In a bid to boost the mutual fund (MF) industry, the Securities and Exchange Board of India (Sebi) has requested the finance ministry to consider tax sops and other measures for investors. A final decision in this regard will be taken by the new government.
These are part of Sebi's efforts to incentivise and channelise household savings into long-term investment products.
Sebi had approved these measures and it has now written to the finance ministry.
One of the proposals include creation of a long-term investment product, Mutual Fund Linked Retirement Plan, with an additional tax incentive of R50,000.
Alternatively, Sebi wants the government to enhance the tax exemption limit under Section 80C of the Income Tax Act from R1 lakh to R2 lakh to help make various MF schemes eligible for such tax benefits.
The regulator also wants the Rajiv Gandhi Equity Savings Scheme to be brought under the enhanced limit.
At present, Section 80C provides tax exemptions on investments totalling R1 lakh in various products, including certain mutual funds, insurance plans and provident fund.
However, there are no restrictions on pension products launched by MFs, but lack of tax benefits makes them unattractive.