Budget 2019: MFs want reversal of LTCG tax; seek clarity on toxic assets

Budget 2019: The mutual fund (MF) industry has sent its Budget wish list to the finance ministry, seeking clarity on the tax treatment of toxic assets held under a segregated portfolio and asking for long-term capital gains (LTCG) tax exemption for equity-oriented schemes.

The LTCG tax was levied on equity-oriented funds last year. The industry body — Association of Mutual Funds in India (Amfi) — pointed out that the introduction of LTCG tax places MF products at a disadvantage vis-à-vis unit-liked insurance plans (ULIPs).

“With high commissions and incentive structure in the life insurance sector, retail investors could be lured away by the insurance agents as retail investors may not understand the distinction between a pure investment product like MF and an insurance product with equity exposure. This could also lead to mis-selling of ULIPs,” said Amfi.

“LTCG tax is not bringing in revenues that the government had envisaged. Meanwhile, it is creating a mental barrier for investors looking at MF products. It is cumbersome for investors calculating tax-liability on their realised gains,” added Jimmy Patel, chief executive officer of Quantum Asset Management.
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