In the Union Budget 2018, the government re-introduced long term capital gain or LTCG tax on equity above Rs. 1 lakh in a financial year at a flat rate of 10%. But as the tax collection due to the above provision resulted in very insignificant collection for the mutual industry as a whole, the sector sees a chance that in view of the scenario, the government may roll back LTCG tax on equity mutual funds.
In the budget speech last year, Arun Jaitley said, "In view of grandfathering, this change in capital gain tax will bring marginal revenue gain of about Rs 20,000 crores in the first year. The revenues in subsequent years may be more".
Furthermore, given the Union Budget 2019 due to be announced at 11:00 am by interim Finance minister, being an interim budget, the mutual fund industry unlike previous budgets is not expecting any major sops. In the previous budgets though the industry expected to include the debt mutual fund category within the contours of the section 80 C investments that provide a deduction from the gross income to the extent Rs. 1.5 lakh in a year.
Nonetheless, an increase in tax exemption or change in tax slabs is expected to work in the favour of the mutual fund industry.