Quantum Tax Saving Mutual Fund: Save Taxes

Posted On Friday, Feb 10, 2012

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Winston Churchill had once said, “There is no such thing as a good tax.” The quote still holds true as one of the harsh realities of life is that you need to pay taxes- even on the returns you received from your own investments! Most of us are not aware of these taxes until the last moment and Capital Gains Tax happens to be one of such taxes - a simple yet often ignored tax levied on the return on investment made when you sell an investment that was earlier purchased at a lower price.


Your returns are taxed based on Short term, Long term and the Dividend received.


If the investment is sold within 365 days from the date of purchase (short term in nature), your investments will be taxed based on Short Term Capital Gains Tax. Imagine the NAV of your fund has appreciated to Rs. 15 from the initial NAV of Rs. 10. If you plan to sell your units before it completes a year in the fund and gain profits, a Short Term Capital Gain Tax is implied.


Alternatively, if the investment is sold after 12 months from the date of purchase, the units are considered as long-term capital assets. Any gain arising from such capital assets attracts Long Term Capital Gains Tax.


Let us look at the Capital Gains levied on Quantum’s funds for resident individuals:


Type of Taxation

Asset Class



Equity Funds (QLTEF and QTSF)

Fund of Funds (QEFOF and QGSF)

Debt Funds(QLF)

Gold Fund (QGF)

Index ETF (QIF)

Short Term Capital Gain Tax

Taxed at 15% + Cess as applicable. STT @ 0.001% will be deducted at the time of redemption and switch to the other schemes. QTSF units have a lock-in period of 3 years and hence cannot be redeemed or switched.

Tax Slab + Cess as applicable

Tax Slab + Cess as applicable

Tax Slab + Cess as applicable

Taxed at 15% + Cess as a pplicable. STT @ 0.001% will be deducted at the time of redemption and switch to the other schemes.

Long Term Capital Gain Tax

Tax Free. STT @ 0.001% will be deducted at the time of redemption and switch to the other schemes. QTSF units can only be redeemed after the 3 year lock-in period.

Taxable at 10% without indexation or 20% with indexation whichever is lower + Cess as applicable

Taxable at 10% without indexation or 20% with indexation whichever is lower + Cess as applicable

Taxable at 10% without indexation or 20% with indexation whichever is lower + Cess as applicable

Tax Free. STT @ 0.001% will be deducted at the time of redemption and switch to the other schemes.

Dividend Received

Tax Free

Nil for investor. DDT for income distributed to Individual is 13.519% which is payable by Mutual Fund

Nil for investor. DDT for income distributed to Individual is 27.038% which is payable by Mutual Fund

NA

Tax Free


STT = Securities Transaction Tax. DDT = Dividend Distribution Tax

Indexation helps counteract the erosion in the value of an asset because of inflation. However, it is best if you calculate your taxes with and without indexation to know the ideal method that helps you save more on taxes.


(An Open Ended ELSS with a lock-in period of 3 years)

As a direct to investor mutual fund,we prefer being transparent in all the costs and expenses levied on you including the taxes imposed on Quantum Tax Saving Fund. As an ELSS, Quantum Tax Saving Fund also incurs Long Term Capital Gains Tax but the benefits of investing in Quantum Tax Saving Fund tip the scales of this small tax implication. Let us see how Quantum Tax Saving Fund will help your portfolio.


Unlike other asset classes, the tax benefits in the Quantum Tax Saving Fund are quite impressive! Through the Quantum Tax Saving Fund, you not only get the opportunity to invest in the equity market, but your investments are also eligible for a tax deduction under the Section 80C category. Under this section, you receive a tax deduction from taxable income on a maximum investment of Rs 1 lakh. Suppose you are in the highest tax bracket of 30%, you save a tax of Rs 30,000.


An ELSS has a compulsory lock-in period of three years. Being a long term investment, your investments in the Quantum Tax Saving Fund are also exempt from long term capital gains taxation as well. You are only liable to pay the STT of 0.001% at the time of redemption or switch. The dividends in an ELSS are not taxed under dividend distribution tax either!


If you are looking for an attractive option to save tax, lower your capital gains tax and earn risk adjusted returns from your investments, maybe you should consider adding Quantum Tax Saving Fund (QTSF) to your portfolio.


In addition to the Quantum Tax Saving Fund, you can also look at investing in other tax savings options under Section 80C such as PPFs, LIC premiums, medical insurance etc.


While Long Term Capital Gains Tax can be saved by investing in Section 54EC bonds (notified bonds of NHAI and REC), Short Term Capital Gains taxes have to be paid.


Even if you don`t understand the detailed taxations levied on your earnings, we` re sure you now realize the taxes that otherwise go unnoticed and are prepared to save it.



Risk Factors: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Please visit – www.quantumamc.com/disclaimer to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the scheme`s objective will be achieved and the NAV of the scheme(s) may go up or down depending upon the factors and forces affecting securities markets. Investment in mutual fund units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the Sponsor / AMC/ Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited (AMC). The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

Above article is authored by Quantum.

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