Will there be any tax deducted at source when I redeem?
In case of resident unitholders, there will be no tax deducted at source irrespective of the amount redeemed. However, in case of non-resident following deduction will be made from the redemption proceeds after taking into consideration cost inflation index.
Is capital gains on sale / transfer of units of mutual fund liable to tax? If yes, at what rate?
Yes. Capital Gain on sale / transfer of units of mutual fund can be classified as Short-term Gain or Long-term Gain. If units are sold/transferred/redeemed after a period of 12 months the gains arisen on sale/transfer/redemption will be treated as long-term capital gain. If units are sold/transferred /redeemed within a period of 12 months the gains arisen on sale/ transfer /redemption will be treated as short-term capital gain.
Short-term Capital Gain will be chargeable at normal rate of tax.
What is the tax liability on Redemptions?
Under Section 2(42A) of the Income Tax Act, units of the Scheme held as a capital asset, for a period of more than twelve months immediately preceding the date of transfer, will be treated as a long term capital asset for the computation of capital gains – thus attracting long term capital gains tax rate. In all other cases it would be treated as a short-term capital asset and would attract short-term capital gains tax rate. Hence depending on the period of investments, long term or short capital gains and tax thereon is applicable on redemptions.
What is the tax liability on receipt of Income on Mutual Fund Units?
As per Section 10(33) of the Income Tax Act, 1961 (‘Act’) income received in respect of units of a mutual fund specified under Section 10(23D) is exempt from income tax in India and the mutual funds are subject to pay distribution tax in debt oriented schemes.
What is the proof of the Tax Deduction at Source?
A TDS certificate is issued in the name of the investor mentioning the details of the transaction and the tax deducted. The TDS certificate is commonly known as Form16 A.
When will the TDS certificate be issued?
A TDS Certificate in Form 16A will be despatched to the investor alongwith the redemption warrant at his registered address. To obtain a duplicate TDS certificate, investor can mail to quoting their account number.
Can an NRI have a joint account in Mutual Funds with a resident Indian?
Yes.An NRI investor can have a joint holder with a resident Indian or a Non-resident Indian.
Is the indexation benefit available to NRIs?
Yes,in case units are held for more than twelve months i.e. on long term capital gains.
Can an NRI gift the units of MFs to resident Indians?
An NRI may gift the units to any investor Indian or an NRI. Units gifted by any person would not be liable to any gift tax since the units held under the schemes are also not subject to provisions on the Gift Tax act, 1958.
Are units of MFs chargeable to Wealth Tax?
No.Units issued to NRIs etc. will not be treated as assets as defined under section 2(ea) of the Wealth-Tax Act, 1957 and hence will not be liable to wealth-tax.
What are Sections 48 & Section 112 benefit?
Sections 48 and 112 deal with capital gains that arise out of sale of mutual fund units & shares held for more than one year. At present the investor is required to pay tax at concessional rate on long-term capital gain after factoring in the benefit of Cost Inflation Index. Alternatively, the investor can opt to pay tax @ 10% (excluding exchange) on long term capital gains, but without the benefit of Cost Inflation Index.
What is Section 88 benefit?
Under section 88, contributions made from taxable income in the specified investments will qualify for a tax rebate of 20 % of the invested amount subject to a maximum aggregated ceiling of Rs.60,000/-. For investment in infrastructure bond, maximum investment limit for tax rebate is Rs.80,000/-.