The mutual fund (MF) industry has asked the Centre to treat the merger of schemes akin to company consolidation for the purpose of taxation and to do away with capital gains tax and securities transactions tax (STT) in the upcoming budget .
"The consolidation of schemes was done based on the regulatory initiative. It would not have been done without this. As such there should not be any tax on such a move," said H. N. Sinor, chief executive of the Association of Mutual Funds of India (Amfi). At present such taxes are being borne by the investors.
The regulator, Sebi, has asked MF firms to merge the schemes, which are similar to each other so that investors can choose the most suitable one from among various offerings. MF investors are overwhelmed by the over 3,000 schemes to choose from.
The MF industry had assets under management (AUM) of about Rs 6.94 lakh crore at end-January, 2011. Of this, equity funds had AUM of Rs 1.90 lakh crore, balanced fund worth Rs 18,104 crore, exchange traded funds (ETFs) Rs 5,411 crore and the rest under various debt schemes.
Infrastructure schemes of mutual funds should be treated on par with infrastructure bonds and given tax-free status, Amfi has proposed. Presently, specified infrastructure institutions are permitted to raise funds from investors issuing tax-free bonds, for onward lending to the infrastructure sector. However, many infrastructure MF schemes are meant for investing in infrastructure stocks.
"The industry has also proposed doing away with STT on buying and selling of mutual fund units by equity funds as that amounts to double taxation since they have to pay STT while transacting in equities," said Sandesh Kirkire, CEO Kotak Mahindra Mutual Fund.
Courtesy: Mail Today