Investments in Mutual Funds are subject to varied tax benefits and liabilities on dividend, dividend distribution and capital gains. Different kinds of mutual fund schemes are subject to different tax provision. It is important to understand the tax provision under various schemes and make informed decision while engaging in mutual fund investments.
"Dividend and Capital gain taxation in the hands of investors in Mutual Fund Schemes from 1 April 2011 (The Finance Bill, 2011 has received assent from the President on 8 April 2011)"
| INDIVIDUALS | CORPORATES | CORPORATES | NRI* | |
| From 01.04.2011 to 31.05.2011 | From 01.06.2011 | |||
| Dividend | ||||
| Equity schemes | Tax free | Tax free | Tax free | Tax free |
| Debt schemes | Tax free | Tax free | Tax free | Tax free |
| Dividend distribution tax | ||||
| Equity schemes | Nil | Nil | Nil | Nil |
| Debt Scheme(other than Money market and Liquid schemes) | 12.5%+ 5% surcharge+ 3% cess | 20%+ 5% surcharge+ 3% cess | 30%+ 5% surcharge+ 3% cess | 12.5%+ 5% surcharge+ 3% cess |
| 13.52% | 21.63% | 32.45% | 13.52% | |
| Money market and Liquid schemes | 25% + 5% surcharge + 3% cess | 25% + 5% surcharge + 3% cess | 30% + 5% surcharge + 3% cess | 25% + 5% surcharge + 3% cess |
| 27.04% | 27.04% | 32.45% | 27.04% | |
| Long term Capital gains (Units held for more than 12 months) | ||||
| Equity schemes | Nil | Nil | Nil | Nil |
| Debt schemes | 10% without indexetion or 20% with indexetion whichever is lower + 3% cess | 10% without indexetion or 20% with indexetion whichever is lower+5% surcharge + 3% cess | 10% without indexetion or 20% with indexetion whichever is lower+5% surcharge + 3% cess | 10% without indexetion or 20% with indexetion whichever is lower + 3% cess |
| Without indexation | 10.30% | 10.82% | 10.82% | 10.300% 3 |
| With indexation | 20.60% | 21.63% | 21.63% | 20.600% 3 |
| Short term Capital gains (Units held for 12 months or less) | ||||
| Equity schemes | 15% flat + 3% cess | 15% + 5% surcharge + 3% cess | 15% + 5% surcharge + 3% cess | 15% + 3% cess |
| 15.45% | 16.22% | 16.22% | 15.450% 3 | |
| Debt schemes | 30% + 3% cess | 30% +5% surcharge + 3% cess | 30% +5% surcharge + 3% cess | |
| 30.9000% | 33.2175% | 30.9000% | 30% + 3% cess | |
| 30.90% | 32.445%2 | 32.445%2 | 30.900% 3 | |
1. STT @ 0.25% will be deducted on equity funds at the time of redemption and switch to the other schemes
2. For foreign corporates, the rate applicable would be 40% + 2% surcharge + 3% cess i.e. 42.024%
3. The short term/long term capital gain tax will be deducted at the time of redemption of units in case of non-resident investors only
The rates that will be applied by the AMC at the time of redemption would be as follows
| Tax Deducted at Source (Applicable only to NRI Investors) | ||
| Short term | Long term | |
| Equity | 15.45% | Nil |
| Debt< | 30.90% | 20.60% |
In terms of section 206AA of the Act, w.e.f. 1st April, 2010 it will be mandatory for every person including a non-resident who is entitled to receive any sum or income or amount, on which tax is deductible, to furnish his/her Permanent Account Number ('PAN'), failing which tax will be deducted at higher of the following rates:
- the rate specified in the relevant provision of the Act;
- at the rate or rates in force i.e., the rate mentioned in the Finance Act; or
- at the rate of 20%.
Furnishing of PAN becomes critical in cases where the gains earned by the investors are taxed at a rate lower than the rate applicable under section 206AA of the Act.
Equity scheme means an "equity oriented fund" which is defined in the Income-tax Act, 1961 ('the Act'), as a fund where the investible funds are invested by way of equity shares in domestic companies to the extent of more than 65% of the total proceeds of such fund.
The expression "money market mutual fund" has been defined under Explanation (d) to Section 115T of the Act, which means a scheme of a mutual fund which has been set up with the objective of investing exclusively in money market instruments as defined in sub-clause (p) of clause (2) of the Securities and Exchange Board of India (Mutual Funds) Regulations,1996.
The expression" liquid fund" has been defined under Explanation (e) to Section 115T which means a scheme or plan of a mutual fund which is classified by the Securities and Exchange Board of India as a liquid fund in accordance with the guidelines issued by it in this behalf under the Securities and Exchange Board of India Act, 1992 or regulations made thereunder.
You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds
1. ICICI Prudential Tax Plan
2. Reliance Tax Saver (ELSS) Fund
3. HDFC TaxSaver
4. DSP BlackRock Tax Saver Fund
5. Religare Tax Plan
6. Franklin India TaxShield
7. Canara Robeco Equity Tax Saver
8. IDFC Tax Advantage (ELSS) Fund
9. Axis Tax Saver Fund
10. BNP Paribas Long Term Equity Fund
Invest in Tax Saver Mutual Funds Online -
For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call
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