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  • Explain few taxation terms in detail.

    Deduction from total income

    Under section 80C of the Act, an assesse, being an individual or HUF, is eligible to claim a deduction upto an aggregate of Rs. 1.5 lacs on account of sums paid as subscription to units of an Equity Linked Savings Scheme.

    The expression "Equity Linked Savings Scheme " refers to Equity Linked Savings Scheme, 2005 as notified by the Central Board of Direct Taxes, Ministry of Finance vide notification dated November 3, 2005 as amended vide notification dated December 13, 2005.

    Securities Transaction Tax

    Under Chapter VII of Finance (No. 2) Act, 2004 the unit holder is liable to pay Securities Transaction Tax (''STT'') in respect of "taxable securities transaction" at the applicable rates. Taxable securities transactions include purchase or sale of units of an equity oriented fund, entered into on the stock exchange or sale of units of an equity oriented fund to the mutual fund.

    The seller of units of an equity oriented fund is liable to pay STT (w.e.f. 1st June, 2013) where the purchase and sale is entered into on a recognized stock exchange and the contract for the purchase and sale of such units is settled by actual delivery or transfer of such units.

    At the time of sale of units of equity oriented fund to the mutual fund, the seller is required to pay an STT @ 0.001%.

    The securities transaction tax paid by the assesse during the year in respect of taxable securities transactions entered in the course of business shall be allowed as deduction under section 36 of the Act subject to the condition that such income from taxable securities transactions is included under the head ''profits and gains of business or profession''.

    Wealth Tax
    Units held under the Scheme of the Fund are not liable to wealth tax as it has been abolished with effect from financial year 2015-16.

    Incomes from Units

    Under the provisions of section 10(35) of the Act, any income (other than income arising from transfer of units) received by any person in respect of the units of the mutual fund is exempt from income tax.

    Dividend Distribution Tax

    Dividend Distribution Tax (DDT) is paid by debt funds on the dividends before it is distributed. The rate of DDT depends on the type of fund and type of investor.

    Gains on transfer / redemption of Units

    Gains arising on transfer / redemption of Units as well as switching between schemes will be chargeable to tax under the Act. The characterization of income from investment in securities as ''business income'' or ''capital gains'' will have to be examined on a case-to-case basis.

    Gift Tax

    The Gift -Tax Act, 1958 has been repealed since October 1, 1988. Gift of units of Mutual fund units would be subject to income-tax in the hands of the donee (receiver of gift). As per section 56(2)(vii), receipts of securities, fair market value of which exceeds fifty thousand rupees, without consideration or without adequate consideration is taxable as income in the hands of individuals / HUFs.

    Further the above provision of section 56(2)(vii) shall not apply to any units received by the done.

    a.From any relative; or
    b.On the occasion of the marriage of the individual; or
    c.Under a will or by way of inheritance; or
    d.In contemplation of death of the payer or donor, as the case may be; or
    e.From any local authority as defined in the Explanation to clause (20) of section 10 of the Act; or
    f.From any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10 of the Act; or
    g.From any trust or institution registered under section 12AA of the Act.

    Relative shall mean:

    ispouse of the individual;
    iiBrother or sister of the individual;
    iiiBrother or sister of the spouse of the individual;
    ivBrother or sister of either of the parents of the individual;
    vAny lineal ascendant or descendant of the individual;
    viAny lineal ascendant or descendant of the spouse of the individual;
    viiSpouse of the person referred to in clauses (ii) to (vi);

    Investors choose between growth, dividend and reinvestment options based on their need and the tax implications.



    Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
  • Please explain Mutual Fund Taxation in India in detail.
    Income from Mutual Fund can be divided into 2 parts Capital Gain (increase in value of your investment) or dividends that investors receive on regular intervals if they have opted for dividend plans. So taxation of Mutual Funds in India can be divided in 2 parts Capital Gain & Dividends.

    Capital Gain Taxation on Mutual Funds

    Capital Gain is appreciation in the value of asset – if you buy something for Rs. 1 Lakh & sell it for Rs. 1.5 Lakh, you have made a Capital Gain of Rs. 50,000. Capital Gains are further divided into short term & long term depending on their investment horizon.

    Short Term Capital Gain arises in case of equity oriented schemes if investment is held for 12 months or less or in simple words sold on or before completion of 1 year. In case of other than equity oriented schemes Short Term Capital Gain arises if investment is hold held for 36 months or less or in simple words sold on or before completion of 3 years.

    Long Term Capital Gain arisesin case of equity oriented schemes if investment is sold after 1 year and in case of other than equity oriented schemes if sold after 3 years.

    Mutual Fund Capital Gain Tax further depends on which type of fund it is – Equity or Other than equity.

    Mutual Fund Dividend Taxation


    Dividend taxation will depend on which type of Mutual Fund you are investing in – Equity or Other than equity.

    There is no dividend distribution tax on equity mutual funds & also the dividend received by investors is tax free in the hands of investors.

    In case of Mutual Funds – dividends received by investor are tax free in their hand or they don’t need to show it as a taxable income. But there is dividend distribution tax paid by mutual funds to income tax department.

  • What is the Tax payable on dividend, received by me as an investor?

    Dividends received by investor are tax free.

    Tax Implications on Dividend received by Unit holders effective: 1st April, 2015

    Individual/ HUF
    Equity oriented schemes NIL
    Other than equity oriented schemes NIL
    Domestic Company
    Equity oriented schemes NIL
    Other than equity oriented schemes NIL
    NRI
    Equity oriented schemes NIL
    Other than equity oriented schemes NIL

  • What are the tax slabs for Short Term Capital Gains and Long Term Capital Gains?
    Short term Capital Gains (STCG*)
    Individual/ HUF
    Equity oriented schemes **15% + Surcharge as applicable $+ 3% Cess = 16.995% or 15.45% (without surcharge)
    Other than equity oriented schemes30%^ + Surcharge as applicable $+ 3% Cess = 33.99% or 30.90% (without surcharge)
    Domestic Company
    Equity oriented schemes **15% + Surcharge as applicable $$+ 3% Cess = 16.223% or 16.995%
    Other than equity oriented schemes30% + Surcharge as applicable $$+ 3% Cess = 32.445% or 33.99%
    NRI
    Equity oriented schemes **15% + Surcharge as applicable $+ 3% Cess = 16.995% or 15.45% (without surcharge)
    Other than equity oriented schemes30%^ + Surcharge as applicable $+ 3% Cess = 33.99% or 30.90% (without surcharge)

    Long Term Capital Gains (LTCG*)
    Individual/ HUF
    Equity oriented schemes**NIL
    Other than equity oriented schemes20% with Indexation + Surcharge as applicable $+ 3% Cess
    Domestic Company
    Equity oriented schemes**NIL
    Other than equity oriented schemes20% with Indexation + Surcharge as applicable $$ + 3% Cess
    NRI*
    Equity oriented schemes**NIL
    Other than equity oriented schemes10% without Indexation + Surcharge as applicable $+ 3% Cess

    *Applicability of STCG and LTCG
    Applicability in STCGLTCG
    Equity oriented schemesUnits held for 12 months or lessUnits held for more than 12 months
    Other than equity oriented schemesUnits held for 36 months or lessUnits held for more than 36 months

    Nil Surcharge if the income less than Rs 1 crore
    $ Surcharge at the rate of 15% shall be levied in case of individual / HUF unit holders where their income exceeds Rs 1 crore.
    $$ Surcharge at the rate of 7% shall be levied for domestic corporate unit holders where the income exceeds Rs 1 crore but less than 10 crores and at the rate of 12%, where income exceeds 10 crores.
    *The short term/long term capital gain tax will be deducted at the time of redemption of units in case of NRI investors only.
    ** STT @ 0.001% will be deducted on equity funds at the time of redemption and switch to the other schemes.
    Mutual Fund would also pay securities transaction tax wherever applicable on the securities bought / sold.
    ^ Assuming the investor falls into highest tax bracket.
  • While distributing dividends; do the respective mutual fund schemes pay any tax?

    There is no dividend distribution tax on equity mutual funds but the Debt and Liquid schemes declaring dividend have to pay dividend distribution tax (DDT) depending on the investor category as follows;


    Individual/ HUF Rates
    Equity oriented schemes NIL
    Debt Schemes 25% +12% Surcharge + 3% Cess =28.84%
    Money market and Liquid schemes 25% + 12% Surcharge + 3% Cess = 28.84%
    Domestic Company
    Equity oriented schemes NIL
    Debt Schemes 30% + 12% Surcharge + 3% Cess = 34.61%
    Money market and Liquid schemes 30% + 12% Surcharge+3% Cess = 34.61%
    NRI
    Equity oriented schemes NIL
    Debt Schemes 25% +12% Surcharge + 3% Cess = 28.84%
    Money market and Liquid schemes 25%+ 12% Surcharge + 3% Cess = 28.84%


  • What are the Capital Gain Tax rates for NRIs and how will you process the same.
    For NRIs in case of Short Term Capital Gain there will be a TDS (tax deducted at source). Which means Tax will be deducted by Mutual Fund Company before paying redemption (sell) amount.
    Tax is deducted at Source for NRIs as per the below table;
    Short term capital gains Long term capital gains
    Equity oriented schemes 15.45% NIL
    Other than equity oriented schemes 30.90% 10.3% without Indexation
  • What is CII and Indexation method used for computing Capital gain? Explain the working.

    Cost-Inflation Index
    Cost Inflation Index (CII) is a figure that is announced by the tax authorities each year that represents the impact of the inflation in the economy. This is a figure that will determine the extent of the benefit that the individual will receive on their investments when they sell them and a capital gains tax has to be paid on it.

    The cost inflation index (CII) is calculated as shown:

               Inflation Index for year in which asset is sold
    CII = ------------------------------------------------------------------------
               Inflation Index for year in which asset was bought

    This index is then multiplied by the cost of the purchase to arrive at “indexed cost”.
    For e.g. let’s assume the following ;
    A Debt Fund was purchased in FY 1996-97 for Rs. 2.50 lacs
    The same fund was sold in FY 2004-05 for Rs. 4.50 lacs
    Cost Inflation Index in 1996-97 was Rs. 305 and in 2004-05 it was Rs. 480
    So, indexed cost would be:

                               480
    Rs. 2,50,000 X ------ = Rs. 3,93,443
                               305

    Now let us calculate LTCG using indexation
    Long Term Capital Gains would be calculated as:-
    Capital Gains = Selling Price of an asset – Indexed Cost

    i.e. Rs. 4,50,000 – Rs. 3,93,443 = Rs. 56,557

    Therefore tax payable will be 20% (excluding applicable cess) of Rs. 56,557 which comes to Rs. 11,311.

    Now let us calculate LTCG without indexation

    Capital Gains tax would have been as follows:-

    Capital Gains = Selling Price of an asset – Cost of acquisition

    i.e. Rs. 4,50,000 – Rs. 2,50,000 = Rs. 2,00,000

    Therefore tax payable @ 10% (excluding applicable cess) of Rs. 2,00,000 would have come to Rs. 20,000 !!

    So you save Rs. 8,689 in taxes by using the benefit of indexation.
    You can pay tax on long term capital gains by either of the two methods:-
    At the rate of 20% (excluding applicable cess) with indexation OR at the rate of 10% (excluding applicable cess) without indexation.

  • Please explain Taxation with respect to all your Schemes?
    Scheme Names QLF/QGSF/QEFOF/QMAF/QDBF QGF-Gold ETF QLTEF/QTSF/QIF-Index ETF
    Tax on Capital Gains * Long Term Short Term Long Term Short Term Long Term Short Term
    Resident Individuals & HUF 20% with Indexation Maximum 30% 20% with Indexation Maximum 30% Nil 15%
    FII’s / Overseas Financial Organisations 10% without Indexation 30% 10% without Indexation 30%
    Partnership Firm 20% with Indexation 30% 20% with Indexation 30%
    Non Resident Indians 10% without Indexation (on transfer of long term capital assets being unlisted securities) Maximum 30% 20% with Indexation (on transfer of long term capital assets being listed securities) Maximum 30%
    Indian Companies 20% with Indexation 30% 20% with Indexation 30%
    Foreign Companies 10% without Indexation (on transfer of long term capital assets being unlisted securities) 40% 20% with Indexation (on transfer of long term capital assets being listed securities) 40%

    The mentioned Tax Rates shall be increased by applicable surcharge & Cess.
    * The mentioned Tax Rates shall be increased by applicable surcharge, if any Education Cess @ 2% and Secondary higher education cess @ 1%. This shall apply to all the categories of tax payers.
    Equity oriented schemes will also attract Securities Transaction Tax (STT) @ 0.001% at the time of redemption and switch to other schemes.
    Mutual fund would also pay Securities Transaction Tax wherever applicable on the securities bought/sold.
    For further details on Taxation please refer the clause of Taxation of SAI and read respective SID.  
  • What are the Income Tax slabs for 2016-2017?
    Tax Slab for Financial Year 2016-17 (Assessment Year 17-18)

    General tax payers:


    Annual income (in Rs.)Tax Rate
    0 to 2,50,000 No tax
    2,50,001 to 5,00,00010%
    5,00,001 to 10,00,00020%
    Above 10,00,00030%

    Senior Citizens tax payers: Aged 60 years but less than 80 years

    Annual income (in Rs.)Tax Rate
    0 to 3,00,000 No tax
    3,00,001 to 5,00,000 10%
    5,00,001 to 10,00,000 20%
    Above 10,00,000 30%

    Very Senior Citizens tax payers: Aged 80 years or above

    Annual income (in Rs.)Tax Rate
    0 to 5,00,000 No tax
    5,00,001 to 10,00,000 20%
    Above 10,00,000 30%
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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.