AMC Stocks tumble and reach 52-week low after LTCG tax benefit scrapped; Check the details here 

Shares of mutual fund asset management companies tanked on Friday after the Finance Bill 2023 proposed an amendment that will classify capital gains arising from debt mutual funds as only short-term capital gains.

HDFC Asset Management (NS: HDFA ) Company’s shares fell 5.20%, UTI Asset Management Company’s shares slipped 4.40% and Aditya Birla Sun Life AMC’s shares dropped 3.91% on Friday. In fact, Aditya Birla Sun Life AMC’s shares reached a 52-week low of ₹ 342.00 apiece.

The government said that investment in mutual funds where not more than 35% is invested in equity shares of Indian companies will now be considered short-term capital gains. Therefore debt funds held for more than three years will no longer enjoy indexation benefits and will not be eligible for a 20% tax rate. This amendment will be applicable to investments made on or after April 01, 2023. Further, grandfathering shall not be extended to market-linked debentures.

Currently, debt mutual funds are treated as long-term investments if they are held for more than 3 years and taxed at the rate of 20% along with indexation benefits or at 10% without indexation. Those funds with a holding period of less than 3 years are taxed according to the tax slab of investors.

The indexation benefit helps investors to bring down taxes as it calculates taxes after accounting for inflation. With these amendments, debt funds that are held for more than three years will no longer enjoy indexation benefits.

Debt funds have a tax advantage over fixed deposits, however, this move will bring bank fixed deposits at par with debt mutual funds, according to experts. They believe that institutional clients and HNIs would mostly be hit by this move as retail investors are currently not that big in the fixed-income category.

Radhika Gupta Managing Director & Chief Executive Officer, Edelweiss (NS: EDEL ) Asset Management Limited hopes that the change in the Finance Bill to remove LTCG with indexation status on debt funds is reviewed. She tweeted that a vibrant corporate bond market needs a strong debt mutual fund ecosystem.

Written by Simran Bafna

The post AMC Stocks tumble and reach 52-week low after LTCG tax benefit scrapped; Check the details here appeared first on Trade Brains.

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