{"id":5635,"date":"2021-04-03T09:26:00","date_gmt":"2021-04-03T03:56:00","guid":{"rendered":"http:\/\/www.apnaplan.com\/?p=5635"},"modified":"2021-06-14T02:23:17","modified_gmt":"2021-06-13T20:53:17","slug":"tax-mutual-funds","status":"publish","type":"post","link":"https:\/\/www.apnaplan.com\/tax-mutual-funds\/","title":{"rendered":"Do you Know how Tax on Mutual Funds Impact your Returns \u2605 FY 2021-22?"},"content":{"rendered":"\n
Equity Mutual Funds are one of the best investments to generate wealth in the long run while Debt mutual funds are more suited to park money for the short term<\/strong> (as an alternative to fixed deposits). But as in case of any investment, the final returns are determined on the way these Mutual Funds are taxed. This post discusses tax on mutual funds for FY 2021-22 [AY 2022-23].<\/strong><\/p>\n\n\n\n For Taxation purpose the Mutual Funds can be divided into Two categories:<\/strong><\/p>\n\n\n\n From tax perspective the tax on mutual funds fall under “Income from Capital Gains”<\/strong>. This would be useful information when you have to decide which ITR Form to use to file income tax returns<\/a>.<\/p>\n\n\n\n The gains that are generated on redeeming the Mutual Fund units can be classified as Short Term or Long Term Capital Gains<\/strong> depending on period of holding which is different in case of equity Vs non-equity mutual Fund. We cover both types of funds one by one.<\/p>\n\n\n\n There is always a debate on what is the right way to invest in Mutual Funds – SIP or lumpsum? We give you examples and situations on which of the investment method outperforms. Do read SIP Vs. Lumpsum \u2013 Which is the Best way to Invest in Mutual Fund?<\/a><\/p> Additionally Read about common myths about SIP investment in Mutual Funds<\/a><\/p><\/div><\/div>\n\n\n\n Long Term Capital Gains\/Losses:<\/strong><\/span> If the redemption of mutual fund happens after 1 year of investment,<\/span><\/strong> the gains or losses are classified as long term capital gains\/losses in case of equity mutual fund.<\/p>\n\n\n\n Short Term Capital Gains\/Losses:<\/strong><\/span> If the redemption of mutual fund happens with-in 1 year of investment<\/strong><\/span>, the gains or losses are classified as short term capital gains\/losses in case of equity mutual fund.<\/p>\n\n\n\n The tax treatment on both types of capital gains are different.<\/strong><\/p>\n\n\n\n Starting April 1, 2018 Long Term Capital Gains<\/span> of more than Rs 1 Lakh would be taxed at the rate of 10.4%<\/span> (including cess).<\/strong> This was introduced in Budget 2018<\/a>. Until last financial year (FY 2016-17) the long term capital gains from equity funds were tax free.<\/p>\n\n\n\n There is NO complication in calculation if you purchased the fund after February 1, 2018 i.e. after Budget 2018. However if your purchase was on or before January 31, 2018 you would be eligible for grandfathering of capital gains till January 31, 2018 for calculation of long term capital gains.<\/p>\n\n\n\n Purchase price is to be considered higher of (a) and (b). (the idea is that only gains made after Jan 31 are taxable)<\/p>\n\n\n\n Below are different scenarios and how LTCG would be calculated:<\/strong><\/span><\/p>\n\n\n\nTypes of Mutual Funds<\/h2>\n\n\n\n
Capital Gains Tax on Mutual Funds<\/h2>\n\n\n\n
SIP Vs. Lumpsum \u2013 Which is the Best way to Invest in Mutual Fund?<\/strong><\/h4>
Tax on Equity Mutual Fund<\/h3>\n\n\n\n