Mutual Fund Taxation FY 2017-18 and Capital Gain Tax Rates

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• Hi Basavaraj,

  I need to report LTCG on equity mutual fund (ard 2.3 Lakh), which ITR form I have to fill - ITR1 (as it asks for details of sec 10(38) ) or I have to fill ITR2.

  Please advise.

  Thanks

  • Dear Nitin,
    Any other income sources for you other than this LTCG?

• Can NRIs claim indexation benefit for LTCG (tax @ 20%) for debt mutual fund (e.g. SBI Debt Fund Series A-19, or ICICI Pru FMP Series 74 369 Plan I-G) ? Or, they have to pay tax @ 10% for LTCG. These funds were kept for more than 3 years. At redemption, as per account statement, no STT were deducted.

  Debt mutual funds and FMPs from AMC's (like SBI, ICICI) are considered listed securities or unlisted securities for purpose of computation of LTCG ?

  • Dear Manish,
    Refer my latest blog post "Budget 2018 – Mutual Fund Taxation FY 2018-19".

• At Part 'B2' and 'B3' of the Schedule with ITR-2 Form, why there is no provision for indexation of Debt Mutual Funds held for 3 years and more? Also, what could be 'cost of improvement' of financial instruments like Debentures, Bonds, etc. in the hands of the holder?

  • Dear Chaudhuri,
    Please recheck once again for provisions. Regarding cost of the improvement, this applies to physical assets but not for financial assets.

• Sir,

  I have purchased SBI Magnum Balanced Funds for Rs.5,50,000/- on 20/2/2017 and for Rs.4,00,000/- on 22/3/17 and as per Mycams, the period being shown as 330 days by today. In order to meet certain domestic urgency, I propose to sell some units valuing Rs.7,00,000/- on completion of 365 days (by end March, 2018). Kindly advice whether the said sale proceeds effects Exist Load of 1% and Post Budget 2018 Taxation Rules on Taxation / TDS. Kindly suggest. snmurthyk

  • Snmurthy-There is no exit load if you withdraw after 365 days completion. LTCG will be applicable if you withdraw the money on or after 1st April, 2018. There is no concept of TDS in mutual funds for resident Indians.

• Thanx for ur reply sir.
  If investment in FD is giving 6.25% guaranteed return...then why to liquid funds??
  And about 20% tax for long term for liquid funds

  • Raj-Good question. If your holding period is more than 3 years, then Liquid Funds will have an edge over FDs in terms of taxation. Also, there will not be yearly TDS in case of Liquid Funds, which makes you more fund available each year for compounding. This is not the case. However, if you are uncomfortable with Liquid Funds, then stick to FD. There is no harm in sticking to FD for such short tenure.

    • Thanx sir.
      And special thanx to make aware regarding hidden pinpoints while investing.
      Misguiding at this stage may harm someone's lyf.
      Lots of appreciation for ur efforts.kp it up?

• Dear sir thanks for info...
  I'm having 5 lakhs...if I hv to go for debt fund rather than FD which is giving 6.25% interest....what will be your suggestion....
  And what will be tax I have to pay after 3 yrs(liquid fund) considering avg.8-9 % returns per year?
  Plz guide..

  • Raj-Debt Funds (Liquid Funds also) taxation is already explained in above post. I do not understand your doubt. Can you elaborate more?

• I have invested Rs.20,000/- in SBI Magnum Balance fund (General) in January 2017. Now its worth in January 2018 is Rs.25,000/-.
  Whether I have to pay Tax on Rs.5000/- profit, in this financial year ending on 31 March 2018?.

  I am planning to close that after three years of deposit i.e. February 2020.

  • Mohammad-Taxation in Mutual Funds (Debt or Equity), will come into picture when you sell the units. Hence, you no need to worry on such appreciation in your investment.

• Suppose tax is there for long term capital gains. If taxation is more,I think mutual funds will generate returns, similar to that of FDs, right. Is I am correct? In that case we will not be able to achieve our long term goals. Is am correct. Kindly advise.

  • Alfin-To arrive at your assumption, what return you expect from equity and also what tax % you considered?

    • Equity =12%.
      Tax slab = 30%

      • Alfin-So as per your the LTCG applicable will be 30% if Govt started to tax?

        • LTCG = 15% on redemption(no tax according to year).

          Ignore tax slab value(my mistake )

        • Alfin-Let us assume 15% LTCG tax, then post tax return of 12% MF return will be still at higher side than Bank FDs or PPF or any other debt funds right?

        • True. Let's hope government will not do that.

        • Alfin-We can only HOPE that also a reality :)

• Hi ! , Thanks for sharing valuable information . Just would like to know are liquid funds tax free if held for a year or less and if not, then how are they better than saving account as now few banks are already giving 6 to 7 % interest on amount over 1 lakh,

  Thanks

  • Deepa-Liquid funds are taxed as debt funds. You have to use such funds to park your emergency fund or immediate cash requirement BUT not to earn more.

• Hi,

  If I am investing in liquid mutual fund with divident reinvestment option on daily basis. Do I need to pay tax at current income tax slab if I hold them less than 3 years or Mutual fund paying dividend distribution tax at 25% is enough?
  please explain

  • Nilesh-You no need to pay the tax on the dividend paid out to you as it is tax-free in the hands of investors. But may I know the logic behind choosing this circus?

    • I need to park my part of my emergency fund in liquid MF which allows greater return than saving account and liquidity to get money next day. I may not hold them for 3 years, so will end up paying tax. Was checking if dividend options saves tax ?

      • Nilesh-I agree with your investment choice but not agree with the circus of DIVIDEND. Simply choose growth rather than the current option. Because in long run, each dividend re-investment will be considered as a fresh investment and taxed accordingly which confuse yourself.

        • Thanks for prompt reply.

          In case of growth option it will taxed at my current tax slab then if hold for less than 3 year.

          was not aware reinvestment is considered as fresh investment.

          Do you have any other option to park emergency fund without tax implications?

        • Nilesh-When your priority is LIQUIDITY and SAFETY, then why bother about returns and taxation?