The Association of Mutual Funds in India (AMFI) has urged the government to reinstate indexation benefits on debt mutual fund schemes. This recommendation was made by AMFI’s Chief Executive, Venkat N Chalasani, during the India Fintech Forum’s IFTA 2024 on Thursday (December 12).

“We want more people to invest in mutual funds, and bringing back indexation will help in that,” he was quoted as saying in Informist report.

In 2023, the government revised the tax laws for debt mutual fund schemes.

Previously, long-term capital gains from debt funds, held for more than three years, were taxed at 20% with indexation benefits.

However, amendments to the Finance Bill in March 2023 removed these tax benefits, bringing the income from debt mutual fund schemes under the investor’s respective tax slab.

Chalasani also highlighted the need for taxation benefits to support the evolution of the corporate bond market.

“The corporate bond market has to evolve, and for that to happen, you need to have some taxation benefits,” he was quoted as saying in a NDTV Profit report.

On the topic of equity fund inflows, Chalasani pointed out that the recent slowdown is mainly due to an increase in lump sum investments. However, he remains optimistic about the long-term outlook for equity mutual funds, despite a dip in November inflows.

It must be noted that equity mutual fund inflows in November 2024 totaled ₹35,927.3 crore, a decrease of 14.1% compared to ₹41,865.4 crore in October, according to Association for Mutual Funds in India (AMFI) data.

In terms of specific fund categories, large-cap fund inflows dropped by 26.3%, from ₹3,452.3 crore in October to ₹2,547.9 crore in November.

Small-cap funds saw an increase of 9.0%, rising from ₹3,772 crore in October to ₹4,112 crore in November.

Mid-cap funds saw a modest increase of 4.3%, from ₹4,683 crore in October to ₹4,883.4 crore in November.