Sunday, 21 October 2018

Tax Benefits of Mutual Fund Investments |Best Investment option - Mutual Fund| Mutual Fund Sahi Hai |

Various tax advantages of mutual funds in India

In this article we will discuss about Tax Benefits of Mutual Fund Investments.

A mutual fund is a fund that mainly collects funds from the public and then invests in certain securities on behalf of its investors.

Mutual funds can be divided into two categories: -

  • Equity Mutual funds
  • Debt Mutual funds
  1. Equity Mutual funds are funds that invest a significant part of their equity investments, and debt funds are mutual funds that invest a significant part of their investments in debt financing instruments. fixed income securities.
  2. To encourage people to invest in mutual funds, the government offers various tax breaks to people who invest in mutual funds. This article focuses on the tax benefits of mutual funds in India. These benefits have been discussed in detail below.

1. Tax advantage in accordance with section 80C for investing in mutual funds

Following are major tax benefits of Mutual Fund Investments.
  • Equity Mutual funds are mutual funds in which a significant part of the amount is invested in the stock market, that is, in the stock market. These ELSS funds buy shares through an IPO or through stock markets.
  • The amount invested in these mutual funds may be declared as a deduction under section 80C. Although there are no restrictions on investing in these mutual funds, the maximum amount of deduction that can be declared in accordance with section 80C for investments in this type of mutual fund is Rs. 1.50,000.
  • This deduction is from Rs. An indicator of 1,50,000, authorized under section 80C, is the cumulative  allowance allowed during the financial year to invest in various specific instruments. The most popular of these instruments for which a deduction under Section 80C can be claimed are:
  1. PPF account
  2. Pension plans
  3. Life insurance policy
  4. National Savings Certificate
  5. Fixed tax saving deposit
  6. Repayment of home  loan

2. The period of blocking mutual funds

  • The final period for mutual funds, which can be declared in accordance with section 80C, is 3 years. In other words, these mutual funds cannot be sold for 3 years.
  • A 3-year blocking period for mutual funds is the lowest compared to a 5-year blocking period for other popular tax instruments, such as a PPF account, a national savings certificate, a fixed savings deposit.

3. Exemption from taxes on the payment of dividends on mutual funds

  • Mutual funds regularly pay dividends to their investors. Dividends received by investors in these mutual funds are not taxed in the hands of investors. In other words, investors do not have to pay tax on dividends received from these mutual funds.

4. Capital gains tax on the sale of mutual funds

  • The value of a mutual fund is indicated by its NAV (i.e. net asset value). The NAV continues to change daily, depending on the efficiency of the mutual fund. A mutual fund is always bought and sold at the cost of its net assets.

  • Profits from the sale of a mutual fund are of two types: long-term capital gains and short-term capital gains. Tax on the sale of long-term / short-term mutual funds is listed below:

  • Long-term capital gains tax: if a mutual fund is held for more than one year, the proceeds from the sale of the mutual fund are fully exempt from capital gains taxes. There is no maximum limit for the amount that can be declared as an exemption from the sale of mutual funds held for more than one year.

  • Short-term capital gains tax: if a mutual fund is held for less than one year, profits from the sale of the mutual fund will be at a rate of 15%, the maximum limit on the amount that will be taxed at this preferential rate of 15% under section 111A


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