Taxability of Mutual
Funds – An Overview
While
computing the tax assessment of any individual or body corporate it has been a
regular issue in front of Chartered Accountants and Article Assistants that
what will be the treatment of mutual funds.
Mutual funds
are of different types and their taxability is also of different in various
cases.
We all know
what mutual funds are, lets us know the two types of mutual funds and their
taxability.
A.
Equity Mutual Funds
It means
that where 65% of the total proceeds are invested in equity shares of Indian
companies.
Dividend – Dividends are tax free for both
the investors and mutual fund house under section 10, as dividend distribution
tax has been paid by the company in whose securities fund has been invested.
Capital Gain –
Period Of
Holding - more than 1 year – Long Term
Capital Gain – No Tax under section 10(38).
Period Of
Holding - less than 1 year – Short Term
Capital Gain – 15% capital gain tax
B.
Debt Mutual Fund
It means
that where major portion is channelized towards debt instruments , government
bonds, etc.
Dividend – Tax free for investors but the
mutual fund house has to pay the Dividend Distribution Tax.
Capital Gain –
Period Of Holding - more than 3 years
– Long Term Capital Gain – 10% (without indexation)
-
20%
(after indexation)
Period Of Holding - less than 3 years – Short Term Capital Gain
– as per the tax slab, will be added to the assesses income.
These were
the basic taxability rates and slabs for the mutual funds. In our next article
we will talk more about types of mutual funds in the market.
WRITTEN AND POSTED
BY
SAMIR DEWAN
EDITOR AT
CHARTERED BLOOD
