Debt Fund – Indexation calculation

POSTED BY Ramprakash ON July 6, 2012 7:36 pm COMMENTS (9)

Hi

If a debt fund (growth) is bought on 10 Feb 2010 and sold on 24 Aug 2011, will one get the benfit to two years for indexation (since it spreads over 3 Financial Years)? Or is it for each completed calendar year (In above example it is 1.5 years)?

Thanks
Ramprakash

9 replies on this article “Debt Fund – Indexation calculation”

  1. bemoneyaware says:

    Sorry for delay in replying. I am not from financial background so had to contact my CA who is busy and returned my call today only

    As you have long term capital loss see if you can adjust with long term capital profit. If not you can carry this loss for 8 years.
    It would come in Schedule CFL : Details of losses to be carried forward to future years xi 2012-13 Current Year Loss
    This will be carried forward. It would come up in ITRV as Current Loss if any .

    Please verify also with some expert.

  2. bemoneyaware says:

    Thanks Ramprakash. Glad to know that it was helpful.(Mehnat vasool :-))
    But now as you said capital gain turned out to be negative i.e you have Capital loss. A little about it.

    Cases may arise when there is a capital loss i.e consideration for transfer is less than the cost of acquisition and improvement. Such loss, whether it relates to a short-term capital asset or a long term capital asset cannot be set off against positive income under any head. It can be carried forward to the next year and can be set off only against Capital gains but under specific categories. Morever, the law allows for any unabsorbed loss to be carried forward for 8 years. However the taxpayer has to file a loss return, failing which the unabsorbed loss will not be allowed for set-off

    Which loss can be offset with what and carried over is explained in another article at Basics of Capital Gain

    1. Ramprakash says:

      Hi BemoneyAware

      I have one more doubt. In the debt fund (growth), though I actually made profit upon selling after holding for 1.5 year, but by applying indexation benefit, the LTCG is negative.

      Now, while filing ITR2, should I show this actual profit in the EI (Exempt Income) worksheet?
      If yes, then under which Serial No.?
      Serial No 1. Interest Income
      Serial No 3. LTCG
      Serial No 5. Others
      Or because on the applying indexation, it turns out to be negative (loss) ,no need to mention the same in ITR2.

      Thanks

  3. bemoneyaware says:

    As answered above it is a Long Term Capital Gain. You can use the calculator at bemoneyaware Capital gain Calculator which on entering Purchase and Sale price and number of units would also calculate Capital Gain with indexation and without too. Excerpth of results from the calculator

    Investment Type:Debt Mutual Funds

    Time between :1 years 195 days

    Gain Type: Long Term Capital Gain

    CII of the Purchase Year: 2010 month: Feb : 632

    CII of the Sale Year: 2011 month: Aug : 785

    1. Ramprakash says:

      Thanks Bemoneyaware.

      Not only I understood which year’s indexation was applicable, I was actually able to compute the capital gains. Whats more, they turned around to be negative!!!!

  4. No , it will be just 2 yrs , not 3 yrs .

    As the tenure is just a little over 1 yr and its spread in two financial years, the total indexation period is 2 yr .

    1. Dear Manish, No the indexation ‘ll be for 3FY as the investment period is spread over 3 FY.

      2009-2010
      2010-2011
      2011-2012

      Thanks

      Ashal

      1. I think we are saying same things in different way , so there is confusion . I am saying that the CII used for Buy will be as 2009-2010 (buying year) and CII for selling would be 2012-2013 , So there will be double indexation , not triple indexation . When the activity is spread over 3 yrs , then its double indexation . Not sure if I have confused the situation more or less 🙂

        Manish

  5. Dear Ramprakash, yes, you ‘ll get the benefit of indexation for 3FY.

    Thanks

    Ashal

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