TAX BENEFITS AND IMPLICATIONS OF INVESTING IN MUTUAL FUNDS
What are the tax provisions for Mutual Fund Units?
The following is the Tax Status in respect of Units of Mutual
Funds:
A : For Equity Schemes:
*10% surcharge plus 3 % Education Cess
B : For Other Schemes:
**Short Term Capital Gains Tax for Partnership Firms would be at 30 %.
Surcharge for Resident Indians, Domestic Companies and NRIs:
- For Individuals, HUFand AOP,BOI, 10 % surcharge on tax payable if income
exceeds Rs.10 Lakhs.
- For others including resident corporate bodies, 10% surcharge on tax payable if
the income exceeds Rs. 1 Crore
Education Cess:
- Education Cess is levied at the rate of 3% calculated on Tax payable plus
surcharge
Abbreviations used:
-
HUF :
Hindu Undivided Family
-
AOP :
Association of Persons
- BOI : Board of Individuals
-
NRI : Non-Resident Indians
C : Wealth Tax & Gift Tax for Mutual Fund Units:
Income Tax Provision on clubbing for Gift of Units
Gift Tax: Mutual Fund units are exempt.
Wealth Tax: Mutual Fund units are exempt.
D : Securities Transaction Tax:
- Mutual fund would also pay transaction tax wherever applicable on the
securities bought / sold.
- As per section 94(7) of Income Tax Act of India: The loss due to sale of units
in the schemes (where dividend is tax free) will not be available for setoff to
the extent of the tax free dividend declared; if units are: - (a) bought within
three months prior to the record date fixed for dividend declaration; and (b)
sold within nine months after the record date fixed for dividend declaration.
- As per section 94(8) of Income Tax Act of India: The loss due to sale of
original units in the schemes, where bonus units are issued, will not be
available for setoff; if original units are: - (a) bought within three months
prior to the record date fixed for allotment of bonus units; and (b) sold
within nine months after the record date fixed date for allotment of bonus
units.
However, the amount of loss so ignored shall be deemed to be the cost of
purchase or acquisition of such unsold bonus units.
Why should you invest in ELSS ?
Excellent returns: Historical Returns from
ELSS have been very attractive. You will discover that these returns have been
much higher than other traditional tax-saving instruments. ELSS Schemes also
have the shortest lock-in period compared to any other tax-saving instruments
in India.
Safety: Due to the 3-year lock-in period,
the Investment Manager can take a long-term view to invest the funds in equity.
The real potential of equities shows up only after a few years. The manager is
not under pressure to take risky, aggressive investment decisions to deliver
short-term returns.
Tax-free income: The dividends you earn
will be tax-free. When you sell the units of ELSS, you can avail of long-term
capital gain under the Income Tax Act, which is exempt from tax.
You can invest
as less as Rs. 500 at regular intervals. You take advantage of fluctuations in
the stock markets by rupee-cost averaging.
How does IFIN help you?
With several schemes in the market today, selecting the right scheme can be
quite a task. We at IFIN provide you with detailed information
on every Mutual Fund scheme to help you shortlist the best ones. You can also
compare peer schemes, see top performing schemes across types and decide where
to invest with just a click of a button.
We offer the facility of Systematic Investment Plans (SIP).
We also spare you of the hassles of searching for an application form, filling
it up and writing cheques. This ensures you don’t miss any opportunities. So
what are you waiting for? Take the first step to start your journey towards
building wealth. Just fill in your contact details. Our representative will be
in touch shortly
|