5 Things To know About Mutual Fund Taxation
1) Currently, there is no tax on long-term gains from equities. So if you sell before on or before March 31, 2018, there will be no long-term capital gains tax.
2) If the mutual fund units/stocks are sold before one year of holding, short term capital gains tax apply. The short-term capital gains tax has been kept unchanged at 15 per cent.
3) From April 1, long-term capital gains exceeding Rs. 1 lakh arising from redemption of mutual fund units or equities will be taxed at 10 per cent (plus cess). It includes long-term capital gains earned from your equity or mutual fund investments put together in a financial year. For example, if you earn Rs. 2 lakh in combined long-term capital gains from stocks or mutual fund investments in a financial year. The taxable long-term capital gains will be Rs. 1 lakh (Rs. 2 lakh - Rs. 1 lakh) and tax liability will be Rs. 10,000 (10 per cent of Rs. 1 lakh).
4) In relaxation given to investors, the government has protected their gains January 31, 2018. This means long-term capital gains earned before 31 January will not be taxed. Or in other words, the long-term capital gains tax will kick in only on profits made after January 31, 2018.
(Read : New Long-Term Capital Gains Tax On Mutual Funds Explained)
5) A tax at the rate of 10 per cent will be levied on dividend distributed by equity-oriented mutual funds from April 1. The effective tax on dividend distributed by equity oriented mutual funds come to 11.648 per cent after inclusion of surcharge and cess.