The Association of Mutual Funds in India has submitted a detailed set of recommendations to the government ahead of the Union Budget for FY 2026–27.
The proposals focus on tax treatment across various mutual fund categories, investor incentives and retirement-oriented products. The industry body aims to address recent tax changes and encourage broader participation in capital markets, as per The Economic Times report.
AMFI has requested the reintroduction of long-term capital gains indexation benefits for debt mutual funds held for more than 36 months. The proposal suggests amending relevant provisions of the Income Tax Act to allow taxation at 12.5% or 20% with indexation.
The industry body highlighted that debt funds remain an important investment option for conservative investors, particularly retirees and senior citizens.
It also noted that a consistent tax framework for debt products could support the development of the corporate bond market and improve the mobilisation of household savings into financial assets.
Another key recommendation is the introduction of a dedicated tax deduction for Equity Linked Savings Schemes under the new tax regime. AMFI has proposed a separate provision, similar in structure to existing pension-related deductions, with a defined investment cap.
The measure is intended to maintain ELSS as an accessible entry point for retail investors seeking equity exposure through tax-efficient instruments.
AMFI has proposed changes to the definition of equity-oriented funds to include fund-of-funds schemes that invest predominantly in domestic equity mutual funds. The recommendation seeks equal tax treatment for such structures, which currently do not receive the same classification despite their indirect equity exposure.
The proposal also calls for clarification in tax provisions to remove ambiguity regarding investments across multiple underlying equity funds.
The industry body has suggested reinstating earlier securities transaction tax rates on futures and options. It noted that arbitrage and equity savings funds rely on derivatives for hedging strategies, and higher transaction costs have reduced arbitrage opportunities and increased fund expenses.
AMFI has recommended that mutual funds investing at least 65% of their assets in Real Estate Investment Trusts or Infrastructure Investment Trusts be granted tax treatment similar to equity-oriented funds.
According to the proposal, such parity could encourage investment into infrastructure and real estate financing channels through professionally managed fund structures.
The proposals also include a request to allow mutual funds to launch retirement-linked savings schemes with tax treatment comparable to the National Pension System.
This would permit employee and employer contributions under a dedicated deduction framework, supported by defined withdrawal and vesting rules.
AMFI stated that extending retirement savings options beyond NPS could encourage long-term household savings.
Other suggestions put forward include the introduction of debt-linked savings schemes to support bond market growth, easing investment rules for ELSS, tax parity for intra-scheme switching, adjustments in withholding tax provisions, and removal of securities transaction tax on mutual fund unit transactions.
Several proposals also address capital gains taxation, consolidation of scheme options, and clarification of tax procedures for non-resident investors.
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AMFI’s Budget 2026 recommendations reflect the mutual fund industry’s focus on restoring tax consistency, expanding retirement savings avenues and improving investor participation. The government’s response to these proposals will be closely monitored, as policy decisions may influence future investment behaviour and the structure of mutual fund offerings in India.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Mutual fund investments in the securities market are subject to market risks. Read all related documents carefully before investing.
Published on: Jan 21, 2026, 2:37 PM IST
Neha Dubey
Neha Dubey is a Content Analyst with 3 years of experience in financial journalism, having written for a leading newswire agency and multiple newspapers. At Angel One, she creates daily content on finance and the economy. Neha holds a degree in Economics and a Master’s in Journalism.
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