New Delhi: Finance Minister Arun Jaitley is all set to present the Union Budget 2018 on Thursday. Many participants have requested FM Jaitley to increase the Section 80C benefit from the current Rs 1.5 lakh limit. Currently, tax payers can invest in a prescribed list of instruments and save taxes of up to Rs 1.5 lakh.
The mutual fund industry has constantly been pressing for hike in the 80C limit because many tax payers are not left with any window for investment after they have exhausted the bracket with several other spendings like –life insurance premium, provident fund contributions and principal repayment on home loan.
Industry body CII has demanded that the holding period for units of debt mutual fund must be restored to 12 months from 36 months to qualify as long-term capital gains and bring it at par with equity market.
Currently, only equity-linked savings schemes (ELSS) qualifies for tax benefits under Section 80 C of the Income Tax Act, for an investment limit of up to Rs 1.5 lakh in a financial year.
By extending the tax benefits to debt-based mutual fund schemes, conservative investors will also get an opportunity to avail tax benefits.
Mutual fund industry lobby - Association of Mutual Funds in India - has compiled and forwarded its Budget proposals . It has proposed that the investments upto Rs 1.5 lakh under DLSS be eligible for tax benefit under ChapterVI A, under a separate sub-Section and subject to a lock in period of 5 years (just like tax saving bank Fixed Deposits).
It has further proposed that, mutual fund units that are redeemable after three years, wherein the underlying investments are made into equity or debt of ‘infrastructure sub-sector’ be also included in the list of the specified long-term assets under Section 54EC.
In its recommendation AMFI has said that Units issued by Mutual Funds that are registered with SEBI, having a lock-in for three years may be notified as “Long term specified assets”underSection 54EE.
Further, the investments in mutual fund units could be permitted in both equity oriented or debt oriented funds, based on investors’ choice & risk appetite, with a lock in period of three years.