InvestorQ : Do I need to pay double Capital Gain tax if my mutual fund house sells shares for gain?
Samita Patil made post

Do I need to pay double Capital Gain tax if my mutual fund house sells shares for gain?

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Manisha Mehta answered.
2 months ago
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No, you do not have to. Mutual funds are taxed just like shares or debt instruments. Basically, if you have a portfolio consisting of debt instruments and equity instruments, you will be taxed for them separately. When a fund house sells shares on behalf of its investors, whatever gain it makes, it distributes that to the holders. So, the final recipient of capital gains is the ultimate investor and hence he would be taxed.

Here’s how equity instruments are taxed:

Short-term Capital Gains: If your mutual fund units are sold within a period of or less than one year, any gain arising on them shall be taxed at a flat rate of 15%. Long-term Capital Gains: If your mutual units are sold beyond a period of 1 year, any gain arising on them shall be taxed at the rate of 10%, with a ceiling of Rs 1 lakh in a financial year. So, any gain beyond Rs 1 lakh would be taxable.

Tax on Debt instruments:
Short-term Capital Gain: Any gains arising on selling your investment before a period of 3 years, shall be taxed at the applicable tax rate of the investor. Say, if you fall under the 30% tax bracket, your gains would be taxed at the same rate.
Long-term Capital Gain: If the mutual fund units are sold beyond the said period of 3 years, they shall be taxed at the rate of 20% with indexation.
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