The chamber has advocated inclusion of units of all mutual funds among securities eligible for capital gains tax. In order to remove any ambiguity as well as to cover all the mutual fund schemes whether listed or not, the chamber suggested that the proposed provision to Section 112 of the Income Tax Act, 1961 should be rewarded as under: ``Provided that where the tax payable in respect of any income arising from the transfer of a long term capital asset being listed securities or units of Unit Trust of India or units of any mutual funds referred to in Section 10(23D), whether such unitsare listed or not, exceeds 10 per cent of the amount of capital gains before giving effect to the provisions of the second provision to Section 48, such excesses shall be ignored for the purpose of computing the tax payable by the assessee.''

Alternatively, the Assocham has suggested that a suitable notification under 2(H)(iia) of Securities Contact (regulation) Act 1956 may be issued by the central government declaring units of all the schemes of UTI and all other funds whether listed or not, as securities eligible for capital gains tax of 10 per cent.

Mutual funds which have launched monthly income plans or schemes with assured returns will be affected by the levy of 10 per cent tax as they will be required to pay from the income generated by the respective schemes. This 10 per cent tax will thus erode the returns to the investors, which could be a source of hardship, particularly to small investors.

For promoting further long term savings by household sector through the pension and retirement plans-- Section 88 of IT Act, 1961, the exclusive limit of Rs 10,000 under equity linked savings scheme be increased to Rs 30,000. The benefit of investment under ELSS scheme should be extended to balanced schemes of mutual funds which have an equity content of 50 per cent. The ELSS guidelines issued by the Ministry of Finance, on December, 28, 1992 may therefore suitably be amended to incorporate the suggestions.

The exemption in respect of income of NRI and HUF from all mutual funds including UTI should be exempt from taxation by a suitable amendment in Section 115A and 196A of the Income Tax Act, 1961. The chamber feels these amendments will place al investments of NRI and HUF in mutual funds on par as far as tax provisions go.

The chamber says Section 115A of the Income Tax Act, 1961 taxes non-residents receiving any income from units of mutual funds at 20 per cent. Section 196A(I) makes it obligatory on mutual funds to deduct tax at 20 per cent in respect of any income payable to a non-resident.