The author is a tax and investment expert and can be reached on jainbalwant@gmail.com
The benefit of concessional LTCG tax can be taken only for deep discount bonds, where the rate of interest is not specified. Profits made on shares and mutual funds become taxable only when you sell, transfer or redeem them. Profits from sale of gold ETFs are treated as LTCG if they are sold after 12 months.
I need clarification on the tax treatment on gains from unlisted secured debentures. I am getting a fixed coupon rate of interest on maturity (on cumulative basis). Will this be treated as long-term capital gains (LTCG) with a tax liability of 12.50 per cent or should it be treated as interest income?
Since the coupon rate is specified in the bonds, you will have to offer the income as interest for taxation and the same cannot be treated as capital gains at all.
The benefit of concessional LTCG tax can be taken in respect of deep discount bonds, where the rate of interest is not specified, and only the issue price and the face value is indicated. Even though the interest is being paid at maturity, you can offer the same on an accrual basis. Whatever basis you follow for taxation of interest income, the same has to be followed on a consistent basis.
I had invested a lump sum in Reliance Growth Fund in the growth option in 2010. I have not contributed anything thereafter and want to remain invested for some time more. How will the LTCGs be calculated when I redeem after, say, three years?
Profits made on any capital assets, including investments in shares and mutual funds become taxable only when you sell, transfer or redeem them. Since this is an equity-oriented scheme, and as you intend to sell them only after one year, your investment will become long-term and tax will be payable at 12.50 per cent of the profit after the initial exemption of Rs 1.25.
For the purpose of computing tax at the time of redemption, any profits earned by you before January 31, 2018 will be tax-free in your hand. So, the net asset value (NAV) of the fund on January 31, 2018 will be the cost for computing the profits. I advise you to review the performance of your investment in mutual fund every year against its benchmark and category performance.
Kindly guide me on the tax implications on profits on gold exchange-traded funds (ETFs) and gold saving funds for an individual.
The profits made on sale of gold ETFs, which are listed security, are treated as LTCG if they are sold after 12 months. For gold fund, the duration is 24 months. In both cases, the LTCG will be taxed at a flat rate of 12.50 per cent without indexation. Profits made on sale of gold ETF within 12 months and for gold saving funds within 24 months are treated as short-term capital gains (STCG). Such capital gains have to be included in your regular income and tax shall be payable at the slab rate applicable to you.
The author is a tax and investment expert and can be reached on jainbalwant@gmail.com
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