Hello, I am an Indian citizen who used to work in the Merchant Navy, which is exempted from tax as we operate on international waters. I accumulated savings during that tenure and invested them in Indian mutual funds. I have never filed an Income Tax Return (ITR) in India. Now, I live abroad on a work visa. I will be withdrawing some of my mutual funds. Am I liable to pay short-term tax? Should I file an ITR?

Ans: Respected Sir,

you may file either ITR- 1 or ITR-2 depending on the complexity of the income. Yes, the lock in period of 3 years applies on ELSS schemes and if withdrawn before that it would attract taxability. Please look at the below a detailed note, which would be helpful to you. Withdrawal from Tax Saver Mutual Fund: If you made a withdrawal of Rs. 65,000 from your tax saver mutual fund, it's important to note that withdrawals from equity-linked saving schemes (ELSS) are subject to tax implications.

- ELSS investments have a lock-in period of three years. Withdrawals made before the completion of the lock-in period are considered as short-term capital gains.

ITR Form: Since you are a teacher by profession, your income is likely from salary and other sources. If you do not have any business income, you would typically file your income tax return using ITR-1 (Sahaj) or ITR-2, depending on the complexity of your income sources.

ITR-1 (Sahaj): For individuals having income from salary, one house property, other sources (like interest income), and total income up to Rs. 50 lakh.
ITR-2: For individuals and Hindu Undivided Families (HUFs) not eligible to file ITR-1 and having income from salary, house property, capital gains, and more than one house property, etc.

Ans: Individual is required to file ITR if gross income exceeds 2.5L (Before 54 exemption) OR if deposits in current account is more than 1 Cr OR Expense are more than 2 L for Foreign Travel OR if Expense are more than 1 L for Electricity OR Sales is more than 60 L OR if Gross receipt profession exceeds 10 L OR if TDS/ TCS deducted is more than 25K ( 50K senior citizen) OR if Deposit are more than 50 L in Saving A/c.

In case non of the conditions are fulfilled, person may not file ITR.

Ans: Taxability of MF depends on type on scheme (equity based - debt based scheme).

If an resident individual's total taxable income is up to Rs.7 lakh and chooses the new tax regime, he will be eligible for rebate of lower of the following:

An amount of income tax payable on his total income OR an amount up to Rs 25,000

E.g. if you have earned STCG from MF taxable @15% and tax on same is say Rs.15000. If you have taxable bank interest (after 80TTA deduction) and tax on same is 10000. Total tax will be Rs.25000 and rebate of 25000 is available, accordingly, net tax payable will be NIL.

Ans: In India, for the current Financial Year (FY) 2024-2025, a resident individual with a long-term capital gain (LTCG) of Rs 1 lakh or more from mutual funds is liable to pay tax on the excess amount over Rs 1 lakh.

In this scenario:

• LTCG from Mutual Funds = Rs 4.8 lakh
• Exempt limit = Rs 1 lakh
• Since the LTCG (Rs 4.8 lakh) is greater than the exempt limit (Rs 1 lakh), the individual will have to pay tax on Rs (4.8 lakh minus 1 lakh) = Rs 3.8 lakh.
• Tax rate on LTCG from equity funds: 10% without any indexation benefit.
• Tax payable: Rs 3.8 lakh * 10% = Rs 38,000
• So yes, the individual will need to pay tax of Rs 38,000.

Regarding ITR filing:

Even though the total income is below the basic exemption limit, filing an ITR is recommended if the individual has LTCG, for carrying forward any losses and claiming any tax refunds.

It's advisable to consult a tax advisor for personalised advice on your specific situation.