SEBI may allow employers to deduct SIP investments directly from salaries

India’s market regulator Securities and Exchange Board of India (SEBI) has proposed allowing salaried employees to invest in mutual funds directly through payroll deductions, a move that could make SIP investing work more like EPF or NPS contributions.

The proposal is part of a broader consultation paper on permitting certain “third-party payments” in mutual funds under regulated conditions.

At present, mutual fund rules require investments to come directly from the investor’s own verified bank account. The framework was designed to prevent fraud, money laundering and misuse of investor funds.

Under the proposed changes, however, employers may be allowed to deduct SIP amounts from employees’ salaries and transfer them to mutual funds on their behalf, provided employees explicitly opt in.

What exactly has SEBI proposed?

The consultation paper proposes enabling third-party payments in a few specified scenarios with safeguards. One of the key proposals is “payment for investment in mutual fund units by an employer on behalf of its employees through payroll deduction.”

In practice, this means an employee could authorise their company to deduct a fixed amount from monthly salary and invest it into a chosen mutual fund scheme as a SIP. The structure would function similarly to automatic deductions already used for EPF, NPS or group insurance contributions.

Why does this matter?

SEBI and industry participants believe payroll-linked SIPs could improve investment discipline and reduce SIP discontinuation rates. Mutual fund SIPs often get stopped because of missed bank mandates, insufficient account balance or investor reactions during volatile markets. Direct salary deduction could make contributions more regular and frictionless.

Industry experts cited in media reports said the proposal could especially help first-time investors who may find manual SIP setup cumbersome. Some have compared the idea to a long-term retirement-style investing framework for Indian salaried workers.

Who can offer the facility?

The proposal indicates that only regulated entities and employers meeting prescribed conditions would be allowed to facilitate such deductions. Employee participation would remain voluntary and require consent.

SEBI has also proposed safeguards around documentation, audit trails and KYC compliance. Importantly, redemption or payout proceeds would continue to go only to the investor’s verified bank account, not the employer’s account.

Is the proposal final?

No. The regulator has issued the framework as a consultation paper and invited public comments before finalising the rules. Feedback is open until June 10, 2026.

The proposal is part of SEBI’s broader effort to ease investment processes while retaining anti-money laundering and investor protection safeguards in the mutual fund industry.