I have a query on tax treatment on part sale of mutual funds units which were invested through SIP(Monthly investment) mode.
Suppose I invest Rs. 1000 each month a MF.first month i receive 100 units @ rs 10 per unit ,second month 90 units@ 11.11 per unit and so forth. At the end of 12th month ,i sale 150 units @ 14 per unit .Now my question is how do to determine whether it will be short term or long tem gains and what would be cost price(to follow FIFO or average price).
As per new amendment holding period for MF units would be 36 months to qualify for long term capital gain/ loss,. For Income Tax purposes, to determine cost of units, weighted average cost is the best method
If we talk of equity Mutual Funds,the holding period is still 12 months.
My point is i ahven't hold all units for 12 months.Only the units acquired in first month are hold for 12 months.the nesxt 90 units for 11 months and so on.
iN these cases how is the holding period and cost detremined
17 July 2014
then in such case u need to take case to case basis i.e unitwise in lots u must have sold to determine the ind mf holding or wtg avg method is suitable in such cases.
17 July 2014
in case when u dont know which units u purchaesed earlier and which u selling as u need to keep eaxct track records then how can u follow fifo and dept may issue u notice on this in case if u also file air report.
17 July 2014
TAX TREATMENT OF CAPITAL GAINS FROM SYSTEMATIC INVESTMENT PLANS (SIP)
Nature of capital gains arising to unitholder who has invested by way of SIP will depend upon the period of holding of units. There may be two situations-
i.Where SIP is closed and some / all units are redeemed ; ii.Where SIP is not closed but some / all existing units are redeemed. At the time of redemption it is impossible to understand as to which units are being redeemed. In this condition, for computing the capital gain chargeable to tax, the cost of acquisition and period of holding of units shall be determined on the basis of FIFO method.
17 July 2014
hey Sampat,the procedure would be same for both equity and debt funds except that for LTCG holding period is 12 months in case of equity and 36 months in case of debt fund. LTCG is exempt in case of equity and taxable in case of debt
CAclubindia
