Government Concession to Debt Funds a Partial Relief: Industry
New Delhi: The mutual fund industry on Friday termed the government's decision to exempt debt mutual funds sold between April 1 and July 10 this year from an increased tax rate as 'partial relief'.
Earlier this month, the Union Budget had proposed doubling of the long-term capital gain tax on debt-oriented mutual funds to 20 per cent with effect April 1, 2014.
Following representations from market participants, Sebi, the Association of Mutual Funds of India (AMFI) and Members of Parliament, Finance Minister Arun Jaitley in Lok Sabha said a higher tax rate of 20 per cent on the debt mutual fund will apply from July 10, the day on which the Budget for 2014-15 was presented, and not from April 1, 2014 as proposed earlier.
"It's a mixed bag. We welcome the step but it's a partial relief. The new tax regime will not apply to investors who undertook transaction of sale of units between April 1 and July 10," Axis Mutual Fund managing director and chief executive Chandresh Nigam said.
He further said that retrospective apply at the time of purchase not at the time of sale, those investors who have bought these units in anticipation of tax benefits will have to re-look their portfolios.
Echoing similar views, LIC Nomura MF senior fund manager Kilol Pandya said, "Its just a marginal relief. This is not going to help the industry incrementally."
The Finance Minister said that new tax regime on debt mutual funds will not be applicable for units sold (not purchased) between April 1 and July 10. (Read full story)
Mr Jaitley in his maiden Budget had proposed to increase the long-term capital gain tax on debt mutual funds from 10 per cent to 20 per cent. He also increased the minimum holding period for debt mutual funds to qualify for long-term capital gains tax to 36 months, from 12 months at present.
The move is part of government's effort to bring parity with banks and other debt instruments.
In the case of debt mutual funds, the minister had said that capital gains arising on transfer of units held for more than a year is taxed at a concessional rate of 10 per cent, 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 percentage is very small among such mutual fund investors, Mr Jaitley had said.
Earlier, the mutual fund industry has protested against the Budget proposal saying the new tax regime will hurt the industry as majority of assets under management comes under the debt category.
-
Signature Play: The Classic Cocktail Is Dead. Or Is It?
Classic cocktails are disappearing from India's cocktail menus. But they're still being ordered, taught to bartenders and borrowed from. So, who's really having the last drink?
-
A New Samvat Wishlist: Inclusive Prosperity And Human Development
India has strengthened its economic foundations through infrastructure, digital access and enterprise. Its next growth chapter must deepen productivity, create better livelihoods and widen participation in prosperity.
-
Love, Sex Aur Dhokha: The Audacious Plot To Spy On Jensen Huang
A Taipei dinner, a Singapore chip buyer and a suspected Chinese asset: inside the alleged spy operation that got close to NVIDIA's Jensen Huang.
-
Ten Things I Learnt This Samvat
Patience can be a trap. Cheap stocks can stay cheap. Leverage can wipe you out. What did Samvat 2082 teach us? Niraj Shah writes on 10 lessons from the year gone by.
-
Talking Points This Week: Tech Nerves, FII Buying, And A Faraway Banking Shock
The global markets are not shining this Diwali. The exception in the large markets is, India.
-
Midterm Rally Lasted A Day. The Hard Reality Of A Divided US May Last Two Years | Opinion
Between a contested AI boom, a debt ceiling that arrives in 2027 and a president with every incentive to act alone, the next two years may prove more volatile than the first day's rally suggests.
-
Blue Wave Will Derail the AI Trade but Won't Dismantle the AI Era | Unhedged Position
The Democrats' sweep of the US Congress will see politics collide with economic forces both over the long and short term.
-
It's Time To Take The GST Council's Bet On Trust Global
Payment records can prove India's services exports, and clear, proportionate rules can bring foreign digital sellers into the tax net.
-
Opinion | India at 38: From Innovation Overperformer to Innovation Powerhouse
India now has 453 VC-backed deep science startups, 18 of them late-stage, after 117 percent growth since 2020. Laurus Labs, at USD 9.3 billion, is the most valuable deep science company in any middle-income economy outside China.
