Capital gains on fmp

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Querist : Anonymous

Querist : Anonymous (Querist)

11 December 2012 "Investments in FMP's are debt instruments and not security based investments." In the circumstances explain how you are entitled to benefit of income being taxed as capital gains - ITO has asked this question. Can any body share any relevant case laws on Capital gains on FMP. I understand that investments is in a mutual fund (FMP) that invests in debts instruments and the investors is allotted units of the scheme. So by definition it becomes a capital assets and hence on can claim indexation benefits.

Amol S Joglekar

Amol S Joglekar (Expert)

11 December 2012 a Mutual Fund registered under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or regulations made there under.... is a capital asset.
"unit of a Mutual Fund specified under clause (23D) of section 10"
If your FMP is satisfying the conditions as above, it is a capital asset and accordingly indexation is available.

Querist : Anonymous

Querist : Anonymous (Querist)

13 December 2012 Thanks, though the argument along with the MF statement has also been provided, I wanted to check if there are any case laws on the same. I have also put one more argument that FMP cannot be considered as a debt instrument as there is no borrower lender relation ship and the resulting income from FMP is not interest but only appreciation in the NAV.

Amol S Joglekar

Amol S Joglekar (Expert)

13 December 2012 Yes, absolutely correct.

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