The Budget should revise the definition of Equity Oriented Funds by including Fund of Funds schemes which invest predominantly in units of equity-oriented mutual fund schemes.
By Jimmy Patel
In the year 2018, retail investors continued to remain buoyant with their SIP investments inspite of the market volatility and rupee devaluation. The year 2019—the election year—markets are given to be on a roller-coaster ride.
The Union Budget this year will be an interim one, so there is not a lot that can be expected. However, having said that, I personally feel that the present government is capable of giving us some surprises. As far as my expectations are concerned, the one thing I have always wanted the Budget to do is to revise the definition of Equity Oriented Funds (EOF) by including Fund of Funds (FOF) schemes which invest predominantly, i.e., 65% or more, in units of equity-oriented mutual fund schemes.
My wish list continues and my second point is a tax exemption on lines of National Pension Scheme (NPS) to investment in retirement benefit/pension schemes that may be allowed to be launched by mutual funds. In my third recommendation, I request that units issued by mutual funds that are registered with Securities and Exchange Board of India (Sebi), having a lock-in for three years wherein the underlying investments are made into equity or debt of ‘infrastructure sub-sector’ as specified by Reserve Bank of India Master Circular in line with ‘Master List of Infrastructure sub-sectors’ notified by the government of India, be also included in the list of the specified long-term assets and may be notified as “Long term specified assets” under Section 54EE.
This will help for exemption on long-term capital gains. Further, in order to bring uniformity in taxation of investment in mutual funds schemes and Ulips of insurance companies, I would like to suggest that in case of Intra-Scheme Switches (switching of investment within the schemes of the fund house and intra-fund house) should ideally be exempt from payment of capital gains tax.
Investors should be given full freedom to choose (or switch) their investments without any conditions applied as is applicable to unit-linked insurance plans (ULIPS). Last but not the least, to make sure that the Budget helps encourage more and more household savings flow into the corporate bond market, the government could introduce Debt Linked Savings Scheme (DLSS) on the lines of equity-linked savings scheme (ELSS). This will help channelise long-term savings of retail investors to deepen the Indian bond market.
The writer is MD & CEO, Quantum Mutual Fund