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Leading fund house Reliance Capital Asset Management Company has got government approval for first ever equity-oriented pension scheme giving tax benefits to investors.
The government has notified Reliance Retirement Fund as a ’Pension Fund’ under a relevant section of the Income Tax Act offering tax deductions to individuals for investments up to Rs 1.5 lakh in a financial year.
This is the first pension fund offering equity-oriented option, thereby enabling investors to earn competitive returns that can help beat inflation.
So far, only two fund houses have been allowed to launch such pension schemes, but both of them offer only one plan each which are predominantly debt-oriented. Besides, UTI and Franklin Templeton MFs had got approvals to launch their Pension funds more than 15 years ago.
The latest ‘pension fund’ notification for Reliance Retirement Fund comes at a time when the market regulator SEBI has asked its Mutual Fund Advisory Committee and the industry body AMFI (Association for Mutual Funds in India) to prepare a draft plan for pension products by mutual funds.
While mutual funds can launch pension products, they mostly do not offer tax benefit equivalent to the similar schemes from insurance companies.
Barring two mutual fund schemes — UTI Retirement Benefit Pension Fund and Templeton India Pension Plan (formerly known as Kothari Pioneer Pension Plan) — an individual does not get tax benefit at the time of investing in a mutual fund pension scheme.
“Globally, retirement is one of the largest categories of investments whereas in India, it is still in a nascent stage.
In the US, retirement asset to GDP is nearly 80 per cent whereas in India, it is only about 15 per cent,” Reliance Capital Asset Management Company CEO Sundeep Sikka said.
Reliance Capital Asset Management (RCAM), part of Anil Ambani-led business conglomerate Reliance Group’s financial services arm Reliance Capital, runs Reliance MF.
The government said in a notification dated December 23 that Reliance Retirement Fund has been notified as “a pension fund for the purposes of the said clause (section 80C of the Income Tax Act) for the assessment year 2015-16 and subsequent assessment years”.
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