Hi @TeamQuicko
I have some investments in equity based mutual funds. Till now I neither sold any unit nor received any money in my account. Thus I thought that I had no capital gains.
But my Capital Gains Statement downloaded from CAMS website clearly shows that I have long term capital gains in the last financial year.
I have some “Switch In” and “Switch Out” transactions in my statement and STT is deducted in those transactions. My fund manager also confirmed that he has switched funds.
Is “Switching” of mutual funds considered as “Redemption” of units ? And do I have to pay 10% capital gains tax this year even though I did not sell any units or received any money ?
Yes it is considered as a redemption since you are actually just selling units of one fund (Switch Out) and reinvesting the amount in another fund (Switch In). Although it may seem like “switching” is a single transaction, there are two separate transactions ocurring.
Since it is an equity fund, it is either taxable as:
- LTCG if you held units for more than 12 months. Gains are exempt upto 1 lakh and taxable @ 10% above that. (Section 112A)
- STCG if you held units less than 12 months. Gains are taxable @ 15%. (Section 111A)
If you’re interested to learn more:
https://learn.quicko.com/long-term-capital-gain-tax-equity-shares-section-112a#3-income-tax-on-long-term-capital-gain
https://learn.quicko.com/short-term-capital-gain-tax-on-shares-section-111a#1-calculation-of-tax-on-stcg-us-111a-
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Yes, as rightly mentioned by @radhesh23k, this will be considered a sale transaction and tax will be applicable based on whether gains are short term (15% tax) or long term (10% tax).
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