How To Reduce Tax On Debt Fund Returns With Indexation

Explained How To Reduce Tax On Debt Fund Returns With Indexation No Without the indexation calculation in debt mutual funds, your entire capital gain of ₹20,000 looks taxable. since you had invested in a scheme for more than a year, long term capital gains (ltcg) tax would be applicable. however, with the debt mutual fund indexation, you do not have to pay ltcg for your entire capital gains. The answer is debt funds. two interesting points about using cii numbers to reduce your tax outgo via indexation: if inflation is high during the period between the purchase and sale, then the indexed cost of acquisition of the investment will be higher. this in turn will reduce the capital gains further.

Use Double Indexation To Reduce Tax Outgo On Debt Fund Returns T To calculate your tax liability on debt mutual funds with indexation, you need to follow these steps: identify your holding period for each debt mutual fund investment. if your holding period is less than 36 months, calculate your stcg by subtracting the purchase price from the sale price and add it to your other income. Taxation of debt mutual funds after 1 april 2023. the budget 2023 has brought about certain amendments that imply that a specified mutual fund will no longer receive indexation benefits when computing long term capital gains (ltcg). therefore, debt mutual funds will now be taxed at the applicable slab rates. moreover, indexation benefits will. 2. tax on mutual funds if the fund managers generate capital gains. if the mutual fund’s managers sell securities in the fund for a profit, the irs will probably consider your share of that. The ltcg tax rate for equity mutual funds is 10% of gains in excess of rs. 1 lakh in a financial year. so, in case your total equity gains are rs. 1.1 lakh in a financial year, the 10% tax is applicable only on rs. 10,000 while the remaining rs. 1 lakh of gains is tax free. 2.

Tax Liability In Debt Mutual Funds How To Calculate With Indexation 2. tax on mutual funds if the fund managers generate capital gains. if the mutual fund’s managers sell securities in the fund for a profit, the irs will probably consider your share of that. The ltcg tax rate for equity mutual funds is 10% of gains in excess of rs. 1 lakh in a financial year. so, in case your total equity gains are rs. 1.1 lakh in a financial year, the 10% tax is applicable only on rs. 10,000 while the remaining rs. 1 lakh of gains is tax free. 2. However, the tax will be calculated and payable on the indexed capital gains and not the actual capital gains of rs. 10,000. thus, using the formula for indexation: index purchase price = (cii of the year of sale of units cii of the year of purchase) x (cost of purchase). the indexed acquisition cost = rs.11,066 calculated as (10,000 * 301 272). Indexation is an efficient way of preventing draining of your returns on investments in the form of taxes. indexation is applicable to long term investments, which include debt fund and other asset classes. indexation helps you in adjusting the purchase price of the investments. in this way, you will be able to lower your tax liability.

Debt Mutual Fund Taxation How To Calculate Your Tax Liability In Debt However, the tax will be calculated and payable on the indexed capital gains and not the actual capital gains of rs. 10,000. thus, using the formula for indexation: index purchase price = (cii of the year of sale of units cii of the year of purchase) x (cost of purchase). the indexed acquisition cost = rs.11,066 calculated as (10,000 * 301 272). Indexation is an efficient way of preventing draining of your returns on investments in the form of taxes. indexation is applicable to long term investments, which include debt fund and other asset classes. indexation helps you in adjusting the purchase price of the investments. in this way, you will be able to lower your tax liability.