Investment
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Frequently Asked
Questions
Deduction from total income
Under section 80C of the Act, an assesse, being an individual or HUF, is eligible to claim a deduction upto an aggregate of Rs. 1.5 lacs on account of sums paid as subscription to units of an Equity Linked Savings Scheme.
The expression "Equity Linked Savings Scheme " refers to Equity Linked Savings Scheme, 2005 as notified by the Central Board of Direct Taxes, Ministry of Finance vide notification dated November 3, 2005 as amended vide notification dated December 13, 2005.
Securities Transaction Tax
Under Chapter VII of Finance (No. 2) Act, 2004 the unit holder is liable to pay Securities Transaction Tax (''STT'') in respect of "taxable securities transaction" at the applicable rates. Taxable securities transactions include purchase or sale of units of an equity oriented fund, entered into on the stock exchange or sale of units of an equity oriented fund to the mutual fund.
The seller of units of an equity oriented fund is liable to pay STT (w.e.f. 1st June, 2013) where the purchase and sale is entered into on a recognized stock exchange and the contract for the purchase and sale of such units is settled by actual delivery or transfer of such units.
At the time of sale of units of equity oriented fund to the mutual fund, the seller is required to pay an STT @ 0.001%.
The securities transaction tax paid by the assesse during the year in respect of taxable securities transactions entered in the course of business shall be allowed as deduction under section 36 of the Act subject to the condition that such income from taxable securities transactions is included under the head ''profits and gains of business or profession''.
Wealth Tax
Units held under the Scheme of the Fund are not liable to wealth tax as it has been abolished with effect from financial year 2015-16.
Incomes from Units
There are two types of income received from units
1) Income from capital gains
2) Dividend Income
Taxability of the same are detailed in the questions described further
As per Finance Bill 2020 , DDT has been abolished with effect from April 01,2020.
Gains on transfer / redemption of UnitsGains arising on transfer / redemption of Units as well as switching between schemes will be chargeable to tax under the Act. The characterization of income from investment in securities as ''business income'' or ''capital gains'' will have to be examined on a case-to-case basis.
Gift Tax
The Gift -Tax Act, 1958 has been repealed since October 1, 1988. Gift of units of Mutual fund units would be subject to income-tax in the hands of the donee (receiver of gift). As per section 56(2)(vii), receipts of securities, fair market value of which exceeds fifty thousand rupees, without consideration or without adequate consideration is taxable as income in the hands of individuals / HUFs.
Further the above provision of section 56(2)(vii) shall not apply to any units received by the done.
| a. | From any relative; or |
| b. | On the occasion of the marriage of the individual; or |
| c. | Under a will or by way of inheritance; or |
| d. | In contemplation of death of the payer or donor, as the case may be; or |
| e. | From any local authority as defined in the Explanation to clause (20) of section 10 of the Act; or |
| f. | From any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10 of the Act; or |
| g. | From any trust or institution registered under section 12AA of the Act. |
Relative shall mean:
| i | spouse of the individual; |
| ii | Brother or sister of the individual; |
| iii | Brother or sister of the spouse of the individual; |
| iv | Brother or sister of either of the parents of the individual; |
| v | Any lineal ascendant or descendant of the individual; |
| vi | Any lineal ascendant or descendant of the spouse of the individual; |
| vii | Spouse of the person referred to in clauses (ii) to (vi); |
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Income from Mutual Fund can be divided into 2 parts Capital Gain (increase in value of your investment) or dividends that investors receive on regular intervals if they have opted for dividend plans. So taxation of Mutual Funds in India can be divided in 2 parts Capital Gain & Dividends.
Capital Gain Taxation on Mutual Funds
Capital Gain is appreciation in the value of asset – if you buy something for Rs. 1 Lakh & sell it for Rs. 1.5 Lakh, you have made a Capital Gain of Rs. 50,000. Capital Gains are further divided into short term & long term depending on their investment horizon.
Short Term Capital Gain arises in case of equity oriented schemes if investment is held for 12 months or less or in simple words sold on or before completion of 1 year. In case of other than equity oriented schemes Short Term Capital Gain arises if investment is hold held for 36 months or less or in simple words sold on or before completion of 3 years.
Long Term Capital Gain arises in case of equity oriented schemes if investment is sold after 1 year and in case of other than equity oriented schemes if sold after 3 years.
Mutual Fund Capital Gain Tax further depends on which type of fund it is – Equity or Other than equity.
Mutual Fund Dividend Taxation
"As per Finance Bill 2020 , mutual funds are liable to deduct TDS on dividend income distributed to the investor
This dividend income will be part of taxable income in the hands of the investor"
Capital Gain Taxation on Mutual Funds
Capital Gain is appreciation in the value of asset – if you buy something for Rs. 1 Lakh & sell it for Rs. 1.5 Lakh, you have made a Capital Gain of Rs. 50,000. Capital Gains are further divided into short term & long term depending on their investment horizon.
Short Term Capital Gain arises in case of equity oriented schemes if investment is held for 12 months or less or in simple words sold on or before completion of 1 year. In case of other than equity oriented schemes Short Term Capital Gain arises if investment is hold held for 36 months or less or in simple words sold on or before completion of 3 years.
Long Term Capital Gain arises in case of equity oriented schemes if investment is sold after 1 year and in case of other than equity oriented schemes if sold after 3 years.
Mutual Fund Capital Gain Tax further depends on which type of fund it is – Equity or Other than equity.
Mutual Fund Dividend Taxation
"As per Finance Bill 2020 , mutual funds are liable to deduct TDS on dividend income distributed to the investor
This dividend income will be part of taxable income in the hands of the investor"
| F.Y. 2023-24 | ||
|---|---|---|
| A) TAX ON INCOME DISTRIBUTION (IDCW OPTION) | ||
| INVESTOR | INCOME TAX RATE | TDS |
Resident Individuals / HUF /Domestic Company | Applicable Slab rates + Surcharge as applicable + 4 % Health & Education Cess | 10% (if income distributed is more than Rs.5,000 during Financial Year) |
Non-Resident | 20% plus Surcharge as applicable + 4% Health & Education Cess | 20% plus + 4% Health & Education Cess = 20.80% (applicable surchrge not deducted) |
| B) CAPITAL GAIN TAXATION | |||
| Scheme Name | QLF/QGSF/QEFOF/ QMAFOF/QDBF/QGF (*) ($) | QLTEVF/QTSF/ QIF-Index ETF/ QIESG/QNFOF (**) | |
| Scheme Category | Schemes with less than 35 % investment in Equity Shares | Schemes with more than 65% investment in Equity Shares | |
| Capital Gains | Short Term | Long Term | Short Term |
| Holding Period | Irrespective of Holding Period | More than 12 months | Less than 12 months |
Individuals, Other than Individuals, Domestic Companies, HUF & NRI | Applicable Slab Rates - Maximum 30% ( No Indexation benefit) + Applicable Surcharge + 4% Health & Education cess | Upto Rs.1 Lac - Nil Tax, Above Rs.1 lac - 10% + Applicable Surcharge + 4% Health & Education cess | 15% + Applicable Surcharge + 4% Health & Education cess |
TDS Deducted on NRI Captial Gains | 30% plus Education Cess = 31.20% ( Applicable surcharge not deducted) | 10% plus Education Cess = 10.40% (Applicable Surcharge not considered) | 15% plus Education Cess = 15.60% ( Applicable surcharge not deducted) |
|
| STT @ 0.001% on redemption value in Equity Schemes | |
| Note :- | ||
| Schemes with 35% to 65% Investment in Equity Shares | ||
| LONG TERM | SHORT TERM | |
Individuals, Other than Individuals, Domestic Companies, HUF & NRI | Listed -- 20% with Indexation + Applicable Surcharge + 4% Health & Education cess | Applicable Slab Rates - Maximum 30% (No Indexation benefit) + Applicable Surcharge + 4% Health & Education cess |
NRI | Unlisted -- 10% without Indexation + Applicable Surcharge + 4% Health & Education cess | 30% plus Education Cess = 31.20% (Applicable surcharge not deducted) |
| (*) Considered as Debt schemes as per Income Tax Act | ||
Quantum Liquid Fund (QLF) | Investing upto 100% in Debt securities | |
Quantum Gold Fund ETF (QGF) | Investing upto 100% in physical gold | |
Quantum Multi Asset Fund of Fund (QMAFOF) | Investing upto 95% in domestic Quantum Mutual Fund Debt & Equity schemes (Both Listed & Unlisted) | |
Quantum Gold Savings Fund (QGSF) | Investing upto 100% in Quantum Gold Fund ETF schemes (Listed securities) | |
Quantum Equity Fund of Fund (QEFOF) | Investing upto 100% in domestic mutual fund schemes of other fund house (unlisted) | |
| (**) Considered as Equity Schemes as per Income Tax Act | |
Quantum Long Term Equity Value Fund (QLTEVF) | Investing more than 65% in domestic equities listed on Stock Exchanges |
Quantum Nifty 50 ETF Fund of Fund (QNFOF) | Investing upto 100% In Quantm Nifty50 ETF (Listed) |
($) Applicable for investment done on or after April 01, 2023. For investment done prior to March,31, 2023 the earlier Tax rate would be applicable.
Stamp Duty is applicable @ 0.005% on subscription value of units in all Schemes.
Dividend will be distributed after deduction of the applicable TDS Rates. The dividend income will form part of the total taxable income of the investor.
From April 01,2020 onwards, Mutual Funds are liable to deduct tax on dividend income distributed to investors.
| Status of individual / Company | Base Rate of Tax | Surcharge as a % of Basic Rate of tax (Considering highest tax bracket ) | Education Cess | Effective Rate (including Surcharge & Education Cess) |
|---|---|---|---|---|
| Resident (other than company) | 10% | 0% | 0% | 10% |
| Domestic Company | 10% | 0% | 0% | 10% |
| Non-Residents (Non Corporates not being a firm, cooperative society and local authority ) | 20% | 37% | 4% | 28.496% |
| Non-Residents (Non Corporates being a Firm, cooperative society and local authority) | 20% | 12% | 4% | 23.296% |
| Non-Residents (Corporates) | 20% | 5% | 4% | 21.840% |
Cost-Inflation Index
Cost Inflation Index (CII) is a figure that is announced by the tax authorities each year that represents the impact of the inflation in the economy. This is a figure that will determine the extent of the benefit that the individual will receive on their investments when they sell them and a capital gains tax has to be paid on it.
The cost inflation index (CII) is calculated as shown:
Inflation Index for year in which asset is sold
CII = ------------------------------------------------------------------------
Inflation Index for year in which asset was bought
This index is then multiplied by the cost of the purchase to arrive at “indexed cost”.
For e.g. let’s assume the following ;
| • | A Debt Fund was purchased in FY 2005-06 for Rs. 60 Lacs |
| • | The same fund was sold in FY 2017-18 for Rs. 1.50 Crores |
| • | Cost Inflation Index in FY.2005-06 was Rs.117 and in 2017-18 it was Rs.272 |
272
Rs.60,00,000 X ------ = Rs.1,39,48,717.95
177
Now let us calculate LTCG using indexation
Long Term Capital Gains would be calculated as:-
Capital Gains = Selling Price of an asset – Indexed Cost
i.e. Rs.1,50,00,000 - Rs.1,39,48,717.95 = Rs.10,51,282.05
Therefore tax payable will be 20% (excluding applicable surcharge and cess) of Rs. 10,51,282.05 which comes to Rs.2,10,256.41
Please note that as per the present taxation rules, it is mandatory for resident individuals to apply above indexation method while calculating long term capital gain tax on Debt Funds.
Now let us calculate LTCG without indexation (Applicable only in case of Non Resident Indians (NRIs))
Capital Gains tax would have been as follows:-Capital Gains = Selling Price of an asset – Cost of acquisition
i.e. Rs.1,50,00,000 – Rs.60,00,000 = Rs.90,00,000
Therefore tax payable @ 10% (excluding applicable surcharge and cess) of Rs. 90,00,000 would have come to Rs. 9,00,000 !!
Short term Capital Gains (STCG*)
Long Term Capital Gains (LTCG*)
*Applicability of STCG and LTCG
$ Surcharge at the rate of :
Nil rate when income is less than Rs 50 lakhs
10% shall be levied in case of individual / HUF unit holders where their income exceeds Rs 50 Lakhs to 1 crore
15% shall be levied in case of individual / HUF unit holders where their income exceeds Rs 1crore to 2 crore
25% shall be levied in case of individual / HUF unit holders where their income exceeds Rs 2 crore to 5 crore
37% shall be levied in case of individual / HUF unit holders where their income exceeds Rs 5 crore
$$ Surcharge at the rate of 7% shall be levied for domestic corporate unit holders where the income exceeds Rs 1 crore but less than 10 crores and at the rate of 12%, where income exceeds 10 crores.
*The short term/long term capital gain tax will be deducted (applicable surcharge is not deducted ) at the time of redemption of units in case of NRI investors only.
** STT @ 0.001% will be deducted on equity funds at the time of redemption and switch to the other schemes.
Mutual Fund would also pay securities transaction tax wherever applicable on the securities bought / sold.
^ Assuming the investor falls into highest tax bracket.
| Individual/ HUF $ | |
|---|---|
| Equity oriented schemes ** | 15% + Applicable Surcharge + 4% Health & Education Cess |
| Other than equity oriented schemes | 30%^ + Applicable Surcharge + 4% Health & Education Cess |
| Domestic Company $$ | |
| Equity oriented schemes ** | 15% + Applicable Surcharge + 4% Health & Education Cess |
| Other than equity oriented schemes | 30%^ + Applicable Surcharge + 4% Health & Education Cess |
| NRI *$ | |
| Equity oriented schemes ** | 15% +Applicable Surcharge + 4% Health & Education Cess |
| Other than equity oriented schemes | 30% +Applicable Surcharge + 4% Health & Education Cess |
Long Term Capital Gains (LTCG*)
| Individual/ HUF $ | |
|---|---|
| Equity oriented schemes** | For Listed Securities: 10% Applicable Surcharge + 4% Health & Education Cess The amount of capital gain in excess of Rs 1,00,000/- in a year will be taxable @ 10%, However relief to the extent of capital gains as on 31st January, 2018. |
| For Unlisted Securities: 10% with Indexation + Applicable Surcharge + 4% Health & Education Cess The amount of capital gain in excess of Rs 1,00,000/- in a year will be taxable @ 10%, However relief to the extent of capital gains as on 31st January, 2018 and subject to in a case where the capital asset is an equity share in a company which is: (A) not listed on a recognised stock exchange as on the 31st day of January, 2018 but listed on such exchange on the date of transfer; (B) listed on a recognised stock exchange on the date of transfer and which became the property of the assessee in consideration of share which is not listed on such exchange as on the 31st day of January, 2018 by way of transaction not regarded as transfer under Section 47 | |
| Other than equity oriented schemes | 20% with Indexation + Applicable Surcharge + 4% Health & Education Cess |
| Domestic Company $$ | |
| Equity oriented schemes** | 10% + Applicable Surcharge + 4% Health & Education Cess The amount of capital gain in excess of Rs 1,00,000/- in a year will be taxable @ 10%, However relief to the extent of capital gains as on 31st January, 2018. |
| Other than equity oriented schemes | 20% with Indexation + Applicable Surcharge + 4% Health & Education Cess |
| NRI *$ | |
| Equity oriented schemes**$ | 10% without Indexation +Applicable Surcharge + 4% Health & Education cess |
| Other than equity oriented schemes | 10% without Indexation +Applicable Surcharge + 4% Health & Education cess |
*Applicability of STCG and LTCG
| Applicability in | STCG | LTCG |
| Equity oriented schemes | Units held for 12 months or less | Units held for more than 12 months |
| Other than equity oriented schemes | Units held for 36 months or less | Units held for more than 36 months |
$ Surcharge at the rate of :
Nil rate when income is less than Rs 50 lakhs
10% shall be levied in case of individual / HUF unit holders where their income exceeds Rs 50 Lakhs to 1 crore
15% shall be levied in case of individual / HUF unit holders where their income exceeds Rs 1crore to 2 crore
25% shall be levied in case of individual / HUF unit holders where their income exceeds Rs 2 crore to 5 crore
37% shall be levied in case of individual / HUF unit holders where their income exceeds Rs 5 crore
$$ Surcharge at the rate of 7% shall be levied for domestic corporate unit holders where the income exceeds Rs 1 crore but less than 10 crores and at the rate of 12%, where income exceeds 10 crores.
*The short term/long term capital gain tax will be deducted (applicable surcharge is not deducted ) at the time of redemption of units in case of NRI investors only.
** STT @ 0.001% will be deducted on equity funds at the time of redemption and switch to the other schemes.
Mutual Fund would also pay securities transaction tax wherever applicable on the securities bought / sold.
^ Assuming the investor falls into highest tax bracket.
For NRIs in case of Short Term Capital Gain there will be a TDS (tax deducted at source). Which means Tax will be deducted by Mutual Fund Company before paying redemption (sell) amount.
| Tax is deducted at Source for NRIs as per the below table; | ||
|---|---|---|
| Short term capital gains | Long term capital gains | |
| Equity oriented schemes | 15% + 4% Health & Education Cess = 15.60% | 10% without Indexation + 4% Health & Education cess = 10.40% |
| Other than equity oriented schemes | 30% + 4% Health & Education Cess = 31.20% | 10% without Indexation + 4% Health & Education cess = 10.40% |
Income Tax Slab for FY 2023-24 (AY 2024-25)
Income Tax Slab Rate for New Tax Regime
The following tables show the Revised Income Tax Slabs. These new tax slabs were presented in the Budget 2023. The table for the new tax regime slabs-
| Net Taxable Income | New Tax Regime (Before Budget 2023 - until 31 March 2023) | New Tax Regime (After Budget 2023 - From 01 April 2023) |
| Rs. 0 to Rs. 2,50,000 | NIL | NIL |
| Rs. 2,50,000 to Rs. 3,00,000 | 5% | NIL |
| Rs. 3,00,000 to Rs. 5,00,000 | 5% | 5% |
| Rs. 5,00,000 to Rs. 6,00,000 | 10% | 5% |
| Rs. 6,00,000 to Rs. 7,50,000 | 10% | 10% |
| Rs. 7,50,000 to Rs. 9,00,000 | 15% | 10% |
| Rs. 9,00,000 to Rs. 10,00,000 | 15% | 15% |
| Rs. 10,00,000 to Rs. 12,00,000 | 20% | 15% |
| Rs. 12,00,000 to Rs. 12,50,000 | 20% | 20% |
| Rs. 12,50,000 to Rs. 15,00,000 | 25% | 20% |
| More than Rs. 15,00,000 | 30% | 30% |
Income Tax Slab for People Between 60 to 80 Years
| Net Taxable Income | Rates |
| Rs. 3 lakhs | NIL |
| Rs. 3 lakhs - Rs. 5 lakhs | 5.00% |
| Rs. 5 lakhs - Rs. 10 lakhs | 20.00% |
| Rs. 10 lakhs and more | 30.00% |
Income Tax Slab for People More than 80 Years
Below-mentioned is the Senior citizen tax slab in detail-
| Net Taxable Income | Rates |
| Rs. 0 - Rs. 5 lakhs | NIL |
| Rs. 5 lakhs - Rs. 10 lakhs | 20.00% |
| Above Rs. 10 lakhs | 30.00% |
| PARTICULARS | Direct Plan | SECTION 194Q |
| Purpose | Tax to be collected | Tax to be deducted |
| Applicability | Seller | Buyer/Purchaser |
| Counter party | Resident Buyer | Resident Seller |
| Trigger point | • Turnover/ Gross Receipt/ Sales from the business of SELLER should exceed Rs 10 crore during the year (FY 19-20) (excluding GST) | • Turnover/ Gross Receipt/ Sales from the business of BUYER should exceed Rs 10 crore during the year (FY 20-21) (excluding GST) |
| W.E.F | 1st October, 2020 | 1st July, 2021 |
| Timing of tax deduction | At the time of receipt | Payment or credit whichever is earlier |
| Rates | • 0.1% (0.075% for FY 2020-21) • 1% (If PAN not available) • On amount exceeding Rs 50 Lakhs | • 0.1% • 5% (If PAN not available) • on amount exceeding Rs 50 Lakhs |
| Not applicable to | • Transaction on which TDS/TCS is applicable under other provisions of the act and the same has been complied with (Meaning thereby; in a situation where TDS has been deducted u/s 194Q this section will not apply) | • Transactions on which TDS is applicable under other provisions of the act • Transactions on which TCS is applicable under 206C other than 206C(1H) |
| Form | 27EQ | 26Q |
| Certificate to be issued to seller/buyer | Form – 27D | Form – 16A |
| Sr. No | Buyer's Turnover | Seller's Turnover | Transaction Value` | Applicability of Section |
| 1 | 5 cr | 11 cr | 55 lakhs | 206C (1H) - Seller will collect TCS |
| 2 | 15 cr | 7 cr | 58 lakhs | 194Q - Buyer will deduct TDS |
| 3 | 12 cr | 13 cr | 54 lakhs | 194Q - Buyer will deduct TDS |
| 4 | 7 cr | 5 cr | 58 lakhs | None |
| 5 | 12 cr | 15 cr | 45 lakhs | None |
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