MFs seek cut in small savings rate, nil dividend tax

MFs also sought measures to boost the industry, which covered only 6% of total household savings.

The mutual fund industry has demanded a cut in small savings rates, removal of dividend distribution tax and a scheme to guarantee capital gains to boost the Rs 1,40,000 crore market.

HT Image

The Association of Mutual Fund in India (AMFI) has given a representation to Finance Minister P Chidambaram to restore the exemption from the 12.5 per cent dividend tax on the returns from equity mutual funds.

The exemption was applicable till March 31, 2004. It could not be extended by the caretaker NDA Government due to the elections.

Private players also sought a slew of measures to boost the mutual fund industry, which covered only six per cent of the total household savings of the country.

Standard Chartered Mutual Fund managing director Naval Bir Kumar said small savings rates should be reduced in line with the prevailing interest rates, other than that for senior citizens and lower income groups.

"This can be done by capping investment to less than Rs 30,000 per year for all citizens with a higher cap for older citizens," he said.

"In order to ensure consistent growth of MF industry, we expect Government to maintain tax benefits and reducing or removing the dividend distribution tax and broadening the scope of Section 54EC to allow capital gains to be invested in MFs," Kumar added.

Bajaj Capital managing director Rajiv Bajaj said: "Government should take initiatives for introducing capital guaranteed products for mutual funds."