September 30, 2010 4:40 am
I am planning to invest in Debt fund like Reliance Medium Term-G for a period of 6 months and less than 1 year. Would there be any tax applicable for the gain?
Do share any more information on Debt funds which might be useful.
No, only equity funds are that lucky 🙂
But shouldnt it be tax free after 1 year of holding?
MIPs comes under debt category. Same taxation will be applied as shown above,
Is there tax implication for debt based mutual fund like mip if they are sold after one year period?
Yes if you are selecting growth option – short term capital gains will be added to your income. So depending on your tax slab (20% or 30%) – tax will be applicable.
If you are in higher tax slab go for dividend plan(payout or reinvestment), there will be 13.84% dividend distribution tax(DDT) but in your hand dividend will be taxfree.
Eg. you invested Rs 1 lakh in DIVIDEND option today & got Rs 1 lakh 1 thousand at the end of 9 months (in between you also got a dividend of Rs 3446 (4000-554) ). If you are in highest tax slab you have to give tax on Rs 1000 @ 30.90% means tax of Rs 309. In this case total tax outflow will be Rs 863 – Rs 554(DDT) + Rs 309(short term capital gain Tax)
But if you will invest in GROWTH option, your short term capital gain will be Rs 5000 & you need to pay tax of Rs 1545(30.9%) on it.
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