To catch investors’ fancy, the mutual fund industry is hoping for tax breaks outside the 80C limit in the Budget 2013-14. V Ramesh, deputy CEO of the Association of Mutual Funds in India (AMFI) tells The Indian Express that mutual fund companies are also hoping to tap into smaller cities. Excerpts:
What are the expectations of the mutual fund industry from the Budget?
Prime Minister Manmohan Singh, when he, for a short period, took over finance ministry from Pranab Mukherjee on his election as the President, had mentioned that the priority would be to develop the Mutual Fund Industry, among other things. Subsequently, finance minister P Chidambaram also has show keen interest in discussing the way in which the industry can be developed. He met AMFI board members where he made recommendations such as permitting mutual funds to launch retirement plans.
We have also suggested changes in the Rajiv Gandhi Equity Savings Scheme from the current format so that it can be an effective saving mechanism for investors. Suggestions regarding making ELSS into a separate section out of 80C is also made because current exemptions are not utilised by investors as the Rs 1 lakh limit under 80C gets exhausted by PF, PPF and insurance premium. If these suggestions are accepted in the Budget, it will be a boost for the Mutual Fund industry.
What do you think of the recently launched Rajiv Gandhi Equity Savings Scheme (RGESS)?
RGESS is an excellent thought to get new investors into the capital market. But it has been made a little more complicated with regard to the operation part and also the benefit is given only once to the investor. If some changes are made in its terms, RGESS can be very useful. We, however, expect some reasonable response under RGESS from investors.
The asset under management (AUM) of ELSS have swelled to a two-year high. What is your outlook for the year 2013?
The number of people utilising the tax benefit under ELSS is reduced because for most people the Rs 1 lakh limit under Section 80C gets exhausted by their PF, PPF and insurance premium. The assets would have been much bigger (at least three times better) if it is under different section since the performance of these funds is very attractive.
Much has been said about Mutual Funds getting investors from smaller cities. Are you looking at any concrete steps in the direction?