Taxability of Mutual Funds – An Overview

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