Transaction tax

Your Questions: Income Tax: The Indexing Benefit Is About Long-Term Gains From Debt Mutual Funds

Please note that debt mutual funds are classified as long term if held for more than 36 months, while equity-focused funds are considered long term if held for more than 12 months. .

By Chirag Nangia

From the mutual fund website, I downloaded my capital gains statement. However, I am confused about how much LTCG I need to report in my ITR-2. Under Section C, the “long term no index” is Rs 16,714.55. But when reporting LTCG, I have to mention “Indexed LTCG”, based on the year of investment.
a) Please tell me how I should calculate this amount. Should the indexed LTCG amount be declared in ITR-2 or Rs 16,714.55?
b) If indexed LTCG should be reported, why is this AMC mutual fund not providing it in the statement?
—SR Hiremath
Long-term capital gains on the sale of listed units of equity-based mutual funds (held for more than 12 months) were exempt until March 31, 2018. As of April 1, 2018, these Capital gains exceeding Rs 1 lakh were made taxable at the rate of 10%, provided that the Tax on Securities Transactions (STT) was duly paid. In addition, the benefit of acquired rights provisions apply to units vested until January 31, 2018.

Consequently, in the case of equity mutual funds purchased on or before January 31, 2018, the acquisition cost will be greater than: (i) the acquisition cost of this asset; and (ii) less than— (A) the fair market value of that asset; and (B) the consideration for the sale of that asset. Accordingly, capital gains should be calculated by deducting the acquisition cost (determined as above) from the consideration for the sale, which will be subject to a 10% tax under Article 112A.

Please note that the benefit of indexation will not be available when calculating capital gains as such.
However, if any capital gains were made from the sale of debt mutual funds, then the capital gains will be taxable at the rate of 20% and you will be able to benefit from the benefit of indexation.

Indexing can be done using the Cost Inflation Index (CII) available on the Income Tax website. Multiply the acquisition cost by the ITC for the year the mutual funds were transferred, then divide the product by the ITC for the year the mutual funds were purchased.

Please note that debt mutual funds are classified as long term if they are held for a period longer than 36 months, while equity funds are considered to be long term if they are held for a period of time. period greater than 12 months.

The writer is director, Nangia Andersen India. Send your questions to [email protected]

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