Investment
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Frequently Asked
Questions
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.This deduction is available only for the persons opting for old tax regime
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
At the time of redemption of units of equity oriented fund to the mutual fund, the investor is required to pay an STT @ 0.001% on redemption value.
Incomes from Units
There are two types of income received from units
1) Income from capital gains
2) IDCW
Taxability of the same are detailed in the questions described further
IDCW
TDS Deductions (Applicable Till 22 July 2024)
TDS on NRI Redemptions - On Short Term Capital Gain Tax @ 15% & Long Term Capital Gain Tax @ 10%. Plus Applicable Surcharge & Education Cess on both.
TDS on IDCW Payment - On Resident Investors @ 10% subject to minimum IDCW of Rs. 5000/- per annum & on NRI @ 20% Plus Applicable Surcharge & Education Cess on both.
TDS Deductions (Effective From 23 July 2024)
TDS on NRI Redemptions - On Short Term Capital Gain Tax @ 20% & Long Term Capital Gain Tax @ 12.50%. Plus Applicable Surcharge & Education Cess on both.
TDS on IDCW Payment - On Resident Investors @ 10% subject to minimum IDCW of Rs. 5000/- per anum & on NRI @ 20% Plus Applicable Surcharge & Education Cess on both.
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.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Income from Mutual Fund can be divided into 2 parts Capital Gain (increase in value of your investment) or IDCW that investors receive on regular intervals if they have opted for IDCW option plans. So taxation of Mutual Funds in India can be divided in 2 parts Capital Gain & IDCW.
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.
Holding period for listed securities and equity oriented mutual funds shall be 12 months and holding period for all other unlisted assets shall be 24 months. Therefore, holding period for non-equity mutual funds (other than Specified Mutual Funds), has been reduced from 36 months to 24 months..
Mutual Fund Capital Gain Tax further depends on which type of fund it is – Equity or Other than equity.
Mutual Fund IDCW Taxation
"As per Finance Bill 2020 , mutual funds are liable to deduct TDS on dividend income distributed to the investor.This dividend income will be part of taxable income in the hands of the investor"
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.
Holding period for listed securities and equity oriented mutual funds shall be 12 months and holding period for all other unlisted assets shall be 24 months. Therefore, holding period for non-equity mutual funds (other than Specified Mutual Funds), has been reduced from 36 months to 24 months..
Mutual Fund Capital Gain Tax further depends on which type of fund it is – Equity or Other than equity.
Mutual Fund IDCW Taxation
"As per Finance Bill 2020 , mutual funds are liable to deduct TDS on dividend income distributed to the investor.This dividend income will be part of taxable income in the hands of the investor"
Kindly refer this link https://quantumamc.com/fileCDN/taxation/QMFSCHEMETAXATION-Post-Budget.xlsx to view taxation in respect to all Quantum Mutual Fund Schemes
IDCW will be distributed after deduction of the applicable TDS Rates. The IDCW income will form part of the total taxable income of the investor.
From April 01,2020 onwards, Mutual Funds are liable to deduct tax on IDCW income distributed to investors.
| Status of individual / Company | Base Rate of Tax | Surcharge as a % of Basic Rate of tax (Considering highest tax bracket ) | Education Cess | Effective Rate (including Surcharge & Education Cess) |
| Resident / Domestic Company | 10% | 0% | 0% | 10% |
| Non-Residents (Non Corporates not being a firm, cooperative society and local authority ) | 20% | 37% | 4% | 28.50% |
| Non-Residents (Non Corporates being a Firm, cooperative society and local authority) | 20% | 12% | 4% | 23.30% |
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 2005-06 for Rs. 60 Lacs |
| • | The same fund was sold in FY 2017-18 for Rs. 1.50 Crores |
| • | Cost Inflation Index in FY.2005-06 was Rs.117 and in 2017-18 it was Rs.272 |
272
Rs.60,00,000 X ------ = Rs.1,39,48,717.95
177
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.1,50,00,000 - Rs.1,39,48,717.95 = Rs.10,51,282.05
Therefore tax payable will be 20% (excluding applicable surcharge and cess) of Rs. 10,51,282.05 which comes to Rs.2,10,256.41
Please note that as per the present taxation rules, it is mandatory for resident individuals to apply above indexation method while calculating long term capital gain tax on Debt Funds.
Now let us calculate LTCG without indexation (Applicable only in case of Non Resident Indians (NRIs))
Capital Gains tax would have been as follows:-Capital Gains = Selling Price of an asset – Cost of acquisition
i.e. Rs.1,50,00,000 – Rs.60,00,000 = Rs.90,00,000
Therefore tax payable @ 10% (excluding applicable surcharge and cess) of Rs. 90,00,000 would have come to Rs. 9,00,000!!
However, the above Indexation is applicable only till 22nd July 2024.
Investors will not get any indexation benefit on long term capital gain tax after 23rd July 2024.
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 (Upto 22nd July 2024): | ||
|---|---|---|
| Short term capital gains | Long term capital gains | |
| All Schemes | 15% + 4% Health & Education Cess = 15.60% | 10% without Indexation + 4% Health & Education cess = 10.40% |
| Tax is deducted at Source for NRIs as per the below table (From 23rd July 2024): | ||
|---|---|---|
| Short term capital gains | Long term capital gains | |
| All Schemes | 20% + 4% Health & Education Cess = 20.80% | 12.50% without Indexation + 4% Health & Education cess = 13% |
Income Tax Slab for FY 2024-25 (AY 2025-26)
Income Tax Slab Rate for New Tax Regime
The following tables show the Revised Income Tax Slabs. The table for the new tax regime slabs-
| Net Taxable Income | New Tax Regime F. Y. 2024-25 (A.Y. 2025-26) |
| Rs. 0 to Rs. 3,00,000 | NIL |
| Rs. 3,00,001 to Rs. 7,00,000 | 5% |
| Rs. 7,00,001 to Rs. 10,00,000 | 10% |
| Rs. 10,00,001 to Rs. 12,00,000 | 15% |
| Rs. 12,00,001 to Rs. 15,00,000 | 20% |
| More than Rs. 15,00,000 | 30% |
Income Tax Slab Rate for Old Tax Regime
The table for the old tax regime slabs-
| Net Taxable Income | OldTax Regime F. Y. 2024-25 (A.Y. 2025-26) |
| Rs. 0 to Rs. 2,50,000 | NIL |
| Rs. 2,50,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% |
| More than Rs. 10,00,000 | 30% |
Income Tax Slab for People Between 60 to 80 Years
| Net Taxable Income | Rates |
| Rs. 3 lakhs | NIL |
| Rs. 3 lakhs - Rs. 5 lakhs | 5.00% |
| Rs. 5 lakhs - Rs. 10 lakhs | 20.00% |
| Rs. 10 lakhs and more | 30.00% |
Income Tax Slab for People More than 80 Years
Below-mentioned is the Senior citizen tax slab in detail-
| Net Taxable Income | Rates |
| Rs. 0 - Rs. 5 lakhs | NIL |
| Rs. 5 lakhs - Rs. 10 lakhs | 20.00% |
| Above Rs. 10 lakhs | 30.00% |
| PARTICULARS | Direct Plan | SECTION 194Q |
| Purpose | Tax to be collected | Tax to be deducted |
| Applicability | Seller | Buyer/Purchaser |
| Counter party | Resident Buyer | Resident Seller |
| Trigger point | • Turnover/ Gross Receipt/ Sales from the business of SELLER should exceed Rs 10 crore during the year (FY 19-20) (excluding GST) | • Turnover/ Gross Receipt/ Sales from the business of BUYER should exceed Rs 10 crore during the year (FY 20-21) (excluding GST) |
| W.E.F | 1st October, 2020 | 1st July, 2021 |
| Timing of tax deduction | At the time of receipt | Payment or credit whichever is earlier |
| Rates | • 0.1% (0.075% for FY 2020-21) • 1% (If PAN not available) • On amount exceeding Rs 50 Lakhs | • 0.1% • 5% (If PAN not available) • on amount exceeding Rs 50 Lakhs |
| Not applicable to | • Transaction on which TDS/TCS is applicable under other provisions of the act and the same has been complied with (Meaning thereby; in a situation where TDS has been deducted u/s 194Q this section will not apply) | • Transactions on which TDS is applicable under other provisions of the act • Transactions on which TCS is applicable under 206C other than 206C(1H) |
| Form | 27EQ | 26Q |
| Certificate to be issued to seller/buyer | Form – 27D | Form – 16A |
| Sr. No | Buyer's Turnover | Seller's Turnover | Transaction Value` | Applicability of Section |
| 1 | 5 cr | 11 cr | 55 lakhs | 206C (1H) - Seller will collect TCS |
| 2 | 15 cr | 7 cr | 58 lakhs | 194Q - Buyer will deduct TDS |
| 3 | 12 cr | 13 cr | 54 lakhs | 194Q - Buyer will deduct TDS |
| 4 | 7 cr | 5 cr | 58 lakhs | None |
| 5 | 12 cr | 15 cr | 45 lakhs | None |
