Government's surprise move to scrap indexation benefit shakes up Debt Mutual Funds and investors.

We have some news that might come as a shock to many of you.

The Indian government has just scrapped the indexation benefit that debt mutual funds enjoyed. This change was snuck into the Finance Bill and passed in Parliament without any prior announcement.

From April 1st, 2023, any new investments made in Debt Mutual Funds will be taxed as per your slab, whether you invest and sell it in 1 month or 10 years. This will hurt investors who park money for the long term to get relatively safe returns and beat inflation comfortably. Without indexation, investments may not beat inflation anymore.

It will also hurt financial experts who earn money when their clients invest in such funds. They might have earned via commissions or charged a percentage fee directly from the client for doling out advice.

It will also hurt the Mutual Fund industry and the corporate bond market. The Bharat Bond Fund, which contained bonds issued by government-backed companies like the National Highways Authority of India (NHAI) and Power Finance Corporation (PFC), may also be impacted.

I urge you to take note of these changes while making your financial plans and investments. Do consult your financial advisor for more information on this.

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