Skip to main content

LTCG Tax on Equity Mutual Funds

Best SIP Funds to Invest Online 


With the Lok Sabha clearing the Finance Bill 2018, the long-term capital gains tax (LTCG) on equity and equityoriented mutual funds came into force from April 1.

1. What LTCG will investors have to pay on equity-oriented MF schemes in this fiscal?

Till financial year 2017-18, investors in equity-oriented mutual fund schemes who sold them after holding for more than a year paid zero LTCG. Balanced funds, equity savings funds and sectoral funds are also considered as equity-oriented funds as their net equity exposure is above 65%. However, from financial year 2018-19, investors in all these categories of funds will have to pay a 10% LTCG tax on gains made above ₹1 lakh per annum.

2. There is grandfathering provided in LTCG. What does that mean?

The grandfathering clause is the exemption granted to existing investors for gains made by them before the new tax came into force. The government has done this to ensure that investors who have committed money keeping in mind the easier tax regime areprotected. As per the new laws, the government has said that gains made in equity-oriented mutual fund schemes till January 31, will be grandfathered or exempted. There will be no LTCG tax on notional profits on mutual funds till then.

3. Who will come under the new LTCG tax net? When is the tax payable?

Since this is a direct tax proposal it will be applicable for the assessment year 2019-20 (Financial Year 2018-19). In other words, long-term capital gains of over ₹1 lakh made for the year 2018-19 will be taxed at 10%.

4. What happens to my tax liability if I sell equity-oriented MFs post April 1?

For calculating LTCG, the following is the method: Purchase price is to be considered higher of (a) and (b). (the idea is that only gains made after Jan 31 are taxable)

a) Actual purchase price

b) Lower of ...

i) Fair market value (it is the highest price / market value as on January 31, 2018)

ii) Full value of consideration (it is the actual sale price). Next, for calculation of the final LTCG amount, exemption of ₹1 lakh is applied. Thus if LTCG as per above is ₹1,20,000 then 10% on only ₹20,000 = ₹2,000 would be applicable.

5. Will dividends on my equityoriented mutual funds be taxed?

Dividends on equity-oriented mutual funds are now taxed at 10%. This provision had to come into effect since LTCG tax of 10% has been levied. If dividends were not taxed, investors would have used it as a opportunity to switch to this option to avoid LTCG





SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Popular posts from this blog

All about "Derivatives"

What are derivatives? Derivatives are financial instruments, which as the name suggests, derive their value from another asset — called the underlying. What are the typical underlying assets? Any asset, whose price is dynamic, probably has a derivative contract today. The most popular ones being stocks, indices, precious metals, commodities, agro products, currencies, etc. Why were they invented? In an increasingly dynamic world, prices of virtually all assets keep changing, thereby exposing participants to price risks. Hence, derivatives were invented to negate these price fluctuations. For example, a wheat farmer expects to sell his crop at the current price of Rs 10/kg and make profits of Rs 2/kg. But, by the time his crop is ready, the price of wheat may have gone down to Rs 5/kg, making him sell his crop at a loss of Rs 3/kg. In order to avoid this, he may enter into a forward contract, agreeing to sell wheat at Rs 10/ kg, right at the outset. So, even if the price of wheat falls ...

Mutual Fund MIPs can give better returns than Post Office MIS

Post Office MIS vs  Mutual Fund MIPs   Post office Monthly Income Scheme has for long been a favourite with investors who want regular monthly income from their investments. They offer risk free 8.5% returns and are especially preferred by conservative investors, like retirees who need regular monthly income from their investments. However, top performing mutual fund monthly income plans (MIPs) have beaten Post Office Monthly Income Scheme (MIS), in terms of annualized returns over the last 5 years, by investing a small part of the corpus in equities which can give higher returns than fixed income investments. The value proposition of the mutual fund aggressive MIPs is that, the interest from debt investment is supplemented by an additional boost to equity returns. Please see the chart below for five year annualized returns from Post office MIS and top performing mutual fund MIPs, monthly d...

NRI Corner: The process of remittances abroad

The process of remittances abroad, and back, is cumbersome. Here’s how you can wade through without hassles Approach The Right Place Outward remittances or the process of sending money abroad is governed by many regulations. In India, outward remittances are made mainly through banks. At the outset, you need to remember that you just cannot trust any individual or a financial firm with the responsibility of sending your money. Experts recommend that you should always try to choose a bank with an international footprint, which will make your job easier. Choose Mode Of Transfer The next step is to choose the mode of transfer. One option is to get a Foreign Currency Demand Draft ( FCDD ). This draft will be denominated in foreign currency and should be drawn in favour of the recipient/ beneficiary. The beneficiary does not necessarily need to have an account with the same bank. The other option is to send money via wire transfer. Do not be puzzled if the bank official uses the word SWIFT ...

Zero Coupon Bonds or discount bond or deep discount bond

A ZERO-COUPON bond (also called a discount bond or deep discount bond ) is a bond bought at a price lower than its face value with the face value repaid at the time of maturity.   There is no coupon or interim payments, hence the term zero-coupon bond. Investors earn return from the compounded interest all paid at maturity plus the difference between the discounted price of the bond and its par (or redemption) value. In contrast, an investor who has a regular bond receives income from coupon payments, which are usually made semi-annually. The investor also receives the principal or face value of the investment when the bond matures. Zero-coupon bonds may be long or short-term investments.   Long term zero coupon maturity dates typically start at 10 years. The bonds can be held until maturity or sold on secondary bond markets.

SBI bonds FAQ

  Maximum retail subscription and over – subscription There is a lot of excitement around these bonds, so I won't be surprised if they get over-subscribed on the first day itself. So, I thought Sameer asked a very good question about over-subscription. Here is that discussion. Here are some other questions that you may find useful. Can I trade the SBI bonds on NSE after it lists? Yes, these can be traded after listing. Where can I get the application forms, and can I buy the bonds online? You can get the application from notified branches, and then fill it up there and submit it. To the best of my knowledge, there is no way to invest in them online, but if anyone knows otherwise then please leave a message, and let us know. Can NRIs apply for these bonds? NRIs can't apply for these bonds as they fall under one of the ineligible categories. Can you take a loan by keeping the SBI bonds as security? The terms of the issue in the prospectus state that the bank shall no...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now