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Jaitley's Revolutionary Move on Mutual Fund Retirement Plans

Budget introduces uniform tax treatment for pensions funds and mutual fund retirement plans

The long-awaited parity between pension funds and mutual fund retirement plans is finally here. Tucked away in a corner of Arun Jaitley's budget highlights is the innocuous sentence 'Uniform tax treatment for pension fund and mutual fund linked retirement plan'. This means that mutual funds can now launch retirement plans of their schemes which will be treated the same way as pension funds, as far as taxation goes.

While the fine print is still awaited in the form of actual notifications by SEBI and CBDT, the broad outline is clear. With this, AMCs are free to launch plans in which investors can make investments that will be free, just as NPS investments are. Just like NPS, These will be locked in till retirement age.

This has the potential to solve the problem of investors' retirement money not flowing into equities. Given the marketing failure of the NPS, mutual fund retirement plans could be the next best option to accomplish this goal.