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Mutual fund

sharfas (article clerk) (55 Points)

13 June 2018

gain on redemption of mutual fund is exempt or not.

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Siddharth Goel (Chartered Accountant) (3031 Points)
Replied 13 June 2018

Hi,

The holding period of mutual fund units can be short-term or long-term. In case of equity mutual funds and balanced mutual funds, a holding period of 12 months or more is regarded as long-term. In case of debt mutual funds, a holding period of 36 months or more is regarded as long-term.

STCG on Equity/Balanced mutual funds is taxed @ 15% and LTCG on the same is taxed @ 10% in excess of Rs. 1,00,000/-.

STCG on Debt mutual funds is taxed as per applicable slab rates and LTCG on the same is taxed @ 20% after indexation.

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (170328 Points)
Replied 13 June 2018

Correct, but for LTCG of equity oriented MF sec. 10(38) is applicable for AY 2018-19 ......

Ie. Any long term capital gain over equity oriented MF in FY 2017-18 is tax-exempt.

Siddharth Goel (Chartered Accountant) (3031 Points)
Replied 13 June 2018

Thankyou for the update Sir!

I would like to just add to this for better understanding, that the equity oriented funds refers to units of Unit Trust of India or a fund wherein investible funds invested by way of equity shares in domestic companies exceed 65% of the total proceeds of such mutual fund.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (170328 Points)
Replied 13 June 2018

" a fund wherein investible funds invested by way of equity shares in domestic companies exceed 65% of the total proceeds of such mutual fund" .........Correct.

Explanation.—For the purposes of this clause, 10(38)

"equity oriented fund" means a fund—

(i) where the investible funds are invested by way of equity shares in domestic companies to the extent of more than sixty-five per cent of the total proceeds of such fund; and

(ii) which has been set up under a scheme of a Mutual Fund specified under clause (23D):

Provided that the percentage of equity share holding of the fund shall be computed with reference to the annual average of the monthly averages of the opening and closing figures.