10 Points You Should Read About Income Tax Rules on Mutual Fund Gains
It is projected that people are investing nearly Rs. 5,000 crore every month through SIPs.
In July, the asset under management of Indian mutual fund industry touched all time high of Rs.20 lakh crore. This is due to the strong inflows into both equity segments and debt. Retailers are investing record amount into mutual funds through SIPs. It is projected that investors are putting in an estimated figure of Rs.5000 crores every month through SIPs. Systematic Investment Plan or SIP is an investment plan offered by mutual funds, wherein one could invest a set amount in a mutual fund scheme at pre-defined intervals.
Below points will help you understand how much income tax you have to pay on gains from mutual fund:
1) For tax purposes, a mutual fund scheme that invests 65 per cent or more of its portfolio in equities or equity-related instruments, is considered equity funds.
2) Apart from equity diversified funds, arbitrage funds are also considered equity funds. Arbitrage funds invest in equity and derivatives such as futures and options while equity income funds invest in a mix of equity, equity derivatives and debt. If a balanced fund invests minimum 65 per cent in equities, it is considered an equity fund for tax purpose.
3) Profit held for more than a period of 12 months, from equity mutual fund units whether SIP or lumpsum is considered as a long term capital gain. As per the policy, there is no tax is applicable on the long-term capital gains from equity funds.
4) For the duration less than 12 months, tax on short-term capital gains is applicable at 15% on the gains from equity funds.
5) Many investors opt for dividend option while investing in equity mutual funds. Dividend income from equity mutual funds is tax-free, irrespective of when you receive it.
6) Investments in debt funds are considered long term only if they are held for more than three years.
7) Currently, the long-term capital gain on debt funds is taxed at the rate of 20 per cent. However, investors get the benefit of indexation on their original debt fund investment. This indicates that the adjustment of original investment is done in accordance for the price if inflation and taxes. Since the original cost of investment goes up after factoring in inflation, long term capital gains tax comes to negligible levels.
8) But before three years if the debt mutual fund investments are redeemed or sold, whatever short-term gains you have are taxed as per your tax slabs.
9) Income from debt funds also come in the form of dividends. Any dividend declared by a debt mutual fund is exempt from tax in the hands of investors.
10) However, mutual fund houses pay dividend distribution tax @ rate of 28.84 per cent (including surcharge and cess) before handing out the dividends to investors.
Good
Good for tax savings also growth of income
God
Good
informative and useful
if a person receive total dividend in year for more than 10 lakhs from equity oriented mutual fund, whether it will be taxable in the hands of recipient as applicable in the case of dividend recd. from company
Very informative and useful. Thank you.
Good
Good information. Can any one explain the difference between equity funds balance fund n debt fund..
Equity Funds are those that invest in equity shares of listed companies. Funds that trade through futures and options on the cash and futures sections of the stock market (and thus called arbitrage funds) will also qualify as equity funds (for taxation purposes).
Those that invest in debt ( fixed income securities such as Govt Bonds, corporate bonds, Certificate of Deposits,Money market and call money) are called debt funds. However, if they invest in equities also and the minimum equity investment is 65% of the total scheme’s investment value, then (for tax purpose) it qualifies as a Balanced Fund. Practically, if a fund invests less than 65% , then too it could be called a balanced fund but not from the Income Tax angle.
Good.
Many are unaware of benefits as risk factor overburden s their minds.Equity means only speculation ,this idea is well set in mind.
More risk more earning,but,in a long run in equity.
Selection of good product with proven record and spreading knowledge through trustworthy people will fetch good results.
I dont agree taxing long term capital gains on debt fund @2o% is a good idea.As senior citizens normally invest in these funds and run their households on income earned.By high taxation the return on debt fund will be sub 10%.also debt funds are not totally risk free.
Good advise and first time investementers to good motivation. At the same time to know the mutual funds and benefits tax benefits really good.
As Senior citizens find the investments through Mutual Funds as secured & attractive, they generally opt for these investments .
The returns should be totally tax free.
RBI has reduced rate of Intt.on FD.now sr.citizen what will do? Naturally they will invest in MF in different ways.gov.is again hunting for taxes in MF. There is the only source of income for sr.citizen to live upon.
very useful
very good
Any clarification on Gratuity above 10 lakhs in income tax. Can taxable Gratuity above 10 lakhs be claimed under 29(c) or any other sections.
Please throw some light on the above.
QUITE USEFUL INFORMATION FOR NEW INVESTORS LIKE ME
very good and highly informative
Not 100 per cent right information as Divided received more than Rs. 10 lakhs is taxable.
Very good information. Thanks for sharing.
It is good advice given .
But I have question .What about , Income from Govt , Bonds , fixed , interest , at the same time tractable in market , like equity in long term ( more than 12 months) and trading may , increase, the original investment . Or trading , may , decrease , the original investment . Will that loss , be compensated by interest earned ??.
Since interest earned on , bonds will be considered as interest on fixed deposits .
How the loss , after redemption of bond , could be adujusted in income earned?? particularly for Senior citizens ??. Can any expert on Taxation , reply ??
Brilliant article which sums up what is a mutual fund and how it works and why investors should invest in it.. I am delighted and happy to read it..
Good informations received. I am having a querry that how we can calculate the indexation value of redeemed Mutual funds ?
Will there be any tax applicable when a MF investment is redeemed after 3 / 5 years period ?
VERY USEFUL INFORMATION
Pl. share more information on Liquid Mutual Fund investment and tax structure on those..
Equity Dividend received in excess of Rs.10 lakhs in a year is taxable from Assessment year 2017-18 onwards. Will dividends received from Mutual Funds also attract this provision.
28.8% dividend distribution tax is paid by mf company in case of equity mf to govt or not
WHAT STUDY SHOULD I DO TO MAXIMISE TAX FREE RETURNS..REQUEST TO GUIDE STEP WISE..MAINLY HOW TO COMPARE VARIOUS COMPANIES…FOR INVESTMENT!!!
REST ALL INFORMATION IS VERY GOOD!!
IAM INTO BUSINESS SINCE LAST 24 YEARS WITH GOOD TURNOVER…BUT DUE TO CERTAIN FAMILY DISTURBANCE HAD TO DIVERT FUNDS FOR FAMILY…SO NOW TO START SAVINGS FOR MY FAMILY.
I am educated . Good. Thank you.
Usefull informations
Good
Useful information
Thank you
VERY USEFUL INFORMATION
Good
One time taxed money ; where so ever invested ; should never be taxed again
very simple economics ;
this is what the majority under stand
UR absolutely correct Mr. Singh, but as u know in our country, very little percentage of people understand this general concept… moreover the government is taking benefits of this lack of awareness to collect more revenue.
Hi
Very nice information
Thnx DiscountWalas’ the IT tax provisions are precisely explained on MF gains. I appreciate your efforts.