Many people make capital gains from stock and mutual fund investments. An individual who has sold shares or mutual fund units in the previous financial year must mention the gains, if any, in the return.
Long-term capital gains on stocks and equity mutual funds are not taxed. But short-term gains are taxed at 15%.
In case of debt mutual funds, both short-term and long-term capital gains are taxed. Short-term capital gains are added to the income and taxed as per the individual's income tax slab. Long-term capital gains from debt mutual funds are taxed at 20% with indexation and 10% without indexation. Indexation is adjusting the purchase price for inflation. This increases the purchase cost and, thus, lowers the gain.
Calculating capital gains is not easy. Imagine you invested in an equity fund through a systematic investment plan, or SIP, till December 2013 and redeemed the investment in March 2014. You might have made decent profits on your total investment, but a part of it could be short-term gains (each SIP instalment must complete one year if it is to be considered a long-term investment for tax purpose), which are taxable at 15%.
Will you be able to calculate the short-term gains on your own? You can, if you are financially savvy, get the net asset value, or NAV, of the fund on each SIP date and calculate the profit/loss on each SIP to arrive at the net gain. Most retail investors will find the process tedious. Even if they are able to do the calculation, they would rather not take any chance lest they make a wrong disclosure in the return.
It's better to get the figure from a trusted source. Mutual fund investors can get the capital account statement on demand from the fund house. However, it is not easy for investors in direct equity, as not all brokerage houses give the statement.
Long-term capital gains on stocks and equity mutual funds are not taxed. But short-term gains are taxed at 15%.
In case of debt mutual funds, both short-term and long-term capital gains are taxed. Short-term capital gains are added to the income and taxed as per the individual's income tax slab. Long-term capital gains from debt mutual funds are taxed at 20% with indexation and 10% without indexation. Indexation is adjusting the purchase price for inflation. This increases the purchase cost and, thus, lowers the gain.
Calculating capital gains is not easy. Imagine you invested in an equity fund through a systematic investment plan, or SIP, till December 2013 and redeemed the investment in March 2014. You might have made decent profits on your total investment, but a part of it could be short-term gains (each SIP instalment must complete one year if it is to be considered a long-term investment for tax purpose), which are taxable at 15%.
Will you be able to calculate the short-term gains on your own? You can, if you are financially savvy, get the net asset value, or NAV, of the fund on each SIP date and calculate the profit/loss on each SIP to arrive at the net gain. Most retail investors will find the process tedious. Even if they are able to do the calculation, they would rather not take any chance lest they make a wrong disclosure in the return.
It's better to get the figure from a trusted source. Mutual fund investors can get the capital account statement on demand from the fund house. However, it is not easy for investors in direct equity, as not all brokerage houses give the statement.
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