What is in the budget for MF investor?

Rajiv Gandhi Equity Savings Scheme (RGESS)

RGESS has been introduced for the current financial year; the scheme offers benefit to the first time investor in capital market for the investors with income less than Rs. 10 Lacs. However in the 2013-14 budget FM has proposed to liberalise the RGESS by increasing the limit from Rs. 10 Lacs to Rs. 12 Lacs with respect to the income and investments can also be done in the mutual fund scheme which are allowed under RGESS scheme. This will boost up more and more investments under this scheme and will benefit Mutual Fund Industry. The scheme allows maximum investment of Rs. 50 k and deduction limit of 50% of the invested amount i.e. the said scheme reduces the taxable income upto Rs. 25 K, thus benefitting investors across different tax slabs.

Reduction in Securities Transaction Tax (STT)

Reduction in Securities Transaction Tax is surely a booster for the mutual fund sector, as this will help to reduce the transaction cost. Reduction in transaction cost will help the schemes to perform better on the returns front and will benefit the investors as it will be passed on to the investors. Reduction in Securities Transaction Tax may also initiate additional investment from investors in order to earn higher return. In the previous budget government had reduced STT from 0.2% to 0.17% and in the current years budget the same has been reduced from 0.17% to 0.1%. 

Pension and Provident Funds can invest in ETF

Pension and provident funds can now invest in exchange traded funds; this will also benefit Mutual Fund Industry as these institutional investors have huge investment pool. This may also include New Pension Scheme (NPS). New Pension Scheme was been launched for non government segment. The scheme is open for anyone from 18 years to 60 years of age; investment in NPS is also eligible for tax deduction.  

DDT on Debt Mutual Funds hiked

Fund houses pay taxes on the dividend income distributed to investors. Though dividends are tax free in the hands of investors, fund houses deduct DDT from the distributable surplus.


Retail investors who choose the dividend option in debt mutual funds (MFs) would get lower post-tax returns on their investments. The Budget has hiked the dividend distribution tax (DDT) on debt mutual funds (MFs) from 12.5% to 25% (plus surcharge and cess) for individuals and HUFs. This would bring them on a par with liquid funds that pay 25% DDT

 But dividend would still be a better option for investors who fall under the higher tax slab (30% and more) compared to bank fixed deposits


MF portfolio is a part of the capital market; it reflects the fortunes of companies in its fold.


As an investor, you get affected @ commodities trading, lesser burden for Insurance for disabled, TDS on property, surcharge on super rich and service tax on luxury living

Budgets will continue to come and go; plan your needs thoughtfully, allocate and maintain separate investments for each need.

happy investing