1. Short Term Gains (before completion of 1 year from the date of investing) on equity mutual funds are taxed @ 15% with an equivalent TDS @ 15% + cess.
2. Long term Gains (after completion of 1 year from the date of investing) on equity mutual funds are taxed @ 10% with an equivalent TDS @ 10% + cess, after the total gains for the financial year cross Rs. 1 lakh.
3. TDS in both cases above can be claimed back by the investor by filing IT returns before the due date (31st July), each year.
4. Short Term Gains (before completion of 3 years from the date of investing) on non-equity mutual funds are added to the Indian Income of the investor and taxed at marginal tax rates. There would also be a TDS implication of 30%.
5. Long Term Gains (after completion of 3 years from the date of investing) on non-equity mutual funds are taxed @ 20%. There would be TDS @ 20% implication on the same.
6. Benefits of Sec 80C are not considered while computing Long Term/ Short Term capital gains.
7. Basic exception limits are not applicable for NRIs for the gains of Equity oriented funds. Basic exception limits, for short term gains of non-equity oriented funds are applicable for NRIs but, Long term gains of non-equity are not applicable.
8. The new revised basic exemption limit of Rs. 5 lakhs (net income), are not applicable for NRIs.
9. NRIs could invest in equity linked savings schemes to reduce taxable income (excluding capital gains income) under Sec 80C.
10. Dividend Income if any, received from equity or non-equity mutual funds are exempted in the hands of the investor. However, there would be implications of Dividend Distribution Tax.
11. Losses if any made on equity or non-equity funds could be used for adjusting future capital gains subject to IT Return filing done before the last filing date (31st July) of each financial year.
Equity mutual funds are those tht invest at least 60% in India Equity or India Equity ETFs. The funds which do not satisfy this criteria are known as non-equity funds.
Naveen Julian Rego-CFP
SEBI Registered Investment Adviser
Reg. No. INA200004250
29th April, 2019