AMFI Appeals for Restoration of Indexation Benefits on Debt Mutual Funds
The Association of Mutual Funds in India (AMFI) has requested the government to reinstate indexation benefits on debt mutual fund schemes. The appeal was made by AMFI’s Chief Executive, Venkat N. Chalasani, who emphasized that the move could encourage more individuals to invest in mutual funds. He noted that the reintroduction of indexation benefits would significantly benefit investors and promote the mutual fund industry.
Chalasani noted that the withdrawal of indexation benefits had reduced the appeal for debt mutual funds. Before March 2023, long-term capital gains held for more than three years arising from any debt fund were taxed at 20% with indexation benefits, thus reducing the tax outgo by the investor. However, the Finance Bill amendments in March 2023 withdrew this benefit and the income now stands to be taxed on the applicable slab of the investor.
In addition to promoting the merits of indexation, Chalasani emphasized that tax incentives would be the biggest enabler of India’s corporate bond market. He said it would ensure the growth of an active and mature bond market in the country.
Trends in Equity Mutual Funds
Chalasani also responded to the recent decline in equity mutual fund inflows, saying the slowdown was primarily due to a spate of lump sum investments. While he still maintains a positive view for the long term, that short-term fall is not significant enough for him.
Data from November 2024 showed equity mutual fund inflows at Rs.35,927.3 crore, a 14.1% decline compared to Rs.41,865.4 crore in October.
- Large-cap funds saw a fall of 26.3% in inflows, with a decline from Rs.3,452.3 crore in October to Rs.2,547.9 crore in November.
- Small-cap funds saw an increase of 9.0%, with inflows going up from Rs.3,772 crore in October to Rs.4,112 crore in November.
- Mid-cap funds have seen a reasonable growth of 4.3%. Inflows increased from Rs.4,683 crore in October to Rs.4,883.4 cr in November.
The call for the revival of indexation benefits and income tax benefits resonates with the overall AMFI policy of making the investment environment even more investor-friendly and boosting the financial markets in the country.
