Mutual funds have been disappointed over the last two years as there has been little respite in the Budget. This time around, mutual funds will look at parity on a number of areas plus a reversal of some of the recent measures pertaining to capital gains tax and the tax on distribution of dividends by MFs.
Time to bring in DLSS
While ELSS has become extremely popular as a tax saving instrument, one argument has been that it forces people to take on risk. The answer could be in extending these Section 80C benefits to debt funds too and introduce a separate DLSS classification for the same. Of course, the lock-in period can be either retained at 3 years or extended to 5 years. The idea is that conservative investors need not be penalized when their financial plan dictates caution.
Parity with ULIPs and NPS
This has been a persistent demand of AMFI over the last few years. The first demand is to put pension plans of mutual funds at par with the National Pension Scheme (NPS) in terms of tax benefits. That will entail extending the additional exemption of Rs.50,000 on NPS to pension plans too. Secondly, while equity MFs are subject to LTCG tax, the ULIPs are exempt from any form of capital gains tax. This puts the mutual funds at a disadvantage and AMFI has been demanding parity.