Hi,
Most answers in forums have a “liable to tax” or “not liable to tax” depending on the SIP type, but I couldn’t find any information anywhere about the calculation.
Assumptions:
1. Pure equity SIP in India
2. Investing Rs. A annually (A/12 monthly) for n years, resulting in a return of rs.F at a CAGR of r%. F falls in the highest income tax bracket (30%) (if this is relevant)
3. n is about 10-15 years. Is it possible to invest for much longer periods for a retirement plan? (say 30-35 years)
Questions:
1. I heard there are no LTCG taxes (I think which apply to longer than 1 year) if it’s pure equity. Are there other taxes I need to consider?
2. I Couldn’t find a concrete relation for how much would remain after getting SIP returns. I am trying to get my financial planning done. Is it naive to assume that income tax is 30% of (F-nA)?
I calculated F as sum of a geometric progression: A+AR+…AR^(n-1) which is a*(R^n – 1)/(R-1), where R = 1+CAGR. (Assuming a CAGR of 12% or 0.12)
Thanks a lot for your help.