Tax calculation process of mutual fund incomes

How do someone calculate tax for incomes from mutual funds only (and not direct stocks)?

There are Equity/Debt, and both have Growth/Dividend. If I have 1/2 funds of all these types, how will it be calculated?

Is it for profits only? Or, is it for loss as well? Will tax be -ve then?

Or is it for the sum of all, and not per individual schemes? What happens if sum is -ve?

What are the rates? Same as regular income slabs or different?

If I made some profit, but don’t redeem it, is it taxable?

Also, if I do redeem it and invest it immediately in a new one, will it still be taxable?

Is there any tax on dividend?

@AkashJhaveri @Laxmi_Navlani @Divya_Singhvi can you?

Hi @ztvusbqpvrco

Sales of Equity shares shall be taxable @15% if short term and @10% if long term. However, sale of debt funds shall be taxed at slab rates.

Tax shall be on profits only. Tax shall be levied on net profits only and tax cannot be -ve.

Unrealised profits cannot be taxed. However if you redeem it shall be taxable even if you invest the amount immediately.

Yes dividend received shall be taxable at slab rates from FY 2020-21.

1 Like

Thank you @Divya_Singhvi . Just 2 quick questions.

So there are the following options:

  1. Debt Short Term
  2. Debt Long Term
  3. Equity Short term
  4. Equity Long Term

So when you tax is on net profit only (I’m assuming it means total profit - total loss), do I calculate this across all 4 of these categories? Or, net only with debt short, or only within debt long, etc.?

And the link said loss can be carried forward for at most 8 years. I hope it doesn’t happen, but in case I am in the situation where one year’s loss is not adjusted by profit/loss in next 8 year, what are the rules for 9th year?

Hi @ztvusbqpvrco

The tax liability is based on the duration so the net shall be separate in the case of Short term debt and Equity and separate in the case of Long term Debt and Equity. However, you can setoff Long term capital gains against the short-term losses, not vice versa.

If the losses are not set off within the next 8 years they will lapse. For further clarification, you can refer to the below article.
Hope this helps :slightly_smiling_face:

It definitely helps a lot. Much appreciated :smile:

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What kind of taxes do Mutual funds pay? For example if a MF sells a equity holding do they pay STCG and LTCG?

Hi @d.r, this might help

My question is different. I am asking about any tax implication when a mutual fund sells a holding (do mutual funds pay STCG and LTCG when they sell any holding). What you’ve shared is about the tax implication of when someone sells a mutual fund unit.

@Kaushal_Soni @Sakshi_Shah1 @AkashJhaveri @Divya_Singhvi @Laxmi_Navlani @Saad_C can you help with this?

Hello @d.r,

As per section 10(23D) any income arising in the hands of a Mutual Fund (subject to conditions u/s 10(23D) of constitution of mutual fund being fulfilled) shall be exempt.

So, as per the above provisions, a mutual fund is not required to pay capital gain taxes when they transfer/sell any holding.

Hope it helps!

Thanks, this helps. Are there any other fund structures in India with similar kind of exemptions?

In ITR2 for AY 2021-22 I understand Equity LTCG is filed in Section 115A. Questions -

  1. Where should I file LTCG from Debt mutual fund (Franklin Templeton)
  2. Is STCG from Debt Mutual Fund (Franklin Templeton) to be clubbed with the Equity STCG?
    Appreciate your response.
    Thanks!

Hi @sxgupta ,

In ITR 2, Equity LTCG on which STT is paid is taxable u/s 112A.

  1. LTCG from debt mutual fund should be filed under “Schedule CG-From Sale of assets other than all the above listed items-Long Term Capital Gain”

  2. STCG from Debt mutual fund shouldn’t be clubbed with Equity STCG. It should be filed under “Schedule CG-From Sale of assets other than all the above listed items-Short Term Capital Gain”

Hope it helps!

Hi @d.r ,

Yes, there are various institutions set up under different statutes which are exempted from income tax u/s 10 of Income Tax Act 1961.

You can refer to section 10(23), 10(23A), 10(23A), 10(23AA) etc. which provides similar exemptions.

If you want to know whether a specific fund structure is exempt or not, you can mention the name, I can help you with that!

Hope it helps!

Thank you! Appreciate your help!
Please let me know if the the heads I have used for the following are correct -

  1. IRB Invit Bond Interest (Other Income)
  2. Power Grid Dividend (Dividend)
  3. Sovereign Gold Bonds Interest (other Income)

Regards

Hey @sxgupta, you have used the right heads for the particular income sources you have mentioned.

Thank you for your prompt response!