Taxes
Tax on Equity Mutual Funds
Profit earned from Mutual Fund held for Long Term which more than 12 months is completely tax free. Profit earned from Mutual Fund held for Short Term, which is less than 12 months has a flat tax rate of 15% under Capital Gain whether Domestic investor/ NRI Dividends derived from Equity Mutual Fund is completely Tax Free.
Tax on non-equity Mutual Funds
(Debts Funds, Liquid Funds, Money Market Funds and Infrastructure debt Funds) Profit earned from non-equity Mutual Fund held for more than 3 years come under long Term Capital Gains, at 20% Indexation/10% without Indexation. Profit earned from selling/redeeming non-equity Mutual Fund investments before three years, short-term gains are taxed as per your tax slab. Dividends are tax free in the hands of Investors but the Fund House incurs a Dividend Distribution tax of 28.4% which includes Surcharges and Cess.
Equity linked Mutual Fund Savings scheme (ELSS)
(Tax Saving Mutual Funds) ELSS Income Tax Act Sec 80 C allows to claim deductions from a taxable income up to Rs.1,50, 000/- in certain Investments. Popular 80 C investment is Tax Saving Mutual Funds or Equity Linked Savings Scheme (ELSS). ELSS schemes will have a compulsory lock of 3 years compared to other investments and it is an equity diversified providing benefits of Capital appreciation and tax benefits.
Tax Implications on Investing Directly in Equity/trading through Brokers
Short-term capital gain (Selling of Shares for a profit before 12 months) incurs a tax @15% Short-term capital gain derived out of equities can be set off against short-term capital loss of different form of investment. Capital gains derived out of sale of shares can be carry-forward to settle offset, the capital losses on sale of shares up to 8 consecutive years.
