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Capital Gain Of Mutual Fund

CA Arindam Sain (Practice) (308 Points)

31 August 2010

Hi friends,

I have a query....could any one pls. help me.....I am giving here the details...

Assessee: An Resident Individual

Marginal tax rate (Slab rate): belongs to 30%

He has acumulated 290000/- in a equity oriented mutual fund by 29 installments through SIP, which is still continuing.

Now he wants to switch entire amount from equity fund to liquid/ debt fund

My question is whether capital gain tax would attract? if so ,,,,is this on entire amount of Rs290000/- or on Rs120000/- as short term of last 12 months Investment.

Could he redeem Rs170000/- as it does not include investment of last 12 months and thus it become LTCG and become tax free transfer.

Pls. help me.............

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Balaji (Knowledge Seeker) (317 Points)
Replied 31 August 2010

Dear Raju,

I presume that the person is investing Rs.10,000/- p.m. via SIP in the scheme.

1) He can withdraw all units allotted to him more than 12 months back and the entire redemption amount would be tax-free.

2) If the Rs.1,70,000/- that you are referring to is the amount invested more than 12 months back,then he can withdraw the same alongwith the appreciation,if any, on the same.The entire amount would be tax-free.

3) If,however, the amount of Rs.170000/- invested more than 12 months back has depreciated in value,say to Rs.160000/-,then though no tax would be payable,the loss of Rs.10,000/- has to be ignored and cannot be off-set against any other income/gains.

Trust this clarifies.Please let me know if you need any further clarifications.

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