scorecardresearch
AMFI asks govt to bring debt-linked saving schemes, tax parity with ULIPs

AMFI asks govt to bring debt-linked saving schemes, tax parity with ULIPs

It has been further proposed that investment of up to Rs 1.5 lakh under DLSS be eligible for tax benefit, subject to a lock in period of five years (just like tax saving bank FDs).

Both MFs and ULIPs invest in securities. Both MFs and ULIPs invest in securities.

Ahead of the Union Budget, industry body Amfi has asked the government to bring uniformity in taxation on listed debt securities and debt mutual fund (MFs) and bring parity in tax treatment between MFs and unit-linked insurance plans (ULIPs).

Both MFs and ULIPs invest in securities.

In its Budget proposals for 2022-23 to the Finance Ministry, the industry body has requested that mutual funds should be allowed to introduce low-cost, lower-risk tax-exemption-linked debt-linked savings schemes (DLSS) on the lines of equity-linked saving schemes (ELSS).

It has been further proposed that investment of up to Rs 1.5 lakh under DLSS be eligible for tax benefit, subject to a lock in period of five years (just like tax saving bank Fixed Deposits).

Currently, equity-linked savings schemes qualify for tax benefits under Section 80 CCC of the Income Tax Act for an investment limit of up to Rs 1.5 lakh in a fiscal year.

With an aim to make gold and silver exchange traded funds (ETFs) more attractive, it has been proposed to lower the minimum holding period for LTCG purposes in case of gold and silver ETFs from three years to one year, as in the case of listed debt securities.

It has recommended that all registered insurance companies be permitted to outsource the fund management activities to registered Asset Management Companies (AMCs) and the AMCs be permitted to provide fund management / asset management services to the insurance firms.

Also, Association of Mutual Funds in India (Amfi) has requested for uniformity in taxation on listed debt securities and debt mutual fund.

The holding period for long term capital gains for direct investment in listed debt securities / and zero-coupon bonds (listed or unlisted) and for investment through debt mutual funds should be harmonized and made uniform.

This may be done by bringing the two at par in either by treating investments in non-equity oriented MF schemes as long term, if they are held for more than 12 months or increasing the minimum holding period for direct investment in listed debt securities / and zero-coupon bonds to 36 months to qualify as Long-Term Capital Asset.

Besides, it has proposed ''to bring parity in tax treatment in respect of capital gains on withdrawal of investments in ULIPs of Life Insurance companies and redemption of Mutual Funds Units, so as to bring about level playing field between ULIPs and MF scheme''.

The industry body has suggested that mutual funds should be allowed to launch pension-oriented MF schemes, 'Mutual Fund Linked Retirement Scheme', with similar tax benefits as applicable to National Pension Scheme (NPS).

It has been proposed that intra-scheme switches -- switching of investment within the same mutual fund scheme is not regarded as a “transfer” and the same should be exempt from payment of capital gains tax.

In addition, the industry body has requested that the threshold limit for withholding tax (TDS) on income distribution (dividend) on mutual fund units should be increased from Rs 5,000 to Rs 50,000 per annum. ''It is proposed that, mutual fund units wherein the underlying investments are made into specified infrastructure sub-sector as may be notified by the Government of India, be also included in the list of the specified long-term assets''. Among others, Amfi said that there is a need to further simplify Taxation provisions of offshore funds managed by Indian portfolio managers.

It has suggested that some or all the conditions relating to safe harbour need to be deleted for portfolio managers/ advisors operating from the International Financial Services Centre (IFSC), GIFT city, Gujarat.