Factor in cost of acquisition, holding period to calculate tax on equity MF

By Chirag Nangia

I have redeemed 500 out of 680 units of HDFC MF. How do I calculate LTCG?

– Manoj Anjaria

If the units you are holding are of an equity-oriented mutual fund, on which Securities Transaction Tax has been paid, long term capital gains (LTCG) accruing on or after April 1, 2018, over of `1 lakh, will be taxable at 10% without the benefit of indexation. However, if the units are of a debt-oriented mutual fund, LTCG will be taxed at 20% with benefit of indexation. LTCG shall be computed after deducting the sale consideration from the cost of acquisition. For equity MFs, which were acquired on or before Feb 1, 2018, cost of acquisition shall be the higher of actual cost of acquisition or the NAV as on Jan 31, 2018. However, if sale consideration is lower than NAV as on Jan 31, 2018, then sale consideration shall be considered instead of this NAV. However, if the units were acquired after Feb 1, 2018, the actual cost of acquisition shall be considered. You shall thus have to compute the capital gains on 500 units, bearing in mind the respective period of holding and the cost of acquisition.

My son and his wife invest Rs 1.5 lakh each in respective PPF accounts. Can they open a PPF Account on behalf of their minor son and contribute Rs 1.5 lakh without claiming tax benefits?

—K R Reddy

A legal guardian can open another account in the name of minor child subject to maximum investment limit of Rs 1.5 lakh by adding balance in all accounts. Further, the account cannot be held jointly. Since your son and his wife are already investing maximum amount individually, they cannot open another account in the name of the minor child unless one of them reduces their investment to incorporate the minor’s investment.

My son, daughter and I inherited agriculture land. We sold part of it and bought REC 54EC bonds for `50 lakh each. What will be the capital gains?

—Devarajan. N

Income arising from transfer of long term capital asset shall be chargeable to tax as LTCG. Such income shall be computed by deducting, from the sales consideration, the indexed cost of acquisition (i.e. cost adjusted as per cost inflation index) and selling expenses, (if any). Capital gains arising from transfer of long term capital asset is taxable at 20%, after availing exemption under Section 54EC.

The writer is director, Nangia Andersen Consulting. Send your queries to [email protected]

Source: Financial Express