Tax on switchover from one scheme of MF to another

 

Dear All,

Here is one interesting case.

Suppose X has invested in A scheme of Mutual Fund, later on he has switched over from that scheme to another within one year. Whether there will be any short term gain arising out of such switchover, as in case of MF statement it shows redemption from one scheme and STT is accordingly charged. So whether ST Capital gain arises or not?

 

My initial view is no.

Views from all the experts is awaited.

 

regards,

 

Paresh

Replies (4)
yes short term capital gains will arise
Any specific wordings in the act or notifications for this. If you have kindly provide
As per my opinion switch from one scheme to another is not a transfer for cap gain calculation, because the person is same only plan is changed. So, no cap gain should be there? Its my opinion i am not sure.
Dear Paresh, Switching of one scheme of mutual fund to other can be said as redeeming the present units of this scheme and investing the proceeds in the units of another scheme, altogether a new transaction.. Hence it can be termed as a transfer U/S 2(47). For example, sale of one land and reinvesting the proceeds in another land attracts capital gains irrespective of the fact that it is reinvested in another land, same analogy applies here also. There are no specific exemptions like sec 54 in case of transfer of long-term residential house for this. Tax implications depend on how long you remain invested in the respective fund and accordingly will be liable to short term or long term. In the example cited by you, it is liable for short-term capital gains tax. Regards, Raghavendra

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