Budget 2026: Will Sitharaman Revive Debt Funds with Tax Incentives?

Experts expect the Union Budget to focus on reducing the cost of capital and strengthening the corporate bond market through potential tax reforms

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Moneycontrol•01-02-2026, 09:48

Budget 2026: Will Sitharaman Revive Debt Funds with Tax Incentives?

•Debt mutual funds currently face a disadvantage with capital gains taxed at the investor's slab rate, unlike equity funds.
•Experts anticipate the Union Budget 2026 may introduce tax reforms to reduce capital costs and strengthen the corporate bond market.
•AMFI has proposed restoring Long-Term Capital Gains (LTCG) benefits for debt funds to boost declining inflows.
•Stable RBI policy rates are expected to benefit short-duration and ultra-short debt funds, reducing volatility.
•Introducing indexation for fixed-income instruments could significantly enhance their appeal, especially for average savers and retirees.

Why It Matters: Budget 2026 may bring tax incentives and indexation benefits to revive debt funds and strengthen the bond market.

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