation. Currently, gains from debt funds are taxed at the marginal rate, regardless of the holding period.
Additionally, AMFI has proposed that the current requirement for ELSS (Equity Linked Savings Scheme) investments to be made in multiples of Rs.500 be removed.
Invest a minimum of Rs.500 to partake in the newly introduced debt-linked savings scheme (DLSS), akin to the existing equity-linked savings scheme (ELSS). The industry association suggests a 5-year lock-in period, aligning it with bank fixed deposits.
The association has also requested the ministry to provide clarity on the applicability of higher taxducted at source (TDS) when a permanent account number (PAN) becomes inoperative, as the non-linkage ofAadhaar and PAN can result inAN becoming inoperative.
Furthermore, the association has proposed to increase the limit on the applicability of TDS on dividend income in mutual funds from the current Rs.5,000 to.50,000 per annum.
Additionally, the association has requested to make the surcharge on TDS for non-resident Indians (NRIs) on dividend income in mutual funds uniform at 10%, as opposed to the current slab-based surcharge.
The association has also requested parity in the taxation of physical gold and gold exchange-traded funds (ETFs), as currently, gold ETFs are subject to debt taxation.
The association suggested that mutual fund schemes investing in the infrastructure sub-sector should be included in the list of specified long-term assets qualifying for tax exem on long-term capital gains under Section 54EC, with a possible three-year lockin period.
Lastly, the association hasd to allow mutual funds to launch Mutual Fund Linked Retirement Schemes (MFLRS).
Invests a majority of its funds in stocks and other equity-related investments. Additionally, schemes that invest in international funds or exchange-traded funds should be exempted from this requirement.
