Industry body Assocham said that market regulator SEBI should allow mutual funds to float Individual Retirement Account, which would encourage common people to invest in equities for long-term.
The scheme, which is prevalent in the US and European countries, broadly aims at creating wealth over a period of time, which could then be available after retirement, Assocham said.
In a representation submitted to SEBI, assocham said that there is a need to promote long-term inflows into equities by floating IRA schemes so that households make their investments through various mutual funds to cherish benefits of their long-term plans.
Under the scheme, each contributor could invest up to five lakh rupees in a year in a mutual fund that would further invest in equity or in a combination of equity and debt as per investors choice, it said adding that the lock-in period for such investments should be a minimum 10 years and withdrawal only after investors attain the age of 58 or 10 years after investment, whichever is earlier.
The chamber further said that the amount invested in the scheme should be tax deductible and dividend should also be exempted from taxes when investors withdraw the amount.
“This will promote long-term investments in equity and also ensure a reasonable income after retirement,” it added.
The IRA scheme would thus help individuals to build their retirement benefit schemes and at the same time channelize the savings of the community to the capital market, Assocham said.
The diversion of savings of household sector to the capital market would provide a steady flow of substantial amounts that would also act as a buffer against volatile inflows and outflows of FIIs, it added.
