Budget 2026: With a growing number of investors turning to mutual funds for long-term equity exposure, the mutual fund industry is expecting policy support in the upcoming Budget to boost retail participation further. Industry players are seeking tax and regulatory relief to make mutual fund investments more attractive.
The Association of Mutual Funds in India (AMFI) has asked the government to rollback certain measures announced in the past years, especially related to debt mutual funds, introduction of new pension-like funds, higher tax-free limits on mutual fund returns, etc.
Tax Incentives
The industry stakeholders are also expecting relief on long-term capital gains tax, incentives to boost systematic investment plan (SIP), etc. ” A key expectation is a reduction in capital gains tax, with long-term capital gains ideally lowered from 12.5% to 10% and short-term capital gains to around 15%,” stated Swapnil Aggarwal, Director, VSRK Capital.
“Taxation remains a major consideration for investors, and lower taxes can improve post-tax returns, encouraging sustained participation. Recent tax relief measures, including exemptions up to ₹12 lakh, have already increased disposable income and supported long-term savings and investments,” added Swapnil Aggarwal.
While tax incentives may boost the popularity of mutual funds investment, raising the tax-free limit on equity capital gains would give more breathing room to mall and long-term investors, as per AMFI.
Indexation for Debt Mutual Funds
In its list of expectations from Budget 2026, AMFI has also mentione restoration of indexation benefits for long-term debt funds. If the government acts on these measures it could mean better inflation adjusted returns, from debt funds, fairer taxation, and stronger incentives to invest in the category.
Pension Mutual Funds
While mutual funds are all about investment for long-term goals, AMFI has urged the government to allow mutual funds to offer pension-focused schemes with tax benefits. This would offer greater options for investors to plan their retirement.
ELSS Style Debt Mutual Funds
In a bid to make debt mutual fund investments more attractive to investors, AMFI has also proposed to the governmentto bring a Debt Linked Savings Scheme (DLSS), which is a tax-saving debt fund on the lines of ELSS. Introduction of such schemes would ensure tax-efficient options for low risk investors, better balance between safety, returns, and planning.
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