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Ramalingam

Ramalingam Kalirajan  |9852 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 03, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
PRAKHAR Question by PRAKHAR on Jun 19, 2025Hindi
Money

How to reduce tax on mf large cap fund , if fund value is 10 lakh

Ans: Reducing tax liability on your large-cap mutual fund portfolio of Rs 10 lakh involves smart planning, timing, and aligning decisions with your financial situation. Let us explore all possible options in a clear, easy way.

Understanding Equity Fund Taxation
Your large-cap fund is treated as equity mutual fund for tax.

If held over one year, capital gains are considered Long-Term Capital Gains (LTCG).

LTCG above Rs 1.25 lakh is taxed at 12.5%.

If redeemed within one year, Short-Term Capital Gains (STCG) are taxed at 20%.

You can use this knowledge to minimise tax impact.

Step-by-Step Tax Reduction Strategy
1. Use the Rs 1.25 Lakh LTCG Exemption
Every financial year, gains up to Rs 1.25 lakh are exempt.

Sell only up to Rs 1.25 lakh of gains yearly to avoid LTCG tax.

Redeeming more triggers 12.5% on surplus gains.

Over years, you can withdraw gains without incurring tax.

This uses your annual exemption fully and wisely.

2. Plan Redemptions Smartly Over Multiple Years
Spread gains across 2–3 years to use full exemption each year.

For example, withdraw part in March, part in next April.

This spreads tax events and avoids lumpsum tax shock.

Creates a steady cash flow without excess tax.

3. Use STP Instead of Lump-sum Redemption
Instead of selling Rs 10 lakh in full, use Systematic Transfer Plan (STP).

Move small amounts monthly or quarterly to a debt fund.

Each STP withdrawal triggers small capital gains.

Keep each small gain within the Rs 1.25 lakh LTCG limit.

This minimises taxable lump-sum and eases cash flow management.

4. Hold for Over 12 Months to Avoid STCG
If fund holds 12 months.

You maintain equity exposure without heavy cash holdings.

You benefit from active fund management and goal consistency.

You gain professional oversight for tax-optimised planning.

Common Mistakes to Avoid
Don’t withdraw entire fund at once and trigger large LTCG.

Don’t sell within one year to avoid 20% STCG.

Don’t use index funds—they don’t protect in falling markets.

Direct funds give no active guidance or tax tracking help.

Don’t ignore professional advice—without it mistakes happen.

Final Insights
By planning your redemptions wisely, you can avoid or minimise tax.
Use yearly LTCG exemption, STP, and timing with income.
Hold funds for over one year to avoid STCG.
Use gift to spouse for extra exemption if suitable.
Invest with actively managed funds and use SWP/STP for smooth income.
Seek help from a Certified Financial Planner to align your tax, investment, and long-term goals.
This approach ensures you pay less tax and keep growing your wealth steadily.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |9852 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 07, 2025

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Money
Mutual fund pe lagnewala wala long term capital gain tax kaise bachaye manlo maine Mutual fund kisi bhi sceme me invest kiya 1 lakh 20 sal ke bad muje mila 10 ka proft mila but muje sava 1.25 ki chhut mili but 8.75 lakh upar jo 12.5% long term capital gain tax kaise bachaye
Ans: Mutual fund investments are subject to taxation. Long-term capital gains (LTCG) on equity mutual funds above Rs. 1.25 lakh are taxed at 12.5%.

You invested Rs. 1 lakh. After 20 years, the value became Rs. 10 lakh. Your profit is Rs. 9 lakh.

The exemption limit is Rs. 1.25 lakh. You need to pay LTCG tax on Rs. 7.75 lakh.

Ways to Reduce LTCG Tax on Mutual Funds
1. Use Tax-Free Withdrawal Every Year
LTCG tax applies only if gains cross Rs. 1.25 lakh in a financial year.

You can withdraw gains up to Rs. 1.25 lakh tax-free every year.

If planned well, you can avoid LTCG tax completely.

Start partial withdrawals after a few years instead of waiting for 20 years.

2. Use Systematic Withdrawal Plan (SWP)
SWP allows you to withdraw a fixed amount regularly.

This spreads LTCG across multiple years.

You can keep withdrawals under Rs. 1.25 lakh per year.

This helps avoid or reduce LTCG tax.

3. Redeem in Family Members' Names
If your spouse or family members are in a lower tax bracket, use their accounts.

Gift them mutual fund units and redeem in their name.

Ensure that each family member stays within the Rs. 1.25 lakh exemption limit.

This can help divide and reduce tax liability.

4. Plan Redemptions in Phases
Selling everything at once leads to higher tax.

Instead, sell in small parts over multiple financial years.

This ensures that you stay within the exemption limit each year.

Strategic planning can significantly reduce your tax burden.

5. Use Capital Gains Against Exempt Income
If you have losses from stocks or mutual funds, use them to offset LTCG.

Short-term capital losses can be adjusted against LTCG.

This will reduce taxable capital gains and lower tax.

Finally
You cannot avoid LTCG tax completely. But proper planning helps reduce the tax burden.

Spreading withdrawals, using family member accounts, and optimising fund selection can help.

A Certified Financial Planner can guide you in structuring withdrawals for tax efficiency.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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