To encourage retail traders to put money into yellow steel by means of mutual fund route, business physique Amfi has requested the federal government for preferential tax therapy for Gold ETFs and Fund of Funds forward of the Union Funds.
In its funds proposals for 2023-24 to the finance ministry, Amfi has proposed that Gold ETFs and Fund of Funds (FoF), which make investments 90 per cent or extra of their corpus in items of Gold ETFs, ought to be subjected to long-term capital positive aspects tax of 10 per cent as an alternative of 20 per cent with indexation profit.
Alternatively, it has advised that holding interval to avail long-term capital positive aspects taxation in respect of Gold ETFs (change traded funds) ought to be decreased from current three years to at least one yr.
“A preferential tax therapy to monetary gold choices like Gold ETFs and Fund of Funds …Will promote the class as a gold funding avenue over different fiscally inefficient avenues like bodily gold and gold jewelry. This transfer will probably be in keeping with the federal government’s agenda to discourage financial savings and investments in bodily gold/jewelry and increase the financialisation of gold holdings,” Amfi stated.
Such incentives are prevalent in different international locations just like the UK the place funding in gold doesn’t entice VAT (Worth Added Tax) which is charged on non-investment gold on the charge of 20 per cent.
At current, Gold ETFs and Fund of Funds are at the moment topic to capital positive aspects tax which is in keeping with different gold funding avenues — short-term capital positive aspects taxed at a marginal tax charge for holding interval as much as 3 years and long-term capital positive aspects tax of 20 per cent with indexation profit for holding interval of greater than 3 years.
Aside from gold, the Affiliation of Mutual Funds in India (Amfi) has advised that the definition of equity-oriented funds ought to be revised to incorporate FoF investing in index funds.
It has requested authorities to carry uniformity in taxation on listed debt securities and debt mutual fund (MF) and convey parity in tax therapy between MFs and unit-linked insurance coverage (ULIPs).
Additionally, it has been proposed that intra-scheme switches — switching of funding throughout the similar mutual fund scheme — are usually not thought to be “switch” and the identical ought to be exempt from fee of capital positive aspects tax.
The business physique has requested that mutual funds ought to be allowed to introduce low-cost, lower-risk tax-exemption-linked debt-linked financial savings schemes (DLSS) on the traces of equity-linked saving schemes (ELSS).
It has been additional proposed that funding of as much as Rs 1.5 lakh underneath DLSS be eligible for tax profit, topic to a lock-in interval of 5 years (similar to tax saving financial institution mounted deposits).
Presently, equity-linked financial savings schemes qualify for tax advantages underneath Part 80 CCC of the Earnings Tax Act for an funding restrict of as much as Rs 1.5 lakh in a fiscal yr.
It has beneficial that each one registered insurance coverage firms be permitted to outsource the fund administration actions to registered Asset Administration Firms (AMCs) and the AMCs be permitted to supply fund administration/asset administration providers to the insurance coverage corporations.
The business physique has advised that mutual funds ought to be allowed to launch pension-oriented MF schemes, ‘Mutual Fund Linked Retirement Scheme’, with comparable tax advantages as relevant to Nationwide Pension Scheme (NPS).
The holding interval for long-term capital positive aspects for direct funding in listed debt securities/and zero-coupon bonds (listed or unlisted) and for funding by means of debt mutual funds ought to be harmonised and made uniform.
This can be completed by bringing the 2 at par both by treating investments in non-equity oriented MF schemes as long-term, if they’re held for greater than 12 months, or rising the minimal holding interval for direct funding in listed debt securities and zero-coupon bonds to 36 months to qualify as long-term capital asset.