Income Tax

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S.Jegadeesan (Querist)
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27 July 2010 Sir,
I want to clarify one doubt relating to Income Tax. i.e. Whether any amount received out of amount invested in Liquid MF?
ex: Mr.X was invested on 28.05.2009 for Rs.500000 in LIC Liquid MF. He get the return(as Dividend) on various date like 30.06.2009, 15.08.2009, 30.10.2009 the sum of Rs. 1000,1500,1250 respectively.But He has invested those returns with the existing amount.So the investment will change.Finally he redeemed the whole/Part amount on 15.12.2009.How it will be taxable?
S.Jegadeesan.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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27 July 2010 In this case, income is declared by LIC periodically and not distributed to Mr. X. Therefore, section 10 (35) cannot be applied. Conversly, when the mutual fund is redeemed, capital gains tax attracts. Here it is a short term capital gain. Most of the mutual funds are redeeming the units by paying securities tranaction tax. So the short term capital gain arised thereon is taxable under section 111A of the Income tax Act,1961.

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