mutual fund

This query is : Resolved

sachin saxena (Querist)
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16 May 2008 i have purchase reliance mutual fund of Rs. one crore in weekly dividend re-investment plan in april and redeem some unit after each month of Rs. 500000.00
what should be the value of investment as on 31st march 2008 in B/S.
when we invest then entry done
investment Dr. Rs one crore
to bank Rs one crore

when redeem then
bank
to investment

is there any capital gain on the redeem is STT has been deducted on the redeem value?

Abhinav Khemani

Abhinav Khemani (Expert)
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16 May 2008 Dear Sachin,

It seems that you have invested in a ‘liquid scheme’ and STT is paid only in case of a equity oriented scheme so no STT is required to be paid in your case.

Dividend income is exempt in the hands of investors as tax on such income is paid by the mutual fund (only in case of a debt or a liquid scheme) so you get net of tax dividend.

Valuation of your investments on B/S date should be = total no. of units (excluding redeemed units but including units created on account of dividend re-investment) as on 31.03.08 multiply by the NAV of the scheme as on 31.03.08.

There should not be any capital gain tax on the redemption as mutual funds generally follow the practice of distributing all appreciations over and above the face vale as divided so that there is no capital gain at the time of redemption.

However if your rate redemption is higher than the rate of investment then you are liable to pay Short Term Capital Gain tax.

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