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Will my MF gain of Rs.90K in 3 years be taxed upon redemption?

Ramalingam

Ramalingam Kalirajan  |8290 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 13, 2024

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
Asked by Anonymous - Aug 07, 2024Hindi
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My MF is 3 year old and gained 90k, will this gain attract tax, if i redeem?

Ans: Yes, the gain will attract tax if you redeem.

Here’s how it works:

Equity Mutual Funds: Gains from equity mutual funds held for more than one year are considered long-term capital gains (LTCG).

LTCG Tax: If your total LTCG in a financial year exceeds Rs 1.25 lakh, the excess amount is taxed at 12.5% without the benefit of indexation.

In Your Case: Since your gain is Rs 90,000 and below the Rs 1.25 lakh exemption limit, you won’t pay any tax on this gain if you redeem now.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
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  |8290 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 18, 2024

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I have invested Rs.1 lakh in my wife's name who is a housewife in Mirae Asset Healthcare mutual fund in November 2018.Its present value is 3.3 lakhs.If it is redeemed what is the tax to be paid.Thanks in advance.
Ans: Tax Implications of Redeeming Mutual Fund Investment
Congratulations on the growth of your investment! Let's delve into the tax implications of redeeming your investment in Mirae Asset Healthcare mutual fund.

Understanding Capital Gains
When you redeem your mutual fund units, any profit you earn is considered capital gains and is subject to taxation. Capital gains are classified as either short-term or long-term based on the holding period.

Short-term Capital Gains
If you redeem your mutual fund units within three years of purchase, the resulting gains are considered short-term capital gains. These gains are added to your taxable income and taxed according to your applicable income tax slab rate.

Long-term Capital Gains
If you hold your mutual fund units for more than three years before redeeming, the gains are classified as long-term capital gains. Long-term capital gains on equity-oriented mutual funds are taxed at a flat rate of 10% without indexation benefits, provided the gains exceed ?1 lakh in a financial year.

Tax Calculation
In your case, since the investment was made in November 2018 and the present value is ?3.3 lakhs, the investment has been held for more than three years. Therefore, the gains would be classified as long-term capital gains.

The tax would be calculated as 10% of the gains exceeding ?1 lakh. Let's say your total gain is ?2.3 lakhs (?3.3 lakhs - ?1 lakh), then the taxable amount would be ?1.3 lakhs (?2.3 lakhs - ?1 lakh). So, the tax payable would be ?13,000 (10% of ?1.3 lakhs).

Mitigating Tax Liability
There are certain strategies to mitigate your tax liability:

Tax-saving Investments: Consider investing in tax-saving instruments like Equity Linked Savings Schemes (ELSS) or Public Provident Fund (PPF) to avail of deductions under Section 80C.

Tax Loss Harvesting: If you have other investments with capital losses, consider selling them to offset the capital gains from your mutual fund investment.

Conclusion
Redeeming your mutual fund investment entails tax implications based on the holding period and gains accrued. Understanding these implications can help you plan your finances effectively.

If you need further assistance in tax planning or investment strategies, feel free to reach out. I'm here to help you navigate through your financial journey.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |8290 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 27, 2024

Asked by Anonymous - Jun 28, 2024Hindi
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Hi Do i have to pay any taxes during the redemption of mutual fund i have a corpus of 12 lakhs N wat inestment plan i should hv for my 17 yr old daughter n 8 yr old son with monthly investment of 20k
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

..Read more

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Hello Sir. My Son has got offer from follwing University.. 1)University of Padua - Italy (BSC - Information Technology) - 3 years Course 2)University Of Strathclyde - UK (BSC - HON Computer Science) - 4 yrs 3)Caledonian University of Glassgow - UK (Bsc Hons Computing). 4 yrs 4) National College of Ireland (BSC - HON Computer Science Engg) - 4 yrs We are confused to select the university / country
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Lastly, deciding which university and country to select depends on your son’s professional objectives, ideal learning atmosphere, budget, as well as plans for the future- whether he prefers a shorter course term, robust industrial connections, global exposure, or residing in a specific nation.

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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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