Table of Contents
Is indexation benefit available on mutual fund?
Mutual fund investments generate Capital gains (Capital gain is a gain or profit realized by way of selling a property or other such asset/investment). The taxation aspect is different for different types of mutual funds. However, indexation benefit is available only for capital gains realized in Debt mutual funds.
How is capital gain on redemption of mutual funds calculated?
Calculation of Capital Gains Under Mutual Fund Capital gains can be calculated in the following way: Capital Gains = The full sale value of the mutual fund investment units less the total of the cost of sale or transfer of said units, the price of acquisition of said units, and the improvement costs of said units.
What do you mean by indexation benefit?
Indexation refers to recalculating the purchase price, after adjusting for inflation index, as published by the Income-Tax authorities. Since the purchase price is adjusted for inflation, the capital gain gets reduced. In case of LTCG for non-equity funds, investors can avail the indexation benefit.
How can indexation be applied to capital gains in India?
Indexed cost of improvement = cost of improvement x cost inflation index of the year of transfer/cost inflation index of the year of improvement. The rate at which capital gains is calculated varies from year to year. In the case of long-term capital gains, individuals are taxed at 20.6\% (including education cess).
The indexation benefit—which takes into account the impact of inflation on acquisition cost—will not be available on gains made from sale of listed securities, as per the amendments to the Finance Bill, which was passed by Lok Sabha on Wednesday.
What is indexation and indexation benefit?
Indexation is the benefit of inflation adjustment that is provided to the investors when they have held their debt funds for a long term. When an investor redeems his long-term debt mutual funds (held for more than 3 years), the capital gain is adjusted to incorporate inflation which is referred to as indexation benefit.
What is indexation in mutual funds?
Indexation is a prudent way to prevent draining of your debt fund returns by way of taxes. It helps you to inflate the purchase price of the debt mutual funds. In this way you can lower your tax liability. Before embarking on indexation, it’s important for you to understand two concepts i.e. inflation and capital gains.
When do you get indexation benefit on capital gains on property?
Indexation benefit on capital gains if property held for more than 2 years * I inherited a plot of land and the registry value at that time was Rs 3.28 lakh. Now, I want to sell it and the value is around Rs 55 lakh. Can I pay capital gain tax with indexation benefit?
How indexation can help in saving tax on long term investments?
One of the most structured and reliable provisions which are considered a boon for investors in saving tax on their long term investments is indexation. Indexation gives the investors an opportunity to increase the purchase price of the asset which in turn helps in lowering the adverse impact on the cost caused by inflation.