Mutual funds tax

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 September 2013 Hi,
Please confirm if i purchase 10000/- units of any mutual fund on a given day in the open market,will it attract more tax than i purchase the same units through SIP ( systematic investment plan).

Thanks in advance.

Ajay Mishra

Ajay Mishra (Expert)

19 September 2013 Hi

Under Section 10(35) of the Income Tax Act, income received in respect of units of a mutual fund specified u/s. 10(23D) are exempt from income tax in the hands of all unit holders and no tax needs to be deducted at source from such distribution by the fund. However, by virtue of the proviso to section 10(35), this exemption does not apply to income arising on "transfer" of units of a mutual fund.

Capital gains tax is applicable when one redeems units in the mutual fund. If mutual fund units are redeemed within one year from the date of their purchase, the gain is regarded as short-term in nature. If units are held after one year of purchase, the gain is considered as long-term in nature.

Ajay Mishra

Ajay Mishra (Expert)

19 September 2013
The following manner of Capital Gains shall apply:

Long term capital gains - Taxed at the rate of 20 per cent (with Indexation) or 10 per cent (without Indexation) - Plus applicable surcharge and Education cess

Short term capital gains - Taxed at the normal rate of tax as applicable to the assessee.

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