Calcutta, Feb. 2: The Association of Mutual Funds in India (Amfi) has urged the Centre to carve out equity-linked savings schemes as a separate part under section 80C of the income tax act offering benefits over and above the ceiling of Rs 1 lakh per annum.
V. Ramesh, deputy chief executive of Amfi, said the scheme could be made more popular among investors if the government decided to offer deductions above the prescribed limit under section 80C.
Besides ELSS, other products that are available for deduction from taxable income under section 80C include public provident fund, insurance premium and national savings certificate.
"The idea of ELSS is to channelise part of the household savings into capital market and offer tax savings at the same time. But investors have different risk-free options under 80C. If they need to take benefit out of the tax exemption from this product, it needs to be out of the 80C limit," Ramesh told The Telegraph on the sidelines of a summit organised by the Indian Chamber of Commerce here today.
"We have made a suggestion of an additional benefit of Rs 50,000. But even if the government decides to give Rs 20,000 as additional benefit, it would bring more money into the capital market and investors can grow. We hope the government can take a call in the upcoming budget," he added.
Data from Amfi show equity-linked tax saving plans have seen net outflows of Rs 1,686 crore in the current financial year till December 2012 compared with an outflow if Rs 356 crore in the same period a year ago.
Deepak Chatterjee, managing director and CEO of SBI Funds Management, attributed this to the selling of old investments in ELSS to cash in on the recent rally in the market. He added that the suggestions from Amfi, if implemented, could popularise the scheme.
Labelling for MFs
The Securities and Exchange Board of India (Sebi) is mulling the introduction of product labelling on mutual fund offer documents to make investors aware of any risks associated with different equities.
"Product labelling is an important investor education agenda for Sebi. The scheme profile will be given very shortly and finally it will be with colour codes," S.V. Muralidhar Rao, executive director of Sebi, said today.
Product labelling has assumed significance following concerns over misselling of products in the mutual fund industry.
"Offer documents will have colour coding according to the risk level associated with the product. It may not solve the entire problem but colour coding will give some kind of indication to the investors," Amfi's Ramesh said.