Debt funds would be held over three years and no longer enjoy any indexation

The government's proposed changes to the Finance Bill would be a significant setback for debt mutual fund investors. According to the new proposal, any mutual fund investments with less than 35% of equity shares of Indian companies will be considered short-term capital gains starting April 1, 2020. This means investors in such funds will have to pay a higher tax on their returns than earlier. The amendment in the Insurance Laws (Amendment) Bill 2020 has certainly taken an unexpected turn, with the added focus on changes to debt funds instead of increasing the non-linked life insurance limit of Rs 5 lakh or providing indexation benefits. The insurance analyst sees this surprise amendment as a 'googly.'

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