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AMC stocks take a hit on concerns of tax advantage for debt mutual funds

As the finance ministry is likely to eliminate the long-term capital gains tax benefits that debt mutual fund (MF) investors currently enjoy, shares of asset management companies (AMCs) fell in Friday trade.

The HDFC Asset Management Company ended the day down 4.81%. 1,659.95, while UTI Asset Management Company saw a 3.92 percent drop in trading volume. 663.65. At AR 346.75, Aditya Birla Sun Life shares were trading 2.57% lower. Only Nippon Life India Asset Management traded at 209.80, up 0.55%.

If debt mutual funds invest less than 35% of their assets in equity, they may miss out on long-term tax benefits. These mutual funds will be subject to a tax on short-term capital gains.

The long-term capital gains tax (LTCG) benefits provided to these specified MFs are likely to be eliminated by amendments made by the finance ministry to the Finance Bill 2023.

As of now, such shared store plans draw in 20% LTCG alongside indexation benefits.

Finance Bill Tax 2023 passed in Lok Sabha

The Finance Bill, 2023, which Union Finance Minister Nirmala Sitharaman introduced in the Lok Sabha on Friday, was approved by the lower house of Parliament. The tax proposals in the bill are for the fiscal year that begins on April 1, 2023.

Experts in the field predicted that this would have an impact on both the bond market and the flow of investors into debt mutual funds. Common subsidizes offered liquidity to the homegrown security market, which is generally very fluid. The financial backer inflows into obligation MFs were conveyed in the security markets,” said Niranjan Awasthi, head, item, promoting and advanced business, Edelweiss Resource The executives I went.

“I look forward to reviewing the proposed changes in the Finance Bill to do away with LTCG with indexation status on debt funds,” Radhika Gupta, Managing Director and Head, stated. India is currently experiencing financialization, with a thriving corporate bond market. A robust debt mutual fund ecosystem is required.” Executive Officer at Edelweiss Asset Management Ltd. Holders of mutual fund schemes that invest up to 35% of their assets in equity shares will be taxed at their slab rates once the amendments to the Finance Bill 2023 are approved by Parliament.

Market-linked debentures and mutual funds (MFs), which invest the majority of their funds in debt, are likely to be taxed in the same way under the proposal.

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