Asset Management Companies Shares Fall On Report Government To Tweak Tax On Debt Mutual Funds

Shares of listed asset management companies declined on reports the Indian government is moving to treat gains from debt mutual funds as short-term gains.

The change, if approved via an amendment to the Finance Bill, would result in the loss of significant benefits available to investors in the form of indexation on long-term capital gains.  

The bill is expected to be tabled in Parliament on Friday.

In Budget 2023, the government moved to treat gains from market-linked debentures as short-term capital gains. The amendment to the bill includes “specified mutual fund schemes”, which include all schemes with equity contributions of less than 35%.

Currently, gains arising from debt mutual fund schemes are considered long-term after a period of three years and taxed at 20% with indexation benefits.

HDFC Asset Management Company Ltd., UTI Asset Management Company Ltd., Aditya Birla Sun Life AMC Ltd., and Nippon Life India AMC Ltd. fell between 1% to over 4% as of 12:10 p.m., compared with 0.07% gain in the benchmark Nifty 50.

“This is good news for banks as they can attract customers with higher interest rates and increase their borrowing and saving book sizes,” Hingar said.

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