India’s financial markets are steadily moving towards reforms aimed at making investing simpler, more disciplined, and accessible to common people. Over the last few years, mutual funds have emerged as a major avenue for wealth creation for millions of investors across the country.
Now, SEBI has introduced a new proposal that could change the way people invest in mutual funds. The proposal is related to enabling direct SIP deductions from employees’ salaries, similar to contributions made towards EPF and NPS. Let us understand what this proposal is and how it could impact investors.
What’s Happening?
On 20 May 2026, SEBI released a draft consultation paper on its official website proposing a significant change in mutual fund investment rules. Under this proposal, ‘third-party payment’ may be allowed in specific circumstances, enabling companies to deduct money directly from employees’ salaries for mutual fund investments. This arrangement could function similarly to the salary-linked investment model used for EPF and NPS.
Currently, mutual fund investments can only be made through the investor’s own bank account. However, SEBI is now considering a limited exemption to this rule, under which employers would be allowed to make consolidated payments on behalf of employees.
The objective of this proposal is to make the investment process easier, more disciplined, and automated, especially for employees who want to invest regularly through SIPs but find it difficult to manage separate payments every month.
Payroll-linked MF SIP
The biggest change proposed in SEBI’s draft could be the introduction of a ‘payroll-linked SIP’ model. Under this system, companies would be able to deduct the amount for mutual fund investments directly from employees’ salaries, much like EPF and NPS contributions. This would eliminate the need for investors to set up separate bank auto-debit instructions and could encourage regular investing.
This facility may initially remain limited to listed companies, EPFO-registered entities, and AMCs. Participation would be entirely voluntary, and the investment would remain in the employee’s name. SEBI has also sought feedback on whether companies should be restricted from promoting their group AMC schemes to employees in order to avoid conflicts of interest.
SEBI has clarified that strict KYC norms, electronic fund tracking, and anti-money laundering rules would continue to apply under this system. Additionally, redemption and dividend proceeds would only be credited to the verified investor account.
Distributor Commission and Social Cause Investment
SEBI has also proposed allowing AMCs to provide mutual fund units to mutual fund distributors (MFDs) instead of cash trail commissions. This facility may be available only to AMFI-registered distributors. The regulator believes that this could strengthen the culture of long-term investing and savings among distributors. However, SEBI has also invited suggestions regarding possible mis-selling and conflicts of interest.
In addition, investors may get the option to donate a part of their mutual fund investments or returns towards social causes. These donations could be made to NPOs or selected NGOs associated with the Social Stock Exchange. SEBI believes that this would offer investors a transparent and regulated way to contribute towards social initiatives.
What Does This Mean for Investors?
This proposal could make investing easier and more practical, especially for salaried individuals. The facility of direct SIP deductions from salary could shift investing towards a ‘save first, spend later’ approach, making it easier to maintain investment discipline over the long term.
Many young professionals want to begin investing but often face challenges such as managing monthly SIP payments, maintaining sufficient bank balances, or missing auto-debit mandates. Payroll-linked SIPs could significantly reduce these hurdles and make investing a seamless part of everyday financial planning.
Additionally, this model could also benefit first-time investors by making the investment process simpler, more automated, and less complicated. Over time, it could further strengthen India’s SIP culture and increase retail participation in mutual funds.
What’s Next?
SEBI’s proposal is being viewed as an important step towards making the mutual fund industry more modern and convenient. If implemented, it could become a strong long-term wealth creation tool for the salaried class.
Public comments on the proposal have been invited until 10 June 2026. If implemented, this system could further expand the reach of mutual funds among young employees and investors in smaller towns. It could be especially beneficial for individuals who want to invest but struggle to maintain the discipline of regular savings.
Overall, this move by SEBI can be seen as a positive step towards making India’s investment ecosystem more inclusive, systematic, and investor-friendly.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
Investments in the securities market are subject to market risks. Read all related documents carefully before investing.
