ULIP, MF tax parity sought

TNN
Mumbai: Mutual fund industry body Amfi has asked the finance minister to bring tax parity between MF schemes and unit-linked insurance plans (ULIPs) by insurers in the forthcoming Budget. It also suggested that the government allow debt linked savings schemes (DLSS), similar to the equity linked savings schemes (ELSS), which are tax-saving plans.
Amfi in its Budget proposals has raised the need to bring parity in tax treatment for investments in different financial sectors.This has been a long-standing demand by the fund houses as both (MFs and ULIPs) are investment products and invest in securities.
“Currently, ULIPs enjoy more tax benefits as compared to MFs in various aspects like no capital gains on switching, no STT (securities transaction tax) levied on the withdrawal proceeds, no income tax on the proceeds (including early surrender and partial withdrawals) subject to certain conditions, etc,” Amfi noted.
Amfi added that DLSS will help channelise long-term savings of retail investors into higher credit-rated debt instruments with appropriate tax benefits, which will help in deepening the country’s bond market. Amfi had made the suggestion about allowing DLSS before the previous Budget too.
Amfi also suggested the government increase the limit for tax deducted at source (TDS) on redemption of MF units to Rs 50,000 from Rs 5,000 now. This would mitigate hardship for retail taxpayers, it said.