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Retirement benefit funds wait for tax clarity from CBDT
July, 29th 2015

Retirement benefit funds of more than half a dozen mutual fund houses are awaiting approval from market regulator Securities and Exchange Board of India (Sebi)?and Central Board of Direct Taxes (CBDT).

These funds have filed the draft proposals with the market regulator and tax authority more than a year back. While Sebi approves the MF schemes from operations perspective in line with its Mutual Fund Regulations, CBDT grants approval for launching a scheme with tax exemptions. With Section 80 C of the Income Tax Act already crowded with provident fund, life insurance and other exemptions, for CBDT to provide exemptions under the same head may not be of much benefit.

According to experts CBDT may have to provide tax benefit to mutual fund linked retirement plan under Section 80CCD which also provide exemption to investments under National Pension System.

Draft offer documents seeking Sebi and CBDT approval were filed by HDFC Mutual Fund, ICICI Prudential Mutual Fund, SBI Mutual Fund, Axis Mutual Fund, DSP BlackRock Mutual Fund, LIC Nomura Mutual Fund between November 13, 2013 to April 29, 2015 but their approval has been on hold, data collated from Sebi and talking to individual fund houses revealed. Canara Robeco Mutual Fund has also filed for Retirement and Pension Solution fund early this month with Sebi.

Even Tata Mutual Fund’s Retirement Savings Fund which was launched earlier in November 2011 but it doesn’t provide tax benefits under Section 80 C of the Income Tax Act. is now seeking approval from CBDT for income tax benefit. Tata Mutual Fund has applied to CBDT for tax exemption benefit for the investors in the scheme much later after its launch in 2011 but it is still awaiting approval from CBDT, according to Tata Mutual Fund officials.

So far only three operational retirement benefit schemes of mutual fund industry from UTI Mutual Fund, Franklin Templeton Mutual Fund and Reliance Mutual Fund houses enjoy income tax benefit under Section 80 C while Tata Mutual Fund’s Retirement Savings Fund do not have Section 80 C exemptions.

While UTI Mutual Fund’s UTI Retirement Benefit Pension Fund was launched in 1994 and Franklin Templeton Mutual Fund’s Franklin India Pension Fund was launched in 1997, the recent approval has only been given to Reliance Mutual Fund’s Reliance Retirement Fund which has received CBDT approval for launching a retirement fund with tax benefits under Section 80C in December 2014.

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