At the same time, Sebi also sought to bring in greater seriousness among fund houses in running mutual fund schemes by asking them to contribute their own money in form of 'seed capital' amounting to 1 percent of amount raised, while minimum networth requirement would also be increased from Rs 10 crore to Rs 50 crore to weed out non-serious players.

Through this policy, Sebi has also asked the government to facilitate channelising of pension money into mutual fund space, while state-run companies would be encouraged to park their surplus funds with various mutual funds.

The proposed tax benefits also include creation of a long-term investment product, Mutual Fund Linked Retirement Plan, with additional tax incentive of Rs 50,000.

Alternatively, Sebi wants the government to enhance the limit under Section 80-C of the Income Tax Act from Rs one lakh to Rs two lakh to help make various mutual fund schemes eligible for such tax benefits.Currently, this section allows for deduction of Rs one lakh from taxable income of a person.

'The long-term policy for mutual funds in India' was cleared by Sebi board at a meeting held here today and it provides for enhancing the reach of mutual funds, provide tax benefits and help mobilise household savings into them.

There are about 45 fund houses present in the country with total assets worth over Rs nine lakh crore, but fund mobilisation has been tough in the past couple of years.

After the board meeting, Sebi Chairman U K Sinha said that the regulator was of the view that this country needs a mutual fund policy for the long term like the same for various other segments. "Many of the proposals which we have recommended today are for the government to implement. Some of them are tax-related and some of them are non-tax related," he said.

"The third segment of the mutual fund policy which is within the realm of Sebi and which has been decided today we will be implementing it since now we have got the board approval.

"One important point on the long term mutual fund policy which we are going to introduce is that the minimum capital requirement for Asset Management Companies (AMCs) will be increased from Rs 10 crore to Rs 50 crore and there are 19 companies today who are having less than Rs 50 crore," he said. The existing fund houses would get three years to comply to these norms.

PTI