Capital Gain Mutual Fund

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When redeeming mutual funds, capital gains are calculated based on the holding period. For tax purposes, it's crucial to use the First-In, First-Out (FIFO) method for calculating these gains. Using an average cost basis is incorrect and can lead to underreporting of income and potential penalties.

Karan Khurana

Karan Khurana (Querist)

26 January 2020 Can any tell me capital gain on redemption of mutual fund calculated on Average cost basis or FIFO basis

Ashiwini Ballodia

Ashiwini Ballodia (Expert)

26 January 2020 FIFO basis

Karan Khurana

Karan Khurana (Querist)

26 January 2020 thank for ur reply but sir if any ony one apply avg cost in that case is it correct if yes than why

Ashiwini Ballodia

Ashiwini Ballodia (Expert)

26 January 2020 What is VG Cost?
If you refer capital Gain than MF is taxable as Short term if it is hold for less than 12 months
So for Bifurcation you have to calculate Short term profit & long term profit separately

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Zeal Bangdiwala

Zeal Bangdiwala (Expert)

27 January 2020 It can only be calculated on FIFO basis. Avg cost even if you apply is incorrect and if offered for tax will lead to misreporting/under reporting of income and can lead to penalty if scrutinised.

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