Benefit Fund
Queries
CD Solanki
Since January 2001 I have invested `5000 every month in UTI ’ s Retirement Benefit Fund ( RBF ), which is a debt fund . I ’ m going to withdraw the maturity amount very soon on completion of 58 years . Please tell me how to calculate long-term capital gains ( LTCG ) since the investment is not a lumpsum but a SIP . How to apply indexation formula for this ? In case of equity funds ( SIPs ) how does one calculate LTCG ? I ’ ll appreciate it if you can offer an illustration as well . As you ’ re going to withdraw the money from the fund in which you have been investing through SIP , first identify the total number of UNITS to be sold . For every unit sold , find out its cost of acquisition / purchase price as per the FIFO ( First In , First Out ) method – that is , units that were purchased first will be sold first , and units purchased later will be sold later for the purpose of calculation . In case of Debt-Based Mutual Funds , any units held for more than 36 months from the date of sale would be treated as long-term capital . Long-term capital gains are taxed at 20 per cent with indexation as shown below . Where indexed cost of acquisition is calculated as : Actual Purchase Price x ( Index of year of sale / Index of year of purchase or 2001-02 ; whichever is later ) LTCG Tax = [( Selling Price of long-term units x no . of units held in the long term ) – ( Indexed cost of acquisition )] x 20 % Units held for less than 36 months are considered as short-term capital , and are taxed as per the slab rate shown below : STCG = ( Selling Price of short-term units x no . of units held in short term ) – ( Actual Cost of Purchase ) This amount of STCG is then added to your total taxable income for that financial year and taxed as per your tax slab rate .
Please keep in mind three most important points . ( 1 ) When it comes to direct equity , while calculating capital gains tax we focus on the number of shares and not their value . The exact same principal should be applicable
Retirement
Benefit Fund
when it comes to calculating capital gains tax on mutual fund units . Focus should be on the number of units and not the amount . Calculate capital gains or loss and longterm and short-term for each unit .
( 2 ) Secondly , there will be instances of capital loss , please remember to set them off against gains . This will reduce your tax burden .
( 3 ) Since debt funds are subject to capital gains tax , you also have the option to invest in long-term capital gains in various bonds which qualify u / s 54 E / C
In the case of Equity Mutual Funds , as per the revised regulations of Budget 2018 : ( 1 ) Units held for less than 12 months are considered as short-term . The gains on these units are taxed at 15 per cent .
( 2 ) Units held for more than 12 months are considered as long-term . The gains on these units are taxed at 10 per cent if total gains for that financial year exceeds 1 lakh .
( 3 ) Cost of acquisition to be considered for calculating LTCG tax is either actual NAV at which they were purchased or NAV as on 31 Jan 2018 , whichever is higher .
Gaurav Mashruwala Financial Planner and Author of Yogic Wealth
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Outlook Money May 2018 www . outlookmoney . com