Mutual Fund Taxation

This week we will look into the taxation aspect of the Mutual Funds. The funds can we divided into equity oriented and non-equity oriented mutual funds. Equity oriented is a fund investing 65% or more of the fund value into domestic equities of companies.

Non-Equity Oriented funds are Debt funds, as a category, include liquid, ultra-short-term, short-term, income accrual, dynamic bond, and gilt funds. It also includes all debt-oriented funds as MIPs and other hybrid non-equity funds. International funds and gold funds also follow the same taxation as debt funds.

Holding period decides the nature of capital gain. Then the nature of capital gain and type of mutual fund decides the taxability of the gains. In the below table we have summarized the taxability structure of the various funds and categorization of capital gains.

Equity Oriented Funds                  Non-Equity Oriented Funds

Long Term Capital Gain (LTCG)

Holding Period                                  More Than 12 months                   More than 36 months

Taxability                                             Not taxable                                        Taxable @ 20% with indexation benefits

Short Term Capital Gain (STCG)

Holding Period                                  Less than 12 months                       Less than 36 Months

Taxability                                             15% of the ST Capital Gain            taxable at slab rate

(Securities transaction tax (at 0.001%) will apply on all redemptions of equity schemes in case of STCG)

Investing in Equities Oriented funds is also advisable from the point of view of taxability as well for Long per period more than 12 months, entire long term capital gains in not taxable.

Do write back to us for your feedback @fianceconnectindia@gmail.com

Discover more about mutual funds on our portal fiannceconnect.in

About Mutual Funds Investment

Mutual Funds are one of the best modes of investments. Mutual Fund collects money from the small investors and invests in the Shares of Companies or Debentures, Securities, etc. They provide the units of the mutual funds to the investors. The units can be tracked at any point of time. There are two types of funds like open ended and closed ended. Open ended are open for investments and closed ended are closed for further investments only they have collected the required funds during initial offer.

• Closed ended are like ELSS funds which gives tax benefits and lock in period is also there before which they ca not be sold.

•        Open ended can be sold any time; no lock in period is required.

      Mutual Funds can be classified as below based on the nature of their investments

Fund Type                                 Investment Type                                             Risk/Return

·         Equity Mutual Funds          In equities of the companies                                          High /High

·         Balanced Funds:-               In equities and another portion in debts                         Medium/Medium

·         Debt Funds                       In the fixed income instruments                                      Low/Low

In personal Financial planning Mutual Funds can play a very good role. One can invest one time or through SIP Systematic Investment Plan mode.

SIP is best mode of investment wherein on a defined date the defined amount gets deducted from your account.  Income- Investment=Expense is the principle of SIP mode of investment. First invest and then balance use for your day to day and other expenses.

The horizon of investment, goal and risk profile are very important to select the type of funds. In case you have long time period of 5 years or more than go for equities, in case of lower time period then go for Debt funds. For low risk profile prefer balanced funds.

Next week we will talk further on mutual funds also look at the tax advantages of investing in Mutual Funds.wer time period then go for Debt funds. For low risk profile prefer balanced funds.

You can visit our portal financeconnect.in for reaching out to mutual funds agents in Pune and Mumbai; they can help you with your investment needs.

In case of any other query reach out to us at financeconnectindia@gmail.com, or you can share your views etc. with us at the same mail id. 

About Mutual Funds Investment

Mutual Funds are one of the best modes of investments. Mutual Fund collects money from the small investors and invests in the Shares of Companies or Debentures, Securities, etc. They provide the units of the mutual funds to the investors. The units can be tracked at any point of time. There are two types of funds like open ended and closed ended. Open ended are open for investments and closed ended are closed for further investments only they have collected the required funds during initial offer.

• Closed ended are like ELSS funds which gives tax benefits and lock in period is also there before which they ca not be sold.

•           Open ended can be sold any time; no lock in period is required.

Mutual Funds can be classified as below based on the nature of their investments

Fund Type

Equity Mutual Funds
Balanced Funds:-
Debt Funds

Investment Type 
         
In equities of the companies
In equities and another portion in debts
In the fixed income instruments

Risk/Return

High /High
Medium/Medium
Low/Low

In personal Financial planning Mutual Funds can play a very good role. One can invest one time or through SIP Systematic Investment Plan mode.

SIP is best mode of investment wherein on a defined date the defined amount gets deducted from your account.  Income- Investment=Expense is the principle of SIP mode of investment. First invest and then balance use for your day to day and other expenses.

The horizon of investment, goal and risk profile are very important to select the type of funds. In case you have long time period of 5 years or more than go for equities, in case of lower time period then go for Debt funds. For low risk profile prefer balanced funds.

Next week we will talk further on mutual funds also look at the tax advantages of investing in Mutual Funds.wer time period then go for Debt funds. For low risk profile prefer balanced funds.

You can visit our portal financeconnect.in for reaching out to mutual funds agents in Pune and Mumbai; they can help you with your investment needs.

In case of any other query reach out to us at financeconnectindia@gmail.com, or you can share your views etc. with us at the same mail id.