Do I Need to File Income Tax Returns for My Mother's 15k Monthly SIP Investment?

Ans: Your mother’s SIP investments and her existing ITR filing bring up important considerations. Let’s understand the tax rules and implications clearly.

1. Filing ITR for Investment Income
If there is no withdrawal from the mutual funds, there is no taxable income.

Mutual fund taxation is only triggered when there is a redemption or withdrawal.

Since she plans to invest for 20 years without withdrawing, no tax will be payable during this time.

2. Tax Implications Upon Redemption
Equity Mutual Funds
Gains after 20 years will be considered long-term capital gains (LTCG).

LTCG above Rs 1.25 lakhs annually will be taxed at 12.5%.

Debt Mutual Funds
If investing in debt mutual funds, the gains will be taxed as per her income tax slab.
3. Continuing ITR Filing for Income
As she already has a job and files ITR, she must continue filing for salary income.

The mutual fund investments themselves do not require separate ITR filing unless redeemed.

Any dividend received from mutual funds, if applicable, must be declared as income.

4. Staying Tax-Ready for 20 Years
Keep Investment Proofs Organised
Maintain records of all SIP transactions, including investment statements.

This will help calculate capital gains easily at redemption time.

Monitor Tax Rules Periodically
Tax laws may change in 20 years. Stay updated on rules applicable to mutual funds.

Consult a Certified Financial Planner periodically to optimise tax planning.

Strategise Withdrawals Smartly
Plan partial withdrawals, if needed, to utilise the Rs 1.25 lakh LTCG exemption annually.
5. Best Practices for Long-Term SIP Investors
Rebalance the portfolio every 2–3 years to align with goals and market conditions.

Avoid over-diversification in too many funds. Focus on quality funds managed actively.

Track the performance of funds regularly to ensure they align with growth expectations.

Final Insights
Your mother doesn’t need to file an ITR specifically for SIP investments unless she redeems. However, maintaining clear records and staying informed will make her financial journey smooth. With consistent SIPs and disciplined tax management, she is on track to build substantial wealth over 20 years.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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