READY For income tax on equity mutual funds FROM 1st April 2018? NO?

READY For income tax on equity mutual funds FROM 1st April 2018? NO?

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CAPITAL GAINS ON EQUITY MUTUAL FUND UNITS BECOME :

LONG TERM (LTCG)    : After they complete 1 Year after date of investment

SHORT TERM (STCG) : Before that first year is complete

LTCG is taxed @ 10% (booked after 1st April 2018 – it was 0% earlier‼️)

STCG is taxed @ 15%

HOWEVER;  the “cost price” to calculate LTCG on equity will be the actual purchase price or the value as on 01.02.2018, WHICHEVER IS HIGHER.

DIVIDENDS FROM EQUITY MUTUAL FUND UNITS PAID AFTER 1st April 2018 will be taxed @ 10%

What this means is that, you will now get 10% less from the dividend as declared by the mutual fund !

HOWEVER; this dividend from Equity mutual funds will continue to be tax free in the hands of the investor.

 Please note that this DDT (for some mysterious reason) is ONLY levied on dividends from Mutual funds but on dividends from Equity shares, there is no tax up to Rs 10 lakh in a financial year‼️ I would hope for this anomaly to be corrected in the future.

1️⃣ IF you are currently invested in Dividend Option

▪️AND you have LTCG :   SWITCH to the Growth Option (ONLY the Units you bought more than a year ago)

▪️IF you have STCG:         Wait till it becomes LTCG (in FY beginning 1st April 2018) & then SWITCH to Growth Option

▪️IF you have a Capital LOSS (Short or Long Term) : Wait for the “next” Financial Year to begin on 1st April 2018) & then SWITCH to Growth Option

2️⃣ BUT IF you are already in Growth Option

▪️ IF you have LTCG (Even after you assume the cost value of your units at the NAV 01.02.2018) – SWITCH to the Growth Option (ONLY the Units you bought more than a year ago)

▪️ IF you have -NO-LTCG  (after you assume the cost value of your units as on 01.02.2018): ▫️▪️▫️▪️Do NOTHING

▪️ IF you have STCG: ▫️▪️▫️▪️Do NOTHING

You should keep all the relevant statements and records because, you can set-off these losses against the capital gains you will book in the future.

Following these tax law changes, it does NOT make sense to invest in the Dividend Options of both Equity and Debt Mutual Funds.

▪️All dividends paid by mutual funds will be taxed at point of payment (even though they are tax free in your hands); which basically means that, the actual dividends credited to your account will be reduced accordingly.

▪️This tax (called the “Dividend Distribution Tax” DDT) cannot be deducted from your total taxes, as you can with TDS. This money once deducted is gone !!

▪️The taxes are quite hefty – especially when your “marginal tax rate” (applicable on your Total Taxable Income) is much lower.

▫️ 12.5% (approx) on dividends from Equity Mutual Funds (from 1st April 2018)

▫️ 24%  (approx) on dividends from Debt Mutual Funds (as it was even last year)

✅ Therefore, if you were in dividend option of mutual funds to get regular income – you will now on have to do it through “SWP”  ( Systematic Withdrawal Plans – which nothing more than standing instructions (in writing) you give to the mutual fund, to pay you a certain fixed amount at specified time intervals).

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