The budget for the year 2025 is going to be presented on february 1, 2025. Before this, the Association of Mutual Funds in india (AMFI) has placed some of its demands for the mutual fund industry. The most important demand among these is to restart the indexation benefit 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 for the year 2023, the government had abolished the indexation benefit by making changes in the capital gains of debt funds. Under this new rule of the government, till march 31, 2023, there was indexation benefit on investments made in debt funds, but it was abolished under the new rule applicable from april 1, 2024. Earlier, investors had to pay tax on long term capital gains on selling debt funds in three years, but due to the continuation of indexation benefit, the tax liability was reduced. Now since the effect of inflation on capital gains is seen under indexation, so if capital gains decrease with inflation, then the tax liability also reduces.
Under the new rule of the government, due to the capital gains of debt funds being added to the income of investors, those falling in higher tax slabs had to pay more tax. Now if the indexation benefit is started again, then the interest of investors in debt funds will increase. AMFI has appealed to the government to impose tax at the rate of 12.5 percent on units of debt mutual funds held for more than 1 year. This will encourage retail investors to invest in debt funds.
click and follow Indiaherald WhatsApp channel