Budget 2025: AMFI Pushes for Old Capital Gains Tax Norms; Check Key Proposals for Investors

As Finance Minister Nirmala Sitharaman is all set to present her eighth consecutive budget, investors are keenly watching out for some relief proposals in the tax slabs.

The Association of Mutual Funds in India has released a list of proposals aimed at easing the tax burden on investors. From bringing back the old capital gains tax regime to restoring long-term indexation benefits for debt mutual funds, here are the top 5 proposals by the mutual fund body ahead of the Budget-

Restoring Long-term Indexation benefits

In last year's budget, presented in the parliament in July month, a major letdown for investors came as the indexation benefits on long-term capital gains on debt mutual funds were removed. This, quite evidently had a negative impact on the investor sentiment.

AMFI has proposed the restoration of such benefits in order to attract investors in debt mutual fund schemes, which are often considered a more stable investment avenue.

"Indexation is not a tax waiver but a neutralizer to the impact of inflation. The removal of indexation benefit will have material impact on Debt Mutual Fund investors. It may be noted that the debt mutual fund investors are any way getting taxed at marginal rate since April 01, 2023 which has already hurt them significantly," the industry body said.

Bringing the old Capital Gains Tax Regime back

Another major letdown for investors during last year's budget was the rise in both short-term and long-term taxation slabs. While the former was increased from 15 per cent to 20 per cent, the long-term tax slab faced a similar brunt and was increased to 12.5 per cent from the earlier 10 per cent level.

This was a major disappointment for investors. AMFI has requested the government to roll back the new taxation slabs and bring the old capital gains regime on debt-oriented mutual funds back.

Introducing Pension-Oriented Mutual Fund Scheme

AMFI has suggested the market watchdog, the Securities and Exchange Board of India (Sebi) for introducing pension-oriented mutual fund schemes. Not only these schemes will provide tax benefits with similar to that of NPS under Sec. 80CCD, but will also encourage investment sentiment in unorganised sector

"Allowing Mutual Funds to launch Mutual Fund Linked Retirement Plans (MFLRP) would bring pension benefits to millions of Indians in the unorganised sector...A long-term product like MFLRS can play a catalytical role in channelising household savings into securities market and bring greater depth," the industry body stated.

Labelling some Mutual Fund Units as ‘Specified Assets’

The domestic mutual fund body has proposed categorising mutual fund units that invest in infrastructure projects as "specified long-term assets." This MF schemes would be exempted from long-Term Capital Gains (LTCG) tax.

This will help support government's infrastructure goals by channeling funds into priority sectors listed in the “Master List of Infrastructure Sub-sectors.” However, investors would need to hold these mutual fund units for at least 3 years to qualify for the tax exemption.

Amendment in ELSS investment rule

Currently, equity linked savings scheme (ELSS) investments must be made in multiples of Rs 500 or more. AMFI has proposed removing this outdated rule, arguing that it no longer fits in today’s digital era. This will likely bring-in more flexibility to the investment space.