Mutual fund agents give up extra numbers after tax rule changes

Asset management companies are receiving requests from mutual fund distributors to merge multiple registrations into a single account. This shift follows new rules from the Securities and Exchange Board of India that removed the tax benefits of splitting business across family members.

Background

Distributors earlier used unique AMFI Registration Numbers in the names of spouses, parents, and siblings to keep individual turnovers below the goods and services tax limit. This trick let agents avoid paying GST on their sales commissions.

New Rules

Sebi changed the mutual fund expense framework on 1 April to separate the base expense ratio from statutory levies. AMCs now pay distributors a base commission without tax, and the GST component is paid only when a registered agent submits a valid tax invoice.

Impact

Experts note that unregistered agents now earn lower net payouts, removing the financial reason to hold multiple accounts. Pallav Bagaria of Equirus Wealth says the active count of distributors may drop in the short term as accounts merge. Delhi distributor Anuj Mittal adds that keeping extra numbers created heavy compliance work like filing separate tax returns.

Context

Consolidating registrations requires agents to get investor consent with a 15-day notice period before approaching the AMFI committee for clearance. Such regulatory updates aim to bring more transparency and simplicity to the Indian financial services sector.