Mutual fund tax treatment

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

15 February 2011 My father has purchased ICICI Infrastructure mutual fund(it was dividend reinvestment plan scheme) when the rate was 10.225 on 8th April 2005.He invested Rupees 700,000.Number of units he got was 700,000/10.225 = 68459.658.The dividend he got from the mutual fund for A.YR 06-07,07-08,08-09,09-10 was exempt under 10(35) and was shown in the income tax return and dividend was reinvested in the plan and got additional units.On 23/7/2009 my father reedemed all the units(including the additional units) for Rupees 1712167.74.
Now my question is what will be the tax treatment of rupees 1712167.74.

Sunil Kr. Sanganeria

Sunil Kr. Sanganeria (Expert)
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15 February 2011 If a person hold Mutual fund for a year, any profit/loss will be on sale of such mutual fund will be treated treated as long term/short term.

a perod of one year will be counted for fresh purchase date to date of sale.

for others the date of dividend reinveted to date of sale.

I think that the plan is not equity oriented pal so MF has not charged STT on redemption value. If charged LTCG is empted and 15% tax on STCG

In case STT not charged:
For LOng Term
Calculate Indexed cost of acquisition by applying cost Inflation Index and pay 20% on the profit

For short Term Tax profit wll be included in Gross Total Income and pay Tax accordingly

K V Subba Rao

K V Subba Rao (Expert)
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15 February 2011 I understand from http://www.valueresearchonline.com/funds/newsnapshot.asp?schemecode=2814
that ICICI Infrastructure is equity oriented mutual fund scheme

In case of units of equity oriented MF Scheme---

(1) for units redeemed after one year of purchase or reinvestment, there is no tax payable

(2) for units redeemed within one year of purchase or reinvestment, tax at 15 % plus two Cesses is payable on STCG

So work out the STCG on units purchased in the form of reinvestment of dividend from 24.07.08 (one year before redemption date) and pay tax on this only

Note: If his taxable income EXCLUDING STCG for FY 2009-10 is below the Exemption Limit, he will be entitled to avail Relief u/s 111A also

I suggest you check the following link also

http://www.simpletaxindia.org/2010/06/tax-on-mutual-funds-sip-stp-bonus.html

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