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Tax relief on merger of MF schemes to benefit investors

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With Union Budget 2016- 17 extending capital gains tax exemption to merger of different plans within a mutual fund scheme, sector officials say it will benefit investors as they will not be liable to pay taxes on these.

The latest relief allows a fund house to merge two options within a scheme without additional tax implications.

Several MF schemes have multiple options such as dividend, growth and bonus. The intra- merger of plans generally happens when fund houses find the size of a scheme to be sub- optimal.

The proposed changes would be effective from April 1and accordingly apply for assessment year 2017- 18 and subsequent ones.

Sundeep Sikka, chief executive officer at Reliance MF, says:” The step is part of the simplifying of the merger of schemes so that investors are not at a loss.” Kaustubh Belapurkar, director ( research) at Morningstar India, added: “ I do not see too many mergers happening in this regard.”

Business Standard, New Delhi, 02 March 2016

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