NEW DELHI: Mutual funds’ industry lobby Association of Mutual Funds in India (Amfi) has submitted its Budget wish-list to the finance ministry demanding mutual fund-linked retirement plan on the lines of the popular 401k pension funds in the United States.
Amfi has also demanded debt-linked savings schemes with tax benefits under Section 80CCC of the Income Tax Act.
Section 80CCC of the Income Tax Act deals with the deductions and income in respect of contributions to certain pension funds by an individual assessee Payment of premium for annuity plan of Life Insurance Corporation of India (LIC) or any other insurer.
Currently, only equity-linked savings schemes (ELSS) have tax benefits under Section 80CCC of the Income Tax Act for investment limit of up to Rs 1.5 lakh in a financial year.
The popularity of the 401k pension plans is because it acts as additional retirement savings to citizens, which is exclusive of the pension given by the government and employers.
“Amfi has been proposing this for many years but it is still to materialise. Last year also, the proposal was made but we are still stuck with the initiation. Let us wait and watch as to what the Budget finally delivers,” said Dhirendra Kumar, CEO of Value Research, a mutual fund tracker.
Pension plans similar to 401k are operational in many other countries where tax-related and other incentives provided by the government have led to significant increase in the share of long-term retail money in mutual funds.
Amfi also wants the tax benefits available under Rajiv Gandhi Equity Savings Scheme (RGESS) extended to all equity fund investors. RGESS was introduced in 2012 to promote investments in equities for first-time investors with annual income below Rs 12 lakh a year.
Amfi has also asked for an extension of the Sec 54 EC benefit for mutual fund schemes with a lock-in period of 3-5 years. Section 54 EC of Income Tax Act, 1961 provides an option to save tax on capital gains arising from transfer of long-term capital asset subject to certain conditions.