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 mutual
fund liable to tax? If yes, at what rate?
Yes. Capital Gain on sale / transfer
of units of 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.
Short-term Capital Gain will be chargeable at normal
rate of tax.
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’) income received in
respect of units of a mutual fund specified under Section
10(23D) is exempt from income tax in India and the
mutual funds are subject to pay distribution tax 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.
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When
will the TDS certificate be issued?
A TDS Certificate in Form 16A will
be despatched to the investor alongwith the redemption
warrant at his registered address. To obtain a duplicate
TDS certificate, investor can mail to quoting their
account 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 available to NRIs?
Yes,in case units are held for more
than twelve months i.e. on long term capital gains.
Can
an NRI gift the units of MFs to resident Indians?
An NRI may gift the units to any investor
Indian or an NRI. Units gifted by any person would
not be liable to any gift tax since the units held
under the schemes are also not subject to provisions
on the Gift Tax act, 1958.
Are
units of MFs chargeable to Wealth Tax?
No.Units issued to NRIs etc. 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 & shares
held for more than one year. At present the investor
is required to pay tax at concessional rate on long-term
capital gain after factoring in the benefit of Cost
Inflation Index. Alternatively, the investor can opt
to pay tax @ 10% (excluding exchange) on long term
capital gains, but without the benefit of Cost Inflation
Index.
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/-.
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