Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: TAX RATES - GOODS TAXABLE @ 4% :: cpt :: VAT RATES :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARDS :: due date for vat payment :: articles on VAT and GST in India :: VAT Audit :: list of goods taxed at 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: form 3cd :: ACCOUNTING STANDARD :: empanelment :: TDS :: ARTICLES ON INPUT TAX CREDIT IN VAT
Sales Tax »
 Amendment to Additional Sales Tax Act unconstitutional: High Court
 Maharashtra will soon achieve Rs one lakh cr sales tax : CM Devendra Fadnavis
 CBEC chief bats for minimal exemptions for India Inc under GST
 Issuance of Free Sale & Commerce Certificate to Merchant Exporters
 Why model GST law does not give confidence to exporting community
 State governments tighten their grip on sales tax holidays
 Income tax dept charts plan to broaden national taxpayer base
 Sale of shares on which STT is payable is exempt from tax
  Sale of Government of India Treasury Bills by Auction
 New tax treatment of sale of unlisted shares brings more certainty, less litigation
 Simpler tax laws, low rate can help get more people to pay up

Types of taxes applicable on sale of mutual fund units
November, 07th 2011

In the previous issue, we looked at the dividend distribution tax (DDT), which is applicable to dividend/income schemes of mutual funds. Besides the DDT, mutual fund investments are subject to the capital gains tax, which is applicable on the gains made on the sale of fund units. This tax is directly levied on investors, as opposed to DDT, which is charged to the fund.

Types of capital gains
There are two types of capital gains: short term and long term. If the units are sold within 12 months from the date of purchase, these are considered short-term capital assets and any gains arising from such sales are subject to short-term capital gains tax. On the other hand, if the units are sold after 12 months from the date of purchase, the units are considered long-term capital assets and any gains from such sales are subject to long-term capital gains tax. Here are the tax rates applicable to different mutual fund categories:

Equity schemes
The long-term capital gains are exempt for equity mutual funds, while the short-term capital gains are chargeable at the rate of 15%. The investors are also liable to pay the applicable surcharge, if any, and the cess.

Debt schemes
The IT act provides the benefit of indexation in case of long-term gains arising from the sale of debt fund units. The assessee can opt for one of the following rates:

1. 10% on the capital gain without the benefit of indexation.

2. 20% on the capital gain after including the impact of indexation.

The investor is also liable to pay the applicable surcharge, if any, and cess on the tax.

To some extent, indexation helps curtail the impact of inflation on the value of the investment. As rising prices erode the real value of investments, it is unfair on the part of the government to tax the value that has already been eroded. The indexation benefit compensates the taxpayer for any such erosion. This is calculated by inflating the purchase cost using the cost inflation index.

Let us look at the following example to understand the tax treatment of debt funds. In the financial year 2009-10, Mr A sold 500 units of a debt fund at Rs 18 per unit. He had purchased these in the financial year 2004-5 for Rs 10 per unit. The cost inflation index for the financial year 2004-5 was 480, and for 2009-10, it was 632. Mr A can choose any one of the following two methods:

The short-term capital gain on debt schemes is clubbed with the income of the investor and is taxed at the slab rate.

Assuming that the investor is in the higher tax bracket, the short-term tax rate works out to 30%.

The investor is also liable to pay the applicable surcharge, if any, and other cess on the tax.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Publishing Management System PMS News Management System Publishing Management System Development Online News Management System for media company custom Publishing management system development Survey management system Market Res

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions