I have invested more than two crores in mutual fund.Will I have to submit audit report.

Ans: If an individual's total income, including income from stock trading, exceeds the threshold specified under the Income Tax Act, then a tax audit is required.

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: Yes, you are required to file a tax return on ITR-2 for the financial year if you have received income from SWP (Systematic Withdrawal Plan) on your mutual fund investment. SWP income is considered as capital gains and needs to be reported in your income tax return.

Reporting SWP Income in ITR-2
In ITR-2, you need to report SWP income under the head "Income from Capital Gains." Here's how to report it:

Calculate Capital Gains: Determine the capital gains on your mutual fund investment from which you received the SWP income. Capital gains can be either short-term or long-term, depending on the holding period of the mutual fund units.

Select the Appropriate Schedule: In ITR-2, navigate to Schedule CG (Capital Gains). Here, you need to fill in the details of your capital gains from different sources, including mutual funds.

Enter Details of Mutual Fund Transactions: Provide details of the mutual fund investment from which you received the SWP income. Include information such as the name of the mutual fund, sale consideration (amount received through SWP), and cost of acquisition.

Calculate Taxable Capital Gains: Calculate the taxable capital gains by deducting the cost of acquisition (purchase price) from the sale consideration (SWP amount). Depending on the holding period, apply the applicable tax rates for short-term or long-term capital gains.

Enter Taxable Capital Gains in ITR-2: Enter the taxable capital gains in the relevant section of Schedule CG. Ensure accurate reporting to avoid any discrepancies.

Additional Considerations
Tax Implications: SWP income from mutual funds is subject to capital gains tax. Short-term capital gains (STCG) are taxed at your applicable income tax slab rate, while long-term capital gains (LTCG) are taxed at 10% without indexation if they exceed Rs. 1 lakh.

Tax Deduction at Source (TDS): If TDS has been deducted on your SWP income, ensure that you claim credit for the same while filing your tax return. Mention the TDS details in the appropriate section of ITR-2.

Conclusion
Filing a tax return on ITR-2 is mandatory if you have received SWP income from your mutual fund investment. Ensure accurate reporting of capital gains from SWP in Schedule CG of ITR-2 to comply with income tax regulations. If you have any doubts or require assistance, consult a tax professional or Certified Financial Planner (CFP) for guidance.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: When you redeem mutual funds, you may need to pay taxes. This depends on the type of mutual fund and the holding period.

Equity Funds: Gains from equity mutual funds held for over a year are long-term capital gains (LTCG). LTCG over Rs 1 lakh are taxed at 10%.

Debt Funds: Gains from debt funds held for over three years are long-term capital gains. These are taxed at 20% after indexation. Gains from debt funds held for less than three years are short-term capital gains (STCG). STCG are added to your income and taxed as per your income tax slab.

Hybrid Funds: Taxation depends on the equity and debt components. For hybrid funds with over 65% equity, taxation is like equity funds. Otherwise, it is like debt funds.

Ensure to consult a tax professional for detailed guidance on your specific case.

Investment Plan for Your Children

Investing for your children's future is crucial. Here’s a structured plan for your 17-year-old daughter and 8-year-old son.

Assessing Goals and Time Horizons

Daughter: She will need funds soon for higher education or other expenses. Your investment horizon is short-term (1-3 years).

Son: You have a longer horizon (10+ years) for his higher education and other goals.

Short-Term Investment Strategy for Your Daughter

Since you need funds soon, opt for safer investments.

Debt Mutual Funds: Suitable for short-term goals. They offer better returns than savings accounts and fixed deposits.

Liquid Funds: They are low-risk and provide reasonable returns. Suitable for funds needed in a year or less.

Ultra-Short Duration Funds: These are slightly higher risk but can offer better returns than liquid funds.

Long-Term Investment Strategy for Your Son

You have time to take advantage of the power of compounding.

Equity Mutual Funds: These are ideal for long-term goals. They offer higher returns but come with market risks.

Diversified Equity Funds: They spread the risk across various sectors. Good for building wealth over the long term.

Systematic Investment Plan (SIP): Invest regularly in equity funds. This mitigates market volatility and averages out the cost of investment.

Balancing Your Investments

Regular Monitoring: Review your investments regularly. Adjust them based on market conditions and goal progress.

Diversification: Spread your investments across different asset classes. This reduces risk and optimizes returns.

The Benefits of Actively Managed Funds

Actively managed funds offer several advantages over index funds.

Potential for Higher Returns: Skilled fund managers aim to outperform the market.

Flexibility: Managers can make timely decisions based on market conditions.

Risk Management: Active funds can avoid poor-performing stocks or sectors.

Disadvantages of Direct Funds

Investing in direct funds has some drawbacks.

Lack of Guidance: You may miss out on professional advice.

Time-Consuming: Managing investments yourself requires time and effort.

Potential for Mistakes: Without expert guidance, there's a risk of making uninformed decisions.

Using Regular Funds with a Certified Financial Planner

Professional Advice: A Certified Financial Planner (CFP) can provide tailored advice.

Better Planning: CFPs help in aligning investments with your financial goals.

Peace of Mind: You get professional support, reducing stress and ensuring better financial health.

Final Insights

Investing for your children's future requires careful planning. Use debt funds for short-term needs and equity funds for long-term goals. Regular monitoring and professional advice will help you achieve your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in