Tax FAQs

Will there be any tax deducted at source when I redeem?

In case of resident unitholders, there will be no tax deducted at source irrespective of the amount redeemed. However, in case of non-resident following deduction will be made from the redemption proceeds after taking into consideration cost inflation index.

Is capital gains on sale / transfer of units of equity mutual fund liable to tax? If yes, at what rate?

Yes. Capital Gain on sale / transfer of units of equity mutual fund can be classified as Short-term Gain or Long-term Gain. If units are sold/transferred/redeemed after a period of 12 months the gains arisen on sale/transfer/redemption will be treated as long-term capital gain. If units are sold/transferred /redeemed within a period of 12 months the gains arisen on sale/ transfer /redemption will be treated as short-term capital gain. Investor is liable to pay STCG tax of 15% on capital gain arises before 1 year & LTCG Tax of 10% on capital gain arise after 1 year.

What is the tax liability on Redemptions?

Under Section 2(42A) of the Income Tax Act, units of the Scheme held as a capital asset, for a period of more than twelve months immediately preceding the date of transfer, will be treated as a long term capital asset for the computation of capital gains – thus attracting long term capital gains tax rate. In all other cases it would be treated as a short-term capital asset and would attract short-term capital gains tax rate. Hence depending on the period of investments, long term or short capital gains and tax thereon is applicable on redemptions.

What is the tax liability on receipt of Income on Mutual Fund Units?

As per Section 10(33) of the Income Tax Act, 1961 (‘Act’) dividend income received in respect of units of an equity mutual fund specified under Section 10(23D) is taxable at the rate of 10% and mutual funds are subject to pay distribution tax of 29.12% in debt oriented schemes.

What is the proof of the Tax Deduction at Source?

A TDS certificate is issued in the name of the investor mentioning the details of the transaction and the tax deducted. The TDS certificate is commonly known as Form16 A.

When will the TDS certificate be issued?

To obtain a TDS certificate, investor can mail to quoting their account/Folio number.

Can an NRI have a joint account in Mutual Funds with a resident Indian?

Yes.An NRI investor can have a joint holder with a resident Indian or a Non-resident Indian.

Is the indexation benefit in Debt schemes available to NRIs?

Yes, in case units are held for more than 3 years.

Are units of MFs chargeable to Wealth Tax?

No.Units issued will not be treated as assets as defined under section 2(ea) of the Wealth-Tax Act, 1957 and hence will not be liable to wealth-tax.

What are Sections 48 & Section 112 benefit?

Sections 48 and 112 deal with capital gains that arise out of sale of mutual fund units held for more less than & more than one year. At present the Equity MF investor is required to pay 15% STCG Tax if capital gain arise before 1 year & 10% LTCG tax if capital gain arise after 1 year.

What is Section 88 benefit?

Under section 88, contributions made from taxable income in the specified investments will qualify for a tax rebate of 20 % of the invested amount subject to a maximum aggregated ceiling of Rs.60,000/-. For investment in infrastructure bond, maximum investment limit for tax rebate is Rs.80,000/-.