The Budget 2023 has a
lot of expectations from the market as it happens to be the last Budget before
the 2024 general elections.
Mutual fund industry
plays an important role in channelizing savings towards the capital market.
Indian households have embraced market linked products like mutual funds in a
big way post demonetization as we enter into an era of financialization of
savings.
It is heartening to
see that the mutual fund industry has grown at a CAGR of 14% from Rs 21.26 lakh
crore in December 2017 to reach Rs 40.76 lakh crore in December 2022. As of
December 2022, the inflows from Systematic Investment Plans (SIPs) stand at Rs
13,573 crore with a record 6.12 crore SIP folios. Thus, it is clearly evident
that Indians are preferring the mutual fund route to meet their long term
goals.
To help mutual funds penetrate further into
smaller towns and cater to investors long term goal like retirement MF products
liked with Retirement Schemes with added tax benefits need to emerge in the
market. Accordingly few recommendations have been made by Association of Mutual
Funds in India (AMFI) for the Budget 2023. One of them is that Mutual Funds
should be allowed to launch Mutual Fund Linked Retirement Plan (MFLRP) akin to
401(k) Plan in the U.S. which would be eligible for tax benefits. Tax
incentives are pivotal in channelizing long term savings. Currently, National
Pension Scheme (NPS) is eligible for additional tax exemption of Rs 50,000
under Section 80CCD. The mutual fund industry has been long demanding that the
tax treatment for NPS and Retirement/Pension oriented schemes launched by
Mutual Funds should be aligned by bringing the latter also under Section 80CCD
of IT Act, 1961. This will bring parity
of tax treatment for the pension schemes and ensure level playing field.
Source: TOI
