Would changing the option for receiving the dividend from an equity mutual fund investment, say from dividend payment to growth option within the same scheme of the mutual fund, mean that this is considered to be a 'transfer' for the purpose of income-tax? When a person makes such a change in the option within the same scheme of the mutual fund, he pays STT twice - once for exiting the registered option of dividend payment and again for registering the new option of growth. He also receives a different no. of units in the new option chosen within the same scheme of the mutual fund, based on the NAVs of the units for these two options on the date of the transaction.
My questions are:
1. Is this change of option within the same scheme considered to be a 'transfer' and whether the unitholder has to calculate the capital gain and report it in his income-tax return for the year in which the option change took place? (Sec. 2(47) of the I-T Act includes 'exchange' as one of the categories in the definition of ;transfer'.)
2. If the unitholder ultimately sells the units through the stock exchange or by repurchase/redemption by the mutual fund, from which date would his holding period be calculated for purposes of capital gains: whether from the original date of investment or from the date of change of the option from dividend payment to growth?
Thanks for the help.
CAclubindia
