NPS-style tax benefits: AMFI proposes mutual fund linked retirement schemes in Budget 2026

What AMFI is proposing

• AMFI’s key recommendation is the launch of Mutual Fund Linked Retirement Schemes (MFLRS).

• EEE(Exempt Exempt Exempt) tax treatment

• Allow separate deductions for employee and employer contributions, under a new or parallel provision akin to Section 80CCD of the Income Tax Act.

• Include clearly defined vesting and withdrawal rules designed specifically for retirement purposes.

Why this matters

AMFI highlights several reasons why the move could strengthen retirement planning in India:

• Broadened retirement options: Mutual fund-based retirement schemes would give taxpayers an alternative to NPS and EPF, expanding the range of formal retirement-saving choices.

• Encouraging long-term investing: With clear tax incentives, investors may be more likely to commit to longer investment horizons, supporting disciplined retirement savings.

• Growing popularity of mutual funds: Monthly inflows into mutual funds have steadily increased in recent years, reaching record highs, demonstrating that MFs are already a preferred channel for long-term wealth creation.

• Rewarding savings beyond NPS: At present, tax benefits are largely restricted to NPS contributions. Extending similar incentives to mutual fund retirement schemes could encourage more individuals to save for the long term.

By introducing MFLRS with tax treatment on par with NPS, AMFI believes the government can significantly strengthen the retirement ecosystem. Currently, tax incentives for retirement savings are primarily available through the NPS. Extending similar benefits to mutual fund–based retirement schemes, AMFI said, would help reward disciplined savings and strengthen long-term financial security for individuals.