Budget 2025: 'Tax Fee Bonds For Infra, Restoration of Indexation Benefit' Top AMFI Budget Wishlist

The Union Budget 2025 offers an opportunity to address the pressing concerns in India’s fixed income and investment markets. From restoring indexation benefits to introducing debt-linked savings schemes, these proposals have the potential to enhance investor confidence and foster long-term economic growth. 

Additionally, focusing on investor education, especially for younger generations, will be crucial in making India’s financial markets more inclusive and accessible to all. With technology and awareness combined, the future looks promising for both fixed-income and equity investors in India.

As we head towards the Union Budget 2025, everyone expects changes that may change the investment landscape, especially in the fixed-income space. Venkat N Chalasani, Chief Executive at AMFI, shared several important requests for the budget to be announced soon. These are aimed at addressing both the fixed income market and the education of the younger population about investment strategies.

Restoration of Indexation Benefit 

One of the main demands is the reinstatement of the indexation benefit for fixed income investments. This benefit was available before March 2023 but was withdrawn in the last budget. The industry is demanding its reinstatement, not only prospectively but also with the removal of the retrospective effect. This would help investors better manage the impact of inflation on their returns.

Alignment of Fixed Income Taxation with Listed Securities

The other major recommendation is to treat fixed income investments on par with listed securities when it comes to capital gains tax. Although listed securities are still exempt from long-term capital gains, the rules are not the same for fixed income investments. Bringing back the beneficial tax treatment for fixed income investments would increase investor confidence in the market.

Equity Market Taxation

The recent budgets have witnessed an increase in both short-term and long-term capital gains taxes. Venkat suggests restoring the tax levels to their previous rates to encourage greater participation in the equity market. This will make the markets more accessible and attractive to investors, especially those from the younger generation.

Introducing Debt-Linked Savings Schemes (DLSS)

Another demand Venkat mentions is the introduction of debt-linked savings schemes (DLSS). This shall enable investors to bond their investment in infrastructure projects, much like the existing Equity Linked Savings Schemes (ELSS) but this time focusing on the debt instruments. This may pump more money into infrastructure development for long-term economic growth.

Tax-Free Bonds for Infrastructure

Venkat further suggests introduction of tax-free bonds to be targeted at the infrastructure projects. These would be like NTIA tax-free bonds where the investors would enjoy exemption from taxes and would be an attractive deal for those looking to invest in country's progress while enjoying tax-friendly terms.

Creating Awareness Among the Young People

This is because investment interest is growing, especially in the minds of the younger generation. Education on different financial products should be increased, and Venkat has emphasized the need for investment awareness campaigns through digital as well as traditional media. AMFI-the association of mutual funds in India-is in partnership with colleges and universities, gearing itself to send the message of investment across to the young mind. 

These will include SIP options and the risks.

A step in the right direction would be a consultation paper recently issued by SEBI that will make the SIP market more accessible and transparent. According to Venkat, however, "Technology alone can't do this job; the most important factor for empowering investors is awareness and education."

The Union Budget 2025 presents a much-needed chance to address all of India's fixed income and investment markets. From restoring indexation benefits to introducing debt-linked savings schemes, these proposals have the potential to enhance investor confidence and foster long-term economic growth. Moreover, investor education, especially for the younger generation, will be critical in making India's financial markets more inclusive and accessible to all. 

With technology and awareness combined, the future looks promising for both fixed-income and equity investors in India.