Example:
I am coming under tax bracket of 20per cent. If I invest R10 lakh in a liquid or ultra short term debt fund for 4 or 5 years how much tax do I have to pay? Please give your answer with numerical example.
- Ramesh M
If you sell them within 3 years, capital gains on debt funds are treated as short term. It will be added to your income and taxed as per your applicable tax slab. Long term capital gains (if exit is after 3 years) are taxed at 20 per cent with an indexation benefit on your cost.
Investment holding period Taxation
Short Term Capital Gain 36 months or lesser added to income and taxed as per applicable slab rate
Long Term Capital Gain more than 36 months 20% with indexation
Let us take an example, Since we do not have the Cost Inflation Index for future years, we will take an example of past. Say you invested R10 lakhs in 2010-2011. Assuming the fund returned 9 percent a year, and you redeem it for R15,38,624 in 2016-17, your long term capital gain would be R5,38,624.
However, if you index the cost with the Cost Inflation Index (provided by the IT department) for 2010-11 and 2015-16, then the cost would be R1,52,0393 (R10 Lakh * 1081/711). Then the long term capital gain would be R18231 (1538624-1520393). A 20 percent tax on this would be R3646.
So, as per this example, your capital gains tax for this financial year will be R3646.
I want to know the taxation on liquid fund. If I sell liquid fund and generate gain, is it taxable?
- Vinod Mehra
Yes, capital gains on liquid funds are taxable.
If you sell your funds before three years (36 months), you will have to pay short-term capital gains tax. Short-term capital gains are added to your income and taxed as per the income tax slab applicable to you. If funds are held for more than three years, your gains will qualify for long-term capital gains tax of 20 per cent with indexation benefit on your original investment.
Links: http://cafemutual.com/news/guestcolumn/51-how-to-calculate-tax-on-mutual-funds
I am coming under tax bracket of 20per cent. If I invest R10 lakh in a liquid or ultra short term debt fund for 4 or 5 years how much tax do I have to pay? Please give your answer with numerical example.
- Ramesh M
If you sell them within 3 years, capital gains on debt funds are treated as short term. It will be added to your income and taxed as per your applicable tax slab. Long term capital gains (if exit is after 3 years) are taxed at 20 per cent with an indexation benefit on your cost.
Investment holding period Taxation
Short Term Capital Gain 36 months or lesser added to income and taxed as per applicable slab rate
Long Term Capital Gain more than 36 months 20% with indexation
Let us take an example, Since we do not have the Cost Inflation Index for future years, we will take an example of past. Say you invested R10 lakhs in 2010-2011. Assuming the fund returned 9 percent a year, and you redeem it for R15,38,624 in 2016-17, your long term capital gain would be R5,38,624.
However, if you index the cost with the Cost Inflation Index (provided by the IT department) for 2010-11 and 2015-16, then the cost would be R1,52,0393 (R10 Lakh * 1081/711). Then the long term capital gain would be R18231 (1538624-1520393). A 20 percent tax on this would be R3646.
So, as per this example, your capital gains tax for this financial year will be R3646.
I want to know the taxation on liquid fund. If I sell liquid fund and generate gain, is it taxable?
- Vinod Mehra
Yes, capital gains on liquid funds are taxable.
If you sell your funds before three years (36 months), you will have to pay short-term capital gains tax. Short-term capital gains are added to your income and taxed as per the income tax slab applicable to you. If funds are held for more than three years, your gains will qualify for long-term capital gains tax of 20 per cent with indexation benefit on your original investment.
Links: http://cafemutual.com/news/guestcolumn/51-how-to-calculate-tax-on-mutual-funds
