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Quantum AMCs Budget Expectation: Income Tax Act should be increased

India Infoline News Service | Mumbai |

In addition, retirement management should be made available or open to asset management companies.

Tax exemption under Section 80C of the Income Tax Act should be increased. Within Section 80C, there should be an exclusive limit for mutual fund investments to be qualified for tax savings. Currently, the equity-linked savings schemes have to compete with other forms of savings and eventually lose out.

In addition, retirement management should be made available or open to asset management companies. Today, the CBDT regulation says that you can make an application on a case-to-case basis to the Central Board of Direct Taxes, which will then approve it but unfortunately it has not approved a single scheme post 1997. So, this bureaucratic regulation should be removed.

Normally, retirement money is deemed to be long-term money and once that comes under mutual funds, fund managers will also be in a position to take long-term investment calls and invest in the capital market. So, indirectly it also benefits capital markets and brings financial inclusion as this is actual hard core retail money that the industry will target.

Under the mutual funds structure, infrastructure debt funds are competent. There are separate guidelines for them and their net worth requirement is also less at 100 mln rupees. Unfortunately, we havent seen any debt fund being launched under this umbrella, which could be more of a teething issue about getting enough quality papers, not knowing how to value those papers, and being able to rely on them, etc.

When all these grey areas are cleared in terms of the asset that is created or papers that are made available, then there would be a lot of scope for infrastructure funds. If the government also adds on with tax benefits to retail investors, the situation will get much better.

The long-term pending requirement is to treat all equity fund of funds as equity funds for tax calculation. Currently, they are treated as debt funds. Consequently, the appetite of fund of funds will also improve. The question is of understanding that revenue is not going to be a major loss if this exemption is made available as equity funds.

Besides that, if you were to go backward and recollect that upto 2002, there was 54EA EB and EC under which any sale proceeds of capital assets, where the full sale proceeds or capital gains from the sales proceeds, if invested into classified equity funds of a mutual fund would get exempted, and the lock-in period was three years or five years depending on the amount of investment. So, the capital gain then probably that should be brought back and indirectly that money can be ploughed back into infrastructure funds.


Pre Budget Expectation of Jimmy Patel- CEO, Quantum AMC
 

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