InvestorQ : What are the complexities in calculating capital gains on mutual funds?
Debbie Mascarenhas made post

What are the complexities in calculating capital gains on mutual funds?

Answer
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Crowny Pinto answered.
1 year ago


When it comes to capital gains there are a lot of complexities. Firstly, you need to find out whether the fund is an equity fund or a debt fund as the tax treatment will depend on that. We have learnt the logic of classification of equity funds and debt funds for tax purposes based on minimum 65% exposure to equities. The Income Tax Act defines how to calculate this 65% and for what period. This classification is critical as capital gains on equity funds and capital gains on debt funds are treated very differently. When it comes to capital gains, there is an additional complication and that is of holding period. The holding period is used to decide whether the capital gains are a long term capital gain (LTCG) or a short term capital gains (STCG). The rates for LTCG on debt funds, LTCG on equity funds, STCG on debt funds and STCG on equity funds are all very different. Let us see how? But first let us understand mutual fund holding period concept.