As a result of the tax benefit, as many as six crore active folio holders in mutual funds would now have more incentive to invest in ETF, says Neeraj Kumar Gupta.
The Department of Investment and Public Asset Management (DIPAM) has proposed creation of fund of funds only to invest in designated Exchange-Traded Funds (ETF), a senior government official said.
“The Finance Bill, 2018 has proposed that Fund of Funds, which is investing only in designated ETF will be given the (tax) treatment of equity. They were earlier treated as debt. Now the tax treatment will be like an equity,” DIPAM Secretary Neeraj Kumar Gupta said.
Fund of funds is an investment strategy, where funds invest in portfolios where there are different assets, instead of directly investing in particular stocks or bonds.
As a result of the tax benefit, as many as six crore active folio holders in mutual funds would now have more incentive to invest in ETF, he said.
“So a fund of fund will be a market maker here and will be providing access to equity products to large number of investors. ETFs are the product of future. More and more ETFs will have access through this route. A new benchmark will come for accessing equity ETF markets, based on the price discoveries,” Gupta said.
In Budget 2018, Finance Minister Arun Jaitley announced that the government will continue to raise funds via ETF and will also come up debt-ETF in 2018-19.
Bharat-22 ETF that the government had offered was a huge success, which enable them garner Rs 14,500 crore in 2017-18.
The government has budgeted to earn Rs 80,000 crore in 2018-19 through disinvestment proceeds, higher by over 10 percent from the current year’s previous original estimates.
For the first time in seven years the government has completed the disinvestment target on the back of multiple deals.
The Centre had set a disinvestment target of Rs 72,500 crore in the current financial year by sale of equity in state-owned companies, including strategic sale. The target included Rs 46,500 crore as disinvestment of central public sector enterprises, Rs 15,000 crore from strategic disinvestment and Rs 11,000 crore from listing of insurance companies.
The Centre has exceeded the disinvestment target of 2017-2018 and is expected to receive about Rs 1 lakh crore.