13 October 2017
Sir Whether Short Term Capital Gain on Mutual Fund will be proportionate of the total gain for computation of income tax.More precisely I am placing my case as follows.An amount of Rs Ten Lakhs ie 1000000 was invested in a Non Equity Mutual Fund.A year later the value of the investment increased to 10.8 Lakhs ie Rs 1080000..Now due to some exigency we want to withdraw this amount.Actually total capital gain in this case is Rs 80000 which is in fact 7.4% of the total value of Rs 1080000.Now for computation of income tax whether total value of Rs 80000 will be considered which will mean IT HAS NO DIFFERENCE WITH BANK FD DEPOSITS.But if only 7.4% of Rs 80000 is considered the value of capital gain will come out to be Rs 5926 which will levy an income tax of Rs 1831 considering highest tax bracket of 30%.But if total value of Rs 80000 is considered it will lead to an income tax figure of Rs 24720. a)If we withdraw only Rs 80000 the what will be the tax b)And if we withdraw Rs 1080000 what will be the tax Please therefore opine what will be the capital gain Rs 5926 or 80000
13 October 2017
Taxation in redemption of Mutual fund investments works on the principle that you sell certain number of units and you gain the amount. Supposing you are redeeming the whole investment,Tax is calculated on the basis of whole amount i.e 10.80 lacs less 10.00 lacs.
13 October 2017
Since this is a non equity fund, holding period of less than 3 years is short term and the gains will be taxed as per individual slab rate
13 October 2017
a)If we withdraw only Rs 80000 the what will be the tax This is not similar to bank deposit where you can withdraw on amount basis. In mutual fund investments, you can redeem part of your investments in units and not in amount.
b)And if we withdraw Rs 1080000 what will be the tax Please refer my reply above.
14 October 2017
Actually the question has arisen due to the fact that an article has been published in Times of India,Hyderabad edition dated 09/10/2017 in Personal Finance page written by Mr Dhirendra Kumar,CEO,Value Research(www.valueresearchonline.com).Excerpts from the article is quoted below.I am a layman in this line,a Retired Chief Engineer.Please see the details.I am only seeking clarification from Experts.If the tax to be paid is only Rs 1831(when capital gain is Rs 5936) in stead of Rs 24720(when Capital Gain is Rs 80000) it will be a eye reckoner to Tax Payers like me IMPORTANT I am referring to an article published by Mr Kumar in TOI ,Hyderabad edition dated 09/10/2017 Titled Mutual funds have multiple tax advantages over bank fixed deposits Excerpts from His Article Let's say you invest Rs 10 lakh in a mutual fund. A year later, the value of the investment has increased to Rs 10.8 lakh. Now, you want to withdraw the Rs 80,000 you have gained. Note that out of the investment you hold, 7.4% is the gain and the remaining 92.6% is the principal that you had invested. Here's the key idea: when you withdraw any money, the withdrawal shall be deemed to consist of the gains and the principal in this same proportion, for tax purposes. Therefore, of that Rs 80,000, only Rs 5,926 will be considered gains and will therefore be added to your taxable income. This makes an enormous difference. In an equivalent FD, you would pay Rs 24,720 as tax in the highest slab. In the mutual fund, you would pay Rs 1,831 as tax. AS PER Mr Kumar the consideration VALUE SHOULD BE 7.4%OF GAIN ie Rs 80000=Rs 5926 AND AT 30.9% TAX SLAB IT IS Rs 1831 ONLY.7.4% figure comes ,as Rs 80000 is 7.4% of a total of Rs 1080000. I am trying to CLARIFY THE POINT as above from Experts,so that as a Income Tax Payers I can take it up with IT Authorities. With thanks.
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