What taxes are applicable on redemption

[sandeep729]

Hello investors,

Advice needed for the following query:

1) If I have invested 10000/- in Jan 2011 and it turns out to be 15000/- in Nov 2011, and if I have to redeem all units will I get the complete amount (i.e. excluding the exit load) or will there be any amount cut towards taxes (STCG)

2) In second scenario if I sell it in say May 2012 and the MF value then is 20000, will I get the total amount or any other charges (like LTCG) will be charged?

Please reply back with solution to the same example as it is relatively easier to understand with this basic situation many investors face

 

[seetharamank]

Hello investors,

Advice needed for the following query:

1) If I have invested 10000/- in Jan 2011 and it turns out to be 15000/- in Nov 2011, and if I have to redeem all units will I get the complete amount (i.e. excluding the exit load) or will there be any amount cut towards taxes (STCG)

2) In second scenario if I sell it in say May 2012 and the MF value then is 20000, will I get the total amount or any other charges (like LTCG) will be charged?

Please reply back with solution to the same example as it is relatively easier to understand with this basic situation many investors face

dear friend if u redeem with in 365 days u will get ur money excluding exit load no tax deduction is made at source u have to pay15% of profits as shortterm capital gains along with ur income tax no other charges u pay in the first case in the second case of redeeming in may2012 no capitalgains,exitload etc you will get all tha20k. if u buy&sell using ur stock market broker ur brokerage system will be effective

 

[asterix24]

Hi Sandeep,

From your post it is not clear if your fund is Liquid or Equity fund and hence, I am posting my reply for both the scenarios. To state, Equity fund has more than 75% investment into Equity and pay STT as part of their transactions.

Taxation is different with equity/MF investments. When you invest and withdraw MF, you will be charged STT and any entry/exit loads as applicable. Different AMCs and different schemes have different strategies and hence, for your specific scheme, I would advise you to check with the AMC.

Coming to your queries,

1) If I have invested 10000/- in Jan 2011 and it turns out to be 15000/- in Nov 2011, and if I have to redeem all units will I get the complete amount (i.e. excluding the exit load) or will there be any amount cut towards taxes (STCG)

As explained earlier, AMC will not deduct any tax except STT. Hence, assuming 5000 is your profit (ignoring STT),

a) If it's liquid fund, you have to pay tax at the same rate of your tax bracket, as the profit is added to your income. So if you are in the highest bracket, you would pay 30.9% tax (including education cess) on the same.
b) If it's an equity fund, you have to pay STCG at the rate of 15% plus education cess.

2) In second scenario if I sell it in say May 2012 and the MF value then is 20000, will I get the total amount or any other charges (like LTCG) will be charged?

Even in this case, AMC doesn't deduct the income tax. Hence, assuming 10000 as your profit,

a) If it's a liquid fund, it's treated as LTCG and will be charged either at flat 20% of your gain or 10% of indexed profit, plus education cess
b) If it's an equity fund, the LTCG is exempted from tax as the current tax rules exempt all LTCG gains for equity investments.

In general, for all cases, you have to pay tax as Advance tax and capture the same in your returns. I hope I have answered your queries.

Happy Investing !!