Budget 2018: Amfi wants debt-linked savings scheme included in Section 80C

A look at the mutual fund industry's budget expectations from finance minister Arun Jaitley in Union Budget 2018

The Association of Mutual Funds in India (Amfi) recently forwarded its Budget 2018 wishlist to the finance ministry. The list of the mutual fund industry’s Budget 2018 expectations from Finance Minister Arun Jaitley includes the following proposals:

Include debt scheme under Sec 80 C

Amfi has proposed that debt-linked savings schemes be brought under Section 80 C of the Income-Tax Act, according to a report by Moneycontrol.com. "We have proposed debt-linked savings scheme (DLSS) to be included under the Sec 80 C limit," a mutual fund source who is also in the Amfi committee told Moneycontrol.

Currently, only equity-linked savings schemes (ELSS) qualify for tax benefits under Section 80 C of the Income-Tax Act for an investment limit of up to Rs 150,000 a financial year. By extending the tax benefits to debt-based mutual fund schemes, conservative investors will also get an opportunity to avail of tax benefits.

Introduce mutual fund-linked retirement plan

Amfi has also proposed a Mutual Fund Long-Term Retirement Plan (MFLRP) similar to the 401(k) plan in the US.

"In the last to last Budget (FY17), they (the finance minister) had mentioned about bringing MFLRP under Section 80 C, which the Securities and Exchange Board of India (Sebi) had proposed, so we asked the finance ministry to give a clarification in this Budget as to how MFLRP can function," another source from the Amfi committee was quoted as saying. "If this comes with tax incentive, it will help in channeling household savings to capital markets, especially for long term.”

If the proposed changes are implemented, fund houses could launch these retirement products directly by getting approval from Sebi. Currently, fund houses have to take approval of the Central Board of Direct Taxes to provide tax benefits to investors.