Budget 2025: The budget for the year 2025 is going to be presented on February 1, 2025. Earlier, the Association of Mutual Funds in India (AMFI) has put forward some demands for the mutual fund industry. The most important of these demands is the resumption of indexation benefits on long-term capital gains for debt mutual funds. AMFI also demands that capital gains on redemption of units of debt mutual funds should be taxed at the rate of 12.5 percent.
That’s why indexation benefit is important
Let us tell you that earlier in the budget of 2023, the government had abolished the indexation benefit by making changes in the capital gains of debt funds. Due to this new rule of the government, indexation benefit was available on investments made in debt funds till March 31, 2023, but it was abolished under the new rule implemented from April 1, 2024.
Earlier, investors had to pay tax on long term capital gains if they sold debt funds within three years, but by getting indexation benefits, the tax liability was reduced. Now, since the effect of inflation on capital gains is considered under indexation, if the capital gains decrease with inflation, then the tax liability also reduces.
Under the government’s new rule, capital gains of debt funds were added to investors’ income and those in higher tax slabs had to pay more tax. Now if indexation benefit is started again, then the interest of investors in debt funds will increase.
AMFI appeals to the government that tax at the rate of 12.5 percent should be imposed on debt mutual fund units held for more than 1 year. This will encourage retail investors to invest in debt funds.
AMFI also made this demand from the government
AMFI’s other demands include increasing the tax deduction (TDS) limit on dividends paid by mutual funds from Rs 5,000 to Rs 50,000, restoration of earlier STT rates for futures and options trading, NPS for mutual funds registered with SEBI. This includes allowing the launch of pension-oriented schemes similar to NPS.
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