Tax Information & Services
Every mutual fund investor must have the requisite knowledge about the taxability of their investments and the income earned on them. Every year the tax rules and regulations are changed as per the the amendments made in the Finance Act. For the financial year 2017-18 the income earned on mutual fund investments are taxable as per the applicability of the rules which can be understood hereunder.
In order to understand the taxability of the income earned from mutual funds, it is divided into two forms. One, Capital Gains, which is attained in the growth plans or when the funds are redeemed, sold, or stopped; and second, Dividend Income, which is earned on a regular basis. The two different types of funds, i.e., equity-oriented funds and debt-oriented funds have different tax regulations which are explained as under:
| Type of Investment | Equity-Oriented Schemes | Debt-Oriented Schemes |
|---|---|---|
| Short-Term | Growth Plan: 15% + 3%= 15.45% | Growth Plan: Profits fully taxable added to the total taxable income and taxed as per the slab rates applicable on the individual. |
| Dividend Plan: Income earned from dividend is fully exempt from taxes. | Dividend Plan: Investors need not pay taxes on the income earned from dividend plan debt schemes. | |
| Long-Term | Growth Plan: Capital gain on equity investments in India in the long-term is tax-free | Growth Plan: Capital gain in this case shall be chargeable to tax at the lowest of the following two rates: 1. 10% rate without indexation 2. 20% with indexation* |
| Dividend Plan: Dividend earned on the long-term equity investments in India is exempt from tax. | Dividend Plan: Investors gaining dividend income in the long run have no tax liability. |
*Indexation is a technique used to diminish the inflation effect on the value of investments in order to compute the net income earned on investments as per the current rate of inflation.
Dividend Distribution Tax
The dividend received are not taxable in the hands of the investors, but the mutual funds are liable to pay the dividend distribution taxes, i.e., DDT. This tax amount is payable at the end of the mutual fund only and investors cannot be held liable for the same. The rates of DDT applicable for the financial year 2017-18 are as under:
In the case of Money Market & Liquid Funds:
DDT= 25% + 12% + 3%= 28.84%
In the case of other Debt Funds:
DDT= 12.5% + 12% + 3%
Securities Transaction Tax
Securities Transaction Tax(STT) is charged on every transaction whether sale or purchase made by the investors in relation to the securities listed on the stock exchange. In the case of mutual funds, the STT is chargeable only at the time of redemption, switch or sale of units in mutual funds.the rates applicable for the same are as under:
| Transaction | Rate of STT | Payable By |
|---|---|---|
| Purchase of equity mutual fund units. | NIL | - |
| Sale of equity mutual fund units (delivery based) | 0.001% | Seller |
| Sale of equity-oriented mutual fund units (non-delivery based) | 0.025% | Seller |
| Sale of units of an equity-oriented fund to the Mutual Fund | 0.001% | Seller |
Income Tax Slabs :
For the financial year 2017-18, the Income Tax Slab for Individual Less Than 60 Years & HUF Assessee :
| Total Income | Tax Rate |
|---|---|
| Up to Rs.2,50,000 | NIL |
| Rs.2,50,001 - Rs.5,00,000 | 5% |
| Rs.5,00,001 - Rs.10,00,000 | 20% |
| More Than Rs.10,00,000 | 30% |
- 10% surcharge where income is in the range of Rs.50 Lakhs to Rs.1 Crore.
- 15% surcharge where income is more than Rs.1 Crore.
- 3% education surcharge on income tax and surcharge.
Income Tax Slab for the Senior Citizens Having Age More Than 60 Years But Less Than 80 Years :
| Total Income | Tax Rate |
|---|---|
| Up to Rs. 3,00,000 | NIL |
| Rs.3,00,001 - Rs.5,00,000 | 5% |
| Rs.5,00,001 - Rs.10,00,000 | 20% |
| More Than Rs.10,00,000 | 30% |
- 10% surcharge where income is in the range of Rs.50 Lakhs to Rs.1 Crore.
- 15% surcharge where income is more than Rs.1 Crore.
- 3% education surcharge on income tax and surcharge.
Income Tax Slab for Super-Senior Citizens Having Age More Than 80 Years :
| Total Income | Tax Rate |
|---|---|
| Up to Rs.5,00,000 | NIL |
| Rs.5,00,001 - Rs.10,00,000 | 20% |
| More Than Rs.10,00,000 | 30% |
- 15% surcharge where income is more than Rs.1 Crore.
- 3% education surcharge on income tax and surcharge.