The Rs 12-lakh-crore mutual fund sector has set its sights on the capital gains from sale of immovable property. In a proposal to the Union ministry of finance, the Association of Mutual Funds in India (Amfi) has asked for inclusion of funds in the exemption list under Section 54EC of the Income Tax Act. Currently, tax exemption under this section is available only if the long-term gains from sale of immovable property are invested in specified long-term assets — the bonds issued by government entities Nabard and NHAI — that are redeemable after three years. “The flight of money from financial markets into real estate sectors has become an irreversible phenomenon.
It is expedient to broaden the list of the specified long-term assets under Section 54EC by including MF units, whether equity or debt-oriented (wherein the underlying investments are made into infrastructure sub-sector), based on investors’ choice and risk appetite, with a lock-in period of three years,” says Amfi's letter to the ministry. Sector executives argue that most individuals liquidate their financial assets to purchase a home property, with or without the aid of home loans. “This money, once invested in immovable property using the sale proceeds from MFs or stocks, never comes back into the capital markets. People invariably re-invest the capital gains arising from sale of an immovable property to buy another property to avail capital gains tax exemption,” says a top official in the sector. Sector insiders told Business Standard that if this demand was approved, it could be a big booster for the MF sector, as there are many individuals having more than one home, for investment purposes. “This will help channelise some gains back to the capital markets via MFs, benefiting both the investors and the industry,” said the chief executive officer of a mid-sized fund house.
|THE SECTOR’S DEMANDS|
| ON RGESS |