Upstream of the budget, Amfi calls for fiscal parity between debt securities, FMs


Ahead of the Union budget for fiscal year 2022-23 (FY23), the Association of Mutual Funds in India (Amfi) made a multitude of proposals, in particular the standardization of the taxation of debt securities listed and debt funds and the authorization of investment fund pension schemes with the same tax treatment as the National Pension Scheme (NPS).

“It is only logical and fair to achieve parity in the tax treatment of direct investments in listed debt securities and indirect investments in the same instruments through debt-based mutual fund systems. This parity between direct investments in a listed security (by companies and HNIs) and indirect investments made through MFs by retail investors would also prevent leakage of tax revenues, ”said the Amfi memo.

Currently, debt-oriented MMF units have a minimum holding period of 36 months to be considered long-term fixed assets. It is 12 months for direct investments in listed securities such as bonds, bonds, government securities, derivatives, etc., and zero coupon bonds.

To encourage the deepening of capital markets through MFs, Amfi has also suggested introducing Debt-Linked Savings (DLSS) programs. He further proposed that investments up to Rs 1.5 lakh under DLSS be eligible for a tax benefit in a separate subsection and subject to a five-year blocking period (just like fixed deposits of tax savings banks).

Another proposal concerned a similar tax treatment on capital gains on investments in FCPs and unit-linked insurance plans (Ulips) of insurance companies. The proceeds of Ulips are exempt from income tax under Section 10 (10D) of the Income Tax Act (IT), if the sum insured in a life insurance policy is d ” at least 10 times the annual premium and withdrawn after a block of five years. .


  • Uniformity of taxation on listed debt securities and debt UCITS
  • Parity of tax treatment in matters of intra-plan unit exchange within the framework of FCP regimes
  • Partial modification of ELSS to allow investment of any amount instead of multiples of Rs 500
  • Reduce the tax rate / TDS for NRIs on STCGs of debt programs from 30% to 15%
  • Allow insurance companies to outsource fund management activities to AMCs

In comparison, long-term capital gains (LTCG) resulting from the sale of publicly traded stocks and units of equity-based capitalization funds are taxed at the rate of 10 percent if the LTCG exceeds Rs. 1 lakh during an exercise.

To alleviate the difficulties of retail investors, Amfi also called for increasing the withholding tax threshold on the distribution of income by MF plan and partially modifying share-linked savings plans (ELSS) to allow investments of any amount.

Amfi has proposed that insurance companies be allowed to outsource fund management activities to asset management companies (AMCs).

“This would lead to complementarity between the microfinance and insurance sectors to access households with financial products that could be simple investment products produced by the asset management sectors or insurance products that could bundle an investment element, ”Amfi said.

He also called for a revision of the ECD guidelines to allow the CPSEs of Maharatna, Navratna and Miniratna to invest their surplus funds in any MF, whether it is a public or private fund.

“The current investment restrictions imposed on CPSEs are rather monopolistic and restrictive, as they deny good investment opportunities to CPSEs who are forced to invest their surplus funds only in public sector MFs, thus losing a competitive opportunity to invest. ” invest in private sector FMs with good track records. “said Amfi.

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John A. Bogar