SEBI proposes payroll-linked mutual fund SIPs, unit commissions; check details

Market regulator Securities and Exchange Board of India (SEBI) has proposed a major overhaul of mutual fund payment rules that could allow employees to invest in mutual funds directly through salary deductions, similar to Provident Fund (PF) and National Pension System (NPS) contributions.

The regulator has floated a draft framework aimed at permitting select third-party payment arrangements in mutual funds, while retaining strict safeguards against misuse. The proposal also includes mutual fund unit-based commission payouts for distributors and donation mechanisms linked to mutual fund investments.

Currently, mutual fund investments generally need to originate from an investor’s own bank account. SEBI said the proposed framework seeks to strike a balance between ease of investing and regulatory protection.

Salary-linked SIP model proposed

One of the most notable proposals involves enabling employers to facilitate mutual fund investments through payroll deductions. Under the framework, employees who voluntarily opt in could authorize a portion of their salary to be invested periodically in mutual fund schemes of their choice.

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SEBI said the facility would be available to listed companies, EPFO-registered firms and asset management companies (AMCs).

The move could potentially create a workplace investing model similar to PF and NPS, making systematic investing more structured and convenient for salaried employees.

However, the regulator has sought public feedback on whether companies should be restricted from directing employees toward schemes run by their own group AMCs to avoid possible conflicts of interest.

Mutual fund commissions in MF units

SEBI has also proposed allowing AMCs to pay commissions to mutual fund distributors through mutual fund units instead of cash payouts. The regulator believes this could encourage disciplined long-term investing among distributors.

However, concerns have also been raised around potential mis-selling risks if distributors begin favoring schemes offering unit-linked commissions. SEBI has invited stakeholder views on safeguards needed to address such risks.

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Donation option via mutual funds

The draft framework additionally proposes allowing investors to donate a portion of their investments or returns toward social causes.

According to SEBI, donations could be routed through Zero Coupon Zero Principal instruments issued by not-for-profit organisations listed on the Social Stock Exchange or directly to selected NGOs.

The regulator said this could reduce operational challenges for investors seeking credible donation avenues.

Strong safeguards to continue

Despite relaxing third-party payment restrictions, SEBI said anti-money laundering safeguards will remain intact. Proposed measures include mandatory KYC verification, relationship checks between investor and payer, transaction tracking, and ensuring that redemption and dividend proceeds continue to be credited only to verified investor bank accounts.

Public comments on the consultation paper have been invited until June 10, 2026.

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