05 Apr 2017 12:47:10
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Tax Filing: Income From Debt And Gold Mutual Funds
Edited transcriptsUdayan Ray Welcome to FundooMoney web series on tax fling. We are discussing various aspects people need to keep in mind while filing for taxes. In this particular segment, we intend to discuss various aspects that you need to keep in mind especially related to any sale of debt mutual funds or gold mutual funds.Debt mutual funds would be mutual funds which invest money of investors in debt securities and gold mutual funds, would likewise be mutual funds which invest in gold. With me is eminent financial expert Swami Saran Sharma and he is going to help us understand the things that one needs to do while filing for taxes, taking into account this particular aspect of income.Swami Saran Sharma Udayan, as far as debt mutual funds are concerned, the period of holding debt mutual funds were changed a couple of years back. Now, you have to hold them for a period of three years to be able to be termed as a long-term capital gain or capital loss.When you sell mutual funds in any particular financial year, you either make a gain or a loss. In case, you make a gain and you have held those units for more than three years, you can adjust your purchase cost as per cost inflation indexation. So, actual amount of gain would be sale price minus the adjusted cost against inflation and the remaining amount is to be taxed. That is added to your regular income.In case you sell those units before you complete three years of holding, the entire amount is added to your regular income and taxed as per your tax slab.Udayan Ray Okay, I am trying to simplify this further. If you actually sold a debt mutual fund last year and you held those units for less than three years, all that money, all that good news, will get added to your taxable income and it is going to get taxed at your relevant or applicable tax rate.However, if you had held the debt mutual fund units for more than three years, whatever was the price of the unit at which you bought, that’s going to get adjusted with the inflation index. So, if the index was hypothetically 100 at some point, and when you sold, it was 150, that adjustment would be made. So, if you bought the unit for Rs 10, it will not be counted as Rs 10, the unit price is going to be elevated by the amount of inflation. Actually, the capital gain that you are making is becoming less. This is for tax purposes. So, you are ending up paying up lower taxes.So, the message is when you hold for a longer term, you end up paying less capital gains tax.
Swami Saran Sharma Also Udayan, the rate of taxation in that case is flat 20%. You may otherwise be in a 30% tax slab. But when you hold for more than 3 years, it becomes a long-term gain and even on the lower amount, tax is calculated after indexing the purchase price and you pay only 20% tax.Udayan Ray So, two benefits. Inflation for a change comes and helps you. It enhances the value the tax guys allow you to attribute to your original cost of investment. Second, the rate is lower.Now Swami, is the treatment the same for gold mutual funds?Swami Saran Sharma Exactly, the same.Udayan Ray Wonderful! Wonderful! I am sure people would have found this information useful. If people want more information, more information is available. You just have to go to our social media platforms, enjoy the information. If you want more information, write to us. Or you can visit our website www.fundoomoney.com
