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Tax Benefit on Mutual Fund Scheme

Amit Kothari (Article Assistant/ PCC Student) (177 Points)

20 August 2009

hey guys

i had a doubt on this about on redemtion on a Sbi Mutual Funds' Magnum Tax Gain Scheme

that the capital gained over the scheme will be taxable or will be exempted from tax as its dividend date is as on the warrant is {22/02/2008}

as i can guess it is a Long tem Capital gain so am ascertaining it to be a Taxable but still am not sure before confirming it

waiting for ur suggestions

regards Amit

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4 Replies

llllVICTORllll (Internal Auditor) (511 Points)
Replied 20 August 2009

hi, as far as i think, income from mutual fund(including the withdrawal after the maturity fime, mya be 3 years in your case) is exempt from tax, please read, section 10(23d) for further clarification.... hope i trigered some help... njoy

CA CS Amit Borade (Chief Accountant) (2828 Points)
Replied 20 August 2009

FYI

In terms of section 10(34) of the Income Tax Act, 1961, any income by way of dividends referred to in Section 115-O (i.e. dividends declared, distributed or paid on or after 1st April, 2003) received on the shares of the Company is exempted from the tax.

In terms of section 10(38) of the Income Tax Act 1961, any income from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund which is chargeable to securities transaction tax are exempt from tax.

Amit Kothari (Article Assistant/ PCC Student) (177 Points)
Replied 20 August 2009

i know the dividend is exempted from tax but the capital gain which would increase the deposit .. take 3 years after the deposit is that long term capital gain exempted or taxable????

Ashish M (Chartered Accountant) (2731 Points)
Replied 21 August 2009

The maturity of mutual fund unit is very much within the purview of 'tranfer' and is hence liable to cap gain tax.. the increase in its value is actually the increase in the fund value of the mutual fund basket and any such capital apprecialtoin is taxable as the capital gains.....such long term cap gain (3 yrs) is taxable as LTCG......

In terms of mutual fund, the concept is that, the income earned by the mutual fund is exempt to them u/s 10(23D)---the dividend they distribute ot its unitholders is taxed in their hands u/s 115R and hence such dividend distribution is exempt to unitholder u/s10(35)----And for transfer by the unithodler of its units or its redemptoin thereof, it is taxed in the hands of unitholder as S/LTCG, firstly by virtue of proviso to Sec.2(14) includes Mutual fund unit as capital asset and secondely its sale (maturity) to the mutual fund is treated as transfer........

what say?