You are here: Home » Markets » Mutual Funds
Business Standard

Mutual funds seek Sebi intervention on Budget tax proposals

FM last week in his budget proposals had said that long-term capital gains tax on debt-oriented mutual funds will go up to 20%

Press Trust of India  |  New Delhi 

Sebi logo

Concerned that some budget proposals may hit the hard, industry body AMFI is taking up this matter with Sebi, requesting intervention of the capital regulator in this issue.

Finance Minister Arun Jaitley last week in his budget proposals had said that long-term capital gains tax on debt-oriented will go up to 20% from 10%. The move is part of government's effort to bring parity with banks and other debt instruments.

Besides, in the Budget 2014-15, the government has proposed to change the definition of 'long term' for debt to 36 months from 12 months now.

According to industry experts, the proposals in the budget would have a negative impact on the mutual fund industry as majority of assets under management comes under the debt category.

Also, Fixed Maturity Plans (FMP) and short-term bond funds are expected to be hit due to change in the capital gains definition.

"Association of Mutual Funds in India (AMFI) has written a letter to Sebi regarding budget's proposals for mutual funds and will sent it to the capital market regulator today or by tomorrow, "an official said.

AMFI has appealed that new budget rules be applied to close-ended debt schemes as against all non equity MF schemes as proposed, he added.

Jaitley in his maiden budget had said that in the case of debt mutual funds, the capital gains arising on transfer of units held for more than a year is taxed at a concessional rate of 10% whereas direct investments in banks and other debt instruments attract a higher rate of tax. This allows tax arbitrage opportunity.

This arbitrage has hardly benefited retail investors as their%age is very small among such mutual fund investors, he said.

"With a view to remove this tax arbitrage, I propose to increase the rate of tax on long term capital gains from 10% to 20% on transfer of units of such (mutual funds other than equity oriented funds) funds," Jaitley had said in his budget speech.

These amendments will be effective from April,1 2015 and will accordingly apply, in relation to the assessment year 2015-16 and subsequent assessment years.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Mon, July 14 2014. 19:14 IST
RECOMMENDED FOR YOU
.