In a bid to increase the investments in India’s mutual fund industry, the Securities and Exchange Board of India (SEBI) has urged the finance ministry to consider various tax sops for mutual funds products to make them more attractive to retail investors. The move is a part of SEBI’s efforts to incentivise and channelise household savings into equity long-term investment products and final decision in this regard would be taken by the new government. Further, high investments by domestic investors would help in curbing the unwanted volatility in domestic equity markets and would reduce the excessive reliance on the foreign investors.
The market regulator has now submitted the draft to Finance Ministry comprising measures to enhance investments in mutual fund industry. Among various proposals, the SEBI proposed for creation of a long-term investment product, Mutual Fund Linked Retirement Plan, with an additional tax incentive of Rs 50,000. In order to make various mutual fund schemes eligible for such tax benefits, the SEBI wants the new government to enhance the tax exemption limit under Section 80C of the Income Tax Act from Rs 1 lakh to Rs 2 lakh. The regulator also wants the Rajiv Gandhi Equity Savings Scheme to be brought under the enhanced tax exemption limit. Besides, SEBI wants all Central Public Sector Enterprises (CPSEs) to be permitted to invest their surplus funds in mutual fund schemes. At present, only miniratna, navratana and CPSEs are allowed to invest in such schemes.
There are about 45 fund houses present in the country with total assets worth over Rs 9 lakh crore. Over the past couple of years, the fund mobilisation to mutual fund houses has remained lower owing to the lack of tax benefits which has made mutual funds products unattractive to investors.