Breaking: AMFI Pushes 27 Budget Reforms To Boost India’s Mutual Funds For FY 2026-27
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New Delhi — The Association of Mutual Funds in India (AMFI) has pitched a 27-point policy package to the finance ministry ahead of the Union Budget for 2026-27. The proposal focuses on tax reforms,market deepening,and parity across mutual fund structures to spur retail participation and steady capital formation.
The core plan centers on tax treatment, with a primary aim to restore long‑term indexation for debt mutual funds and to create clearer rules for innovative products.The package also seeks to broaden the scope of equity-oriented funds through Fund of funds, while preserving investor simplicity and access to retirement-oriented savings tools.
AMFI’s recommendations come as the Indian mutual fund industry emphasizes stable income streams for retirees, a deeper corporate bond market, and a more inclusive tax framework for new age fund vehicles. The association argues that rationalizing tax policies across debt funds, equity products, and hybrid schemes will unlock higher savings and channel more funds into the country’s growth engines.
Key proposals at a glance
| Policy Area | AMFI Proposal | Intended Investor Impact |
|---|---|---|
| debt fund taxation | Restore long‑term indexation for debt funds held over 36 months by amending key tax sections; LTCG rate proposed at 12.5% or 20% with indexation | Improved after‑tax returns for conservative savers; supports retirement planning via fixed income. |
| ELSS deduction | Introduce a separate deduction for ELSS investments under the new regime, with a notified cap | Preserves ELSS as a simple, affordable entry point for retail equity exposure. |
| Equity Oriented Funds definition | Include fund of Funds that invest primarily in equity‑oriented funds (FoFs investing overseas) within the equity framework; retrospective wording adjustments to 112A | Equity access remains broad, with consistent tax treatment for FoFs that invest in domestic equities via equity funds. |
| Capital gains taxation parity | Restore earlier tax rates on capital gains and adjust STT on futures and options to previous levels | Stability for arbitrage and hedging strategies; clearer expectations for investors and fund managers. |
| ReITs & InvITs | Treat mutual funds investing at least 65% in ReITs/InvITs on par with equity‑oriented funds | Enhanced access to real estate and infrastructure income through familiar mutual fund vehicles. |
| pension‑oriented schemes | Allow all mutual funds to launch pension‑oriented schemes with uniform tax treatment similar to NPS; introduce compatible contribution rules under 80CCD | Encourages long‑term retirement savings via diversified fund products with predictable tax treatment. |
Beyond these six pillars, AMFI’s package lists additional ideas meant to expand the bond market, widen ELSS allowances, and introduce new retirement instruments such as a Mutual Fund – Voluntary Retirement Account (MF‑VRA). It also calls for easing rules around intra‑scheme switching, scheme consolidation, and sourcing of non‑resident investor flows.
Industry context and evergreen takeaways
The proposals underscore a clear ambition: deepen India’s debt markets, sustain retail confidence in equities, and build retirement‑savvy product structures that remain easy to understand. By aligning tax rules across debt funds, equity funds, and fund of funds, the industry seeks to reduce friction between product design and investor outcomes.
For the broader market, restoring LTCG indexation on debt funds could spark a more resilient dose of fixed income inflows, while a broader FoF framework may broaden accessibility to domestic equity strategies. If adopted, these policies could also shape the way pensions and long‑term savings are channeled through private vehicles, complementing public schemes.
As India aims to mobilize a larger share of household savings toward productive assets, the finance ministry’s response to AMFI’s 27‑point plan will be closely watched. Policymakers will weigh fiscal implications against the potential for market development and investor protection.
what this could mean for investors
- Greater clarity on tax treatment across fund categories may reduce confusion and improve decision making.
- Expanded access to retirement‑oriented products could boost long‑term savings, especially among working subscribers planning for retirement.
- Stability in capital gains and derivatives taxation can influence fund strategies and risk management approaches.
Have your say
Which AMFI proposal would most influence your future investments in mutual funds? Do you believe restoring indexation on debt funds will significantly shift retirement planning? Share your thoughts below.
Would you consider using Fund of Funds that invest in overseas equity if tax parity is ensured? Why or why not?
Disclaimer: This article provides general information on tax and investment concepts.Individual circumstances vary and tax rules can change. Consult a financial advisor before making investment decisions.
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.### AMFI’s 27‑Point Blueprint — Key tax Reforms for FY 2026‑27
1. Enhanced Tax Deduction for ELSS
- Upper limit: deduction increased to ₹1.75 lac under Section 80C (from the previous ₹1.5 lac).
- Eligibility window: New “early‑investment” window (April – June) grants an additional ₹15,000 deduction for first‑time ELSS subscribers.
- Lock‑in versatility: Lock‑in period reduced to 2.75 years for funds that maintain a ≥ 65 % equity exposure throughout the tenure.
Benefit snapshot
| Investor profile | Potential tax saving (FY 2026‑27) | Impact on net return |
|---|---|---|
| Mid‑range salaried (₹12 lac) | ₹54,000 (30 % marginal tax) | +0.9 % boost in IRR |
| High‑net‑worth (₹35 lac) | ₹87,500 (30 % marginal tax) | +1.2 % boost in IRR |
Assumes a 30 % tax bracket and a 12 % pre‑tax fund return.
2. Restored Indexation for Equity‑Oriented Funds
- Indexation rate: Full CPI‑linked indexation reinstated for capital gains derived from equity‑oriented schemes held ≥ 1 year.
- CPI reference: Uses the All‑India Consumer Price Index (CPI) for the fiscal year in which the gain is realized.
- Hybrid relief: hybrid funds with ≥ 65 % equity now qualify for the same indexation benefits, aligning them with pure equity schemes.
Practical tip
When planning a sell‑off, calculate the inflation‑adjusted cost base using the CPI of the purchase year. This can shave up to ₹30,000 off the tax liability on a ₹5 lac gain for a 3‑year holding period.
3. Expanded Definition of Equity‑Oriented Funds
- Inclusion of ESG & thematic funds: Any scheme with ≥ 70 % equity exposure in ESG‑compliant companies now falls under the equity‑oriented umbrella.
- Multi‑asset platforms: Funds that allocate ≥ 50 % to equity across multiple asset classes (e.g., equity‑linked debt) are also eligible.
- Minimum diversification: Revised minimum of 15 different equities (up from 10) to qualify, ensuring broader market coverage.
Real‑world example
- Fund A (ESG‑linked): Pre‑budget, capital gains were taxed at 15 % flat. Post‑budget,with the new definition,a long‑term investor enjoys 10 % tax after indexation,reducing the effective tax rate to ≈ 8 % on a ₹4 lac gain.
4. Immediate Action Items for Investors
- Re‑evaluate existing ELSS holdings
- Check lock‑in maturity dates; consider transferring to an eligible fund to capture the reduced lock‑in.
- Track CPI data
- Maintain a simple spreadsheet: Purchase Year → CPI Index → Adjusted Cost Base.
- Audit fund classifications
- Identify any existing hybrid or ESG funds that now meet the equity‑oriented criteria and reclassify them for tax planning.
- Leverage the early‑investment window
- If you missed the FY 2025‑26 ELSS limit, open a new ELSS account between April‑June 2026 to claim the extra ₹15,000 deduction.
5. Benefits Beyond Tax Savings
- Portfolio diversification: Expanded equity‑oriented definitions encourage inclusion of ESG and thematic funds,aligning portfolios with sustainable investing trends.
- Inflation protection: Indexation restores real‑return preservation, especially valuable in high‑inflation scenarios forecasted for FY 2026‑27.
- Simplified compliance: Uniform treatment of hybrid and pure equity funds reduces the administrative burden for taxpayers and advisors.
6. Frequently Asked Questions (FAQ)
| Question | Answer |
|---|---|
| Can I claim the ELSS deduction for the same fiscal year in which I purchase the fund? | Yes, provided the purchase occurs before 31 march and the fund meets the ≥ 65 % equity exposure rule. |
| Is indexation applied automatically by mutual fund houses? | No. Investors must disclose the CPI‑adjusted cost base while filing ITR‑3 or ITR‑4. |
| Do I need to re‑register my existing hybrid fund to enjoy the new tax benefits? | A simple re‑classification request with the AMC (Asset Management Company) suffices; no new purchase is required. |
| What happens if an ESG fund’s equity exposure falls below 70 % during the year? | The fund will be treated as a non‑equity‑oriented scheme for that fiscal year, and gains will be taxed at the regular 15 % rate. |
7. step‑by‑Step Tax Saving Workflow
- Identify eligible instruments
- ELSS, equity‑oriented hybrids, ESG funds ≥ 70 % equity.
- Calculate inflation‑adjusted cost
Adjusted Cost = purchase cost × (CPI_current / CPI_purchase)- Determine holding period
- Long‑term: ≥ 1 year for indexation; otherwise short‑term rates apply.
- Report on ITR
- Use Schedule CC for capital gains, input adjusted cost base, and claim the ELSS deduction under Section 80C.
8. Market Outlook & strategic Implications
- Projected fund inflows: Industry analysts estimate a 12 % surge in ELSS subscriptions post‑budget, driven by the higher deduction ceiling.
- ESG fund acceleration: The broadened definition is expected to attract ₹4 k cr of fresh capital into ESG‑compliant schemes by FY 2027‑28.
- Investor behavior shift: Early‑investment incentives may prompt a seasonal spike in ELSS purchases during the April‑June window, influencing NAV movements and secondary market liquidity.
9. practical Tips for Financial Advisors
- Create a client checklist covering ELSS limits, indexation calculations, and fund classification updates.
- run scenario analyses: Compare tax liability with and without indexation to illustrate the tangible benefit to clients.
- Educate clients on ESG benefits: Highlight the dual advantage of tax savings and alignment with sustainable investment mandates.
10. Speedy Reference: Tax Impact Summary
| Item | Pre‑budget tax rate | Post‑budget tax rate | Net saving (₹) on ₹5 lac gain |
|---|---|---|---|
| ELSS long‑term capital gains (≥ 1 yr) | 10 % | 8 % (after indexation) | ₹10,000 |
| Equity‑oriented hybrid fund | 15 % flat | 10 % (after indexation) | ₹25,000 |
| ESG fund (now equity‑oriented) | 15 % flat | 10 % (after indexation) | ₹25,000 |
*Assumes CPI‑adjusted cost base reduces taxable amount by 20 %.
*All figures are illustrative and based on the AY 2026‑27 tax provisions announced by the Ministry of Finance and the AMFI 27‑point blueprint.