SEBI has also proposed permitting AMCs to pay trail commissions, or part thereof, to empanelled mutual fund distributors in the form of mutual fund units
The Securities and Exchange Board of India (SEBI) on Wednesday proposed easing restrictions on third-party payments in mutual funds by permitting such transactions in select cases, including salary deductions by employers for employee investments and commission payouts to distributors in the form of mutual fund units.
The regulator also proposed enabling investors to contribute or donate towards social causes through mutual fund schemes under a regulated framework.
Currently, mutual fund investments must originate directly from an investor’s own bank account and be routed through RBI-authorised payment aggregators or SEBI-recognised clearing corporations. The framework was introduced to mitigate risks related to money laundering and ensure a complete audit trail.
However, SEBI said the mutual fund industry had sought relaxation in certain genuine cases “such as payment of salaries by employers, payment of commissions by AMCs etc with adequate safeguards in place.”
Payroll investments
Under the proposal, listed and EPFO-registered companies would be allowed to facilitate investments in mutual fund schemes on behalf of employees through payroll deductions. “This mechanism would allow AMCs to accept consolidated payments for mutual fund investments through salary deduction,” the paper said.
The regulator has proposed that only employees opting for the arrangement would be covered, and they would be allowed to choose schemes for salary deductions.
SEBI has also proposed permitting asset management companies (AMCs) to pay trail commissions, or part thereof, to empanelled mutual fund distributors in the form of mutual fund units. According to the consultation paper, the move would provide “a convenient, seamless and disciplined way of investing in MF units for the MFD and encourages the MFDs to save and invest for the long term.”
Only distributors registered with the Association of Mutual Funds in India (AMFI) and selling schemes of the concerned AMC would be eligible for the facility.
Social Investing
On social impact investing, the regulator proposed allowing investors to contribute a part of their subscription amount or scheme returns towards a social cause through mutual funds. SEBI said enabling donations through mutual funds would help investors avoid “operational difficulties and the burden on investors to independently identify credible Non-Governmental Organisations.”
The paper added that donations routed through Zero Coupon Zero Principal instruments issued by not-for-profit organisations registered on the Social Stock Exchange would provide “a strong layer of transparency”.
Donation framework
SEBI has proposed two options for implementing the donation framework – either through dedicated mutual fund schemes or by allowing all existing schemes to offer such a facility.
The regulator said AMCs would need to put in place safeguards including robust KYC checks for both payee and beneficiary, clear written mandates, auditable electronic fund trails, and compliance with Prevention of Money Laundering Act (PMLA) norms.
“The intent is to strike a balanced approach that facilitates ease of investing in genuine cases while reinforcing robust safeguards against potential misuse,” SEBI said.
SEBI has sought public comments on the proposals till June 10.
Published on May 20, 2026