The Union Budget of 2018 made a significant change in taxation of equity mutual funds. Long Term Capital Gains on equity funds, which had been exempt since 2004, were made taxable once again.
With the new rule, a tax of 10% will be payable on long term gains at the time of redemption. There are two key changes here:
- Gains up to Rs. 1 Lakh per annum on all equity investments will be exempt from tax
- Gains accrued up to 31st January 2018 will not be taxed
The second point requires you to know, at any point, how many shares/units you held as on 31st January 2018, and what was its value. Needless to say, this calculation can get really tedious, especially if you redeem units three years down the line.
However, Fundsindia investors do not need to go into the nitty gritties of these calculations. We are now providing capital gains reports complete with all the details and computations.
The new capital gains report is available in the same place as earlier. You need to navigate to My MF Holdings → Reports under the mutual funds section on the website. You will find the capital gains report there. Like it was earlier, you will have two reports, a detailed report and a grouped report.
The detailed report shows the details of individual transactions which resulted in capital gains. It also shows a summary of fund-wise short-term and long-term gains. The grouped report shows the capital gains by asset-class. This makes it easy to differentiate funds which will have differential tax treatment. It also has a summary sheet which shows capital gains separated by advance tax filing dates. This helps you avoid unnecessary interest payment by checking when the capital gains were incurred.
The modified report will include a few more data points wherever relevant. Here is the information that has been added:
- Value of units as of 31st January 2018 – when you sell units which were bought prior to 31st January 2014, the value of those units as on 31st January will be available in the report. This will help you understand exactly how the capital gains were calculated.
- Cost of acquisition for tax purposes – This is the amount that is reduced from the sale value to arrive at the taxable gains. In case of units bought on or prior to 31st January 2018, the cost of acquisition is calculated as the higher of:
- Original cost of acquisition
- Lower of:
- Value of units as on 31st January 2018
- Sale value
The above calculation ensures that while you do not pay tax on profits made till 31st January, you will also not be able to book any notional loss in case the value of your investments fell since 31st January.
- Long term capital gains for tax purposes – this is the final amount on which the tax will be calculated.
All other information which were presented in the report remain the same.
Do note the following points though:
- The capital gains report only shows your taxable gains, it does not show the amount of tax that you need to pay.
- The report does not take into account the exemption of Rs. 1 Lakh. This is because investors may have other equity holdings elsewhere, in mutual funds or shares, as well. Hence, before filing your returns, make sure you deduct the exemption amount from your total gains.
With this update, you don’t need to look anywhere else for your tax filing needs. The Capital gains report will give you all the information that you need.