Govt Plans to Change Capital Gains Tax Regime for Debt Mutual Funds
The Government of India is seeking to change the capital gains tax regime for debt mutual funds to provide some relief to the Bharat Bond Exchange Traded Fund.
In a meeting last week in the Finance Ministry, the concern was raised as the government intends to issue a new tranche of the Bharat ETF in the current financial year. The matter of changes in the Capital Gains Tax Regime is currently under examination and the final decision will be taken when the budget is presented by the government.
The Official said that starting from April 1st, just like any other debt mutual fund, the Bharat ETF will be taxed at the slab rate, which could be an inconvenience for investors.
Finance Bill 2023 proposed and changed the debt mutual funds’s tax structure. Earlier in 2023, debt funds taxation was dependent on the holding period. In a case where the debt funds holding period was for more than 36 months then at the rate of 20% with indexation benefits, the capital gain was levied. And, If the holding period is less than 36 months then short-term capital gains were levied.
However, after the Finance Bill introduced changes, debt mutual funds are taxed at the income tax rate applicable in your slab in which equity investments are less than 35%. The official stated that the govt can consider giving a waiver for Bharat Bond ETF.
The offficial further said that after the new government assume his work, a formal recommendation in this regard will sent to the Department of Revenue for consideration by DIPAM.
Officials of the Finance Ministry will meet with executives from PSUs to review their funding requirements for the current financial year. The bonds of the Bharat Bond Exchange Traded Fund (ETF) have been issued by CPSEs, CPSUs, Central Public Financial Institutions and other govt entities, apart from these 3 private companies are also included in it.
The government initiated a process in Dec 2023 to appoint a consultant who will advise on issuing a fresh tranche and managing the Bharat Bond ETF.
