In the first-ever long term policy for over Rs 9-trillion mutual fund industry, regulator Sebi on Thursday proposed tax incentives for investors to help channelise household savings into these investment products.
At the same time, Sebi also sought to bring in greater seriousness among fund houses in running mutual fund schemes by asking them to contribute their own money in form of ‘seed capital’ amounting to 1 per cent of amount raised, while minimum networth requirement would also be increased from Rs 10 crore to Rs 50 crore to weed out non-serious players.
Through this policy, Sebi has also asked the Government to facilitate channelising of pension money into mutual fund space, while state-run companies would be encouraged to park their surplus funds with various mutual funds. The proposed tax benefits also include creation of a long-term investment product, Mutual Fund linked Retirement Plan, with additional tax incentive of Rs 50,000.
Alternatively, Sebi wants the Government to enhance the limit under Section 80-C of the Income Tax Act from Rs one lakh to Rs two lakh to help make various mutual fund schemes eligible for such tax benefits. Currently, this section allows for deduction of Rs one lakh from taxable income of a person.
‘The long-term policy for mutual funds in India’ was cleared by Sebi board at a meeting held here today and it provides for enhancing the reach of mutual funds, provide tax benefits and help mobilise household savings into them.