What all taxes imposed at the time of selling Mutual fund in case of SIP

[d.shruti]

What are the taxes imposed at the time of selling of mutual fund in case of SIP?

 

[anchitkm]

When selling mutual fund units acquired through a Systematic Investment Plan (SIP), the tax implications primarily depend on the duration for which you held the units and the type of mutual fund you're selling (equity or debt).

1. Equity Mutual Funds:
   • Short-term capital gains (STCG): If you sell equity mutual fund units within one year of purchase, the gains are considered short-term. STCG is taxed at a flat rate of 15% plus applicable cess and surcharge.
   • Long-term capital gains (LTCG): If you sell equity mutual fund units after holding them for more than one year, the gains exceeding Rs. 1 lakh in a financial year are taxed at 10% without the benefit of indexation.
2. Debt Mutual Funds:
   • Short-term capital gains (STCG): If you sell debt mutual fund units within three years of purchase, the gains are considered short-term. STCG is taxed at your applicable income tax slab rates.
   • Long-term capital gains (LTCG): If you sell debt mutual fund units after holding them for more than three years, LTCG is taxed at 20% with indexation benefits. Indexation adjusts the purchase price for inflation, reducing the taxable capital gains.

Additionally, there's a tax called the Securities Transaction Tax (STT) which is applicable at the time of selling equity mutual fund units but not for debt mutual funds.

Let's understand with an Example:

Scenario:

• You have been investing Rs. 5,000 per month through SIP in a mutual fund for the last three years.
• The current value of your investment is Rs. 2,00,000.
• You decide to sell all your units.

Equity Mutual Funds:

1. Short-term Capital Gains (STCG):
   • You sell your equity mutual fund units within one year of purchase.
   • Let's assume your initial investment was Rs. 5,000 per month for 36 months, totaling Rs. 1,80,000.
   • Your gains are Rs. 20,000 (Rs. 2,00,000 - Rs. 1,80,000).
   • The short-term capital gains tax rate is 15%.
   • Tax on STCG = 15% of Rs. 20,000 = Rs. 3,000.
2. Long-term Capital Gains (LTCG):
   • You sell your equity mutual fund units after holding them for more than one year.
   • Gains exceeding Rs. 1 lakh in a financial year are taxed at 10%.
   • Your gains are Rs. 20,000.
   • Taxable LTCG = Rs. 20,000 - Rs. 1,00,000 = Rs. 0 (as it doesn't exceed Rs. 1 lakh).
   • Tax on LTCG = 10% of Rs. 0 = Rs. 0.

Debt Mutual Funds:

1. Short-term Capital Gains (STCG):
   • You sell your debt mutual fund units within three years of purchase.
   • Since debt funds have a holding period of less than three years, gains will be taxed at your applicable income tax slab rates.
   • Let's assume your income tax slab rate is 20%.
   • Tax on STCG = 20% of Rs. 20,000 = Rs. 4,000.
2. Long-term Capital Gains (LTCG):
   • You sell your debt mutual fund units after holding them for more than three years.
   • LTCG is taxed at 20% with indexation benefits.
   • Let's assume the indexed cost of acquisition is Rs. 1,90,000.
   • Indexed gains = Rs. 2,00,000 - Rs. 1,90,000 = Rs. 10,000.
   • Tax on LTCG = 20% of Rs. 10,000 = Rs. 2,000 (with indexation benefits).

So, in this example:

• For equity mutual funds, you'd owe Rs. 3,000 if sold within one year, and no tax if sold after one year.
• For debt mutual funds, you'd owe Rs. 4,000 if sold within three years, and Rs. 2,000 if sold after three years with indexation benefits.

Thank you.

*** Do your own research - take your own decisions & full responsibility for them ***
**Like & Mark as Solution if you find the info helpful **

 

[zacobite]

When selling mutual fund units acquired through a Systematic Investment Plan (SIP), the tax implications primarily depend on the duration for which you held the units and the type of mutual fund you're selling (equity or debt).

1. Equity Mutual Funds:
   • Short-term capital gains (STCG): If you sell equity mutual fund units within one year of purchase, the gains are considered short-term. STCG is taxed at a flat rate of 15% plus applicable cess and surcharge.
   • Long-term capital gains (LTCG): If you sell equity mutual fund units after holding them for more than one year, the gains exceeding Rs. 1 lakh in a financial year are taxed at 10% without the benefit of indexation.
2. Debt Mutual Funds:
   • Short-term capital gains (STCG): If you sell debt mutual fund units within three years of purchase, the gains are considered short-term. STCG is taxed at your applicable income tax slab rates.
   • Long-term capital gains (LTCG): If you sell debt mutual fund units after holding them for more than three years, LTCG is taxed at 20% with indexation benefits. Indexation adjusts the purchase price for inflation, reducing the taxable capital gains.

Additionally, there's a tax called the Securities Transaction Tax (STT) which is applicable at the time of selling equity mutual fund units but not for debt mutual funds.

Let's understand with an Example:

Scenario:

• You have been investing Rs. 5,000 per month through SIP in a mutual fund for the last three years.
• The current value of your investment is Rs. 2,00,000.
• You decide to sell all your units.

Equity Mutual Funds:

1. Short-term Capital Gains (STCG):
   • You sell your equity mutual fund units within one year of purchase.
   • Let's assume your initial investment was Rs. 5,000 per month for 36 months, totaling Rs. 1,80,000.
   • Your gains are Rs. 20,000 (Rs. 2,00,000 - Rs. 1,80,000).
   • The short-term capital gains tax rate is 15%.
   • Tax on STCG = 15% of Rs. 20,000 = Rs. 3,000.
2. Long-term Capital Gains (LTCG):
   • You sell your equity mutual fund units after holding them for more than one year.
   • Gains exceeding Rs. 1 lakh in a financial year are taxed at 10%.
   • Your gains are Rs. 20,000.
   • Taxable LTCG = Rs. 20,000 - Rs. 1,00,000 = Rs. 0 (as it doesn't exceed Rs. 1 lakh).
   • Tax on LTCG = 10% of Rs. 0 = Rs. 0.

Debt Mutual Funds:

1. Short-term Capital Gains (STCG):
   • You sell your debt mutual fund units within three years of purchase.
   • Since debt funds have a holding period of less than three years, gains will be taxed at your applicable income tax slab rates.
   • Let's assume your income tax slab rate is 20%.
   • Tax on STCG = 20% of Rs. 20,000 = Rs. 4,000.
2. Long-term Capital Gains (LTCG):
   • You sell your debt mutual fund units after holding them for more than three years.
   • LTCG is taxed at 20% with indexation benefits.
   • Let's assume the indexed cost of acquisition is Rs. 1,90,000.
   • Indexed gains = Rs. 2,00,000 - Rs. 1,90,000 = Rs. 10,000.
   • Tax on LTCG = 20% of Rs. 10,000 = Rs. 2,000 (with indexation benefits).

So, in this example:

• For equity mutual funds, you'd owe Rs. 3,000 if sold within one year, and no tax if sold after one year.
• For debt mutual funds, you'd owe Rs. 4,000 if sold within three years, and Rs. 2,000 if sold after three years with indexation benefits.

Thank you.

ALL of this + Exit Load if applicable

 

[guptajoy961]

What are the taxes imposed at the time of selling of mutual fund in case of SIP?

So, you want to know about taxes on mutual funds sold through Systematic Investment Plans (SIPs)? Here's a simple breakdown of how it works:

1. Short-Term Capital Gains Tax:
   • Selling mutual fund units within a year of buying them means you'll pay short-term capital gains tax.
   • For equity-oriented funds, this tax is a flat 15% of the gains.
   • For debt-oriented funds, the tax depends on your income tax bracket.
2. Long-Term Capital Gains Tax:
   • Selling mutual fund units after holding them for more than a year subjects you to long-term capital gains tax.
   • For equity-oriented funds, gains up to ₹1 lakh are tax-free, while any gains over that amount are taxed at 10%.
   • For debt-oriented funds, the tax is 20% after adjusting for inflation.
3. Securities Transaction Tax (STT):
   • There's a 0.001% STT on the sale of mutual fund units, but it doesn't apply to debt funds.

So, the tax you pay on mutual funds sold through SIPs depends on the type of fund, how long you held the units, and your income tax bracket. Keep these factors in mind to make the most of your investments!