SEBI Chairman UK Sinha clarifies the fate of the mutual fund retirement plans mentioned in the budget highlights
29-Sep-2014 •Research Desk
In an exclusive interview for with Mutual Fund Insight Editor Dhirendra Kumar, SEBI Chairman UK Sinha has revealed what has transpired regarding the budget announcement about mutual fund retirement plans. The full interview shall appear in the forthcoming 11th anniversary issue of Mutual Fund Insight.
Back in July, when Finance Minister Arun Jaitley presented his first Union Budget, there was this one reference to mutual fund retirement plans. Page 12 of the Budget Highlights document said 'Uniform tax treatment for pension fund and mutual fund linked retirement plan'. From this it appeared that the government had accepted SEBI's recommendation for creating a new class of mutual fund retirement plans.
However, there was no reference to this in the budget speech, nor in the budget bill itself. That little reference to retirement plans seemed to have found its way into the budget highlights without anything to back it up.
The mystery was explained to us when Dhirendra Kumar interviewed UK Sinha last week. In response to a question about the retirement plan reference in the budget, Sinha revealed that SEBI too was puzzled by the apparent omission. However, when the regulator checked with the government, they were told that there was no reference in the budget bill because no change in the law was required to put these retirement plans into action.
The government told SEBI that if an AMC applies to the regulator for approval of such a fund, and SEBI approved it, then the Central Board of Direct Taxes (CBDT) would also approve it. Such a fund would provide tax rebate under 80C, and have a lock in till retirement, thus forming a retirement solution.
Value Research learns that one such fund, from SBI Mutual Fund, has already applied for approval from SEBI. It has a number of plans, each suited to an investor at a different stage of life. While we will analyse this plan in detail when it gets approved, we must point out that in the current shape, retirement plans are just a pale shadow of what had originally been envisaged.
