Cost of
acquisition of Mutual Fund units will be inclusive of stamp duty for capital gains
tax calculation..!
There
has been doubt in the minds of distributors and investors about whether
the cost of acquisition of mutual fund units would come down to the extent of
stamp duty tax deduction for calculating capital gains tax in mutual funds.
Simply put, if your client invests
Rs.10 Lakh in a liquid fund, the fund house will deduct Rs.50 and allocate
units against the remaining amount i.e. Rs.99,950 . Now, many distributors and
investors believe that the new cost of acquisition will be Rs. 99,950 for the calculation of capital gains tax in
mutual funds.
However, Mutual Fund officials have
clarified that that cost of acquisition of Mutual Fund units will be inclusive
of stamp duty tax for the calculation of capital gains tax. In the above
example, the actual cost of acquisition for calculation of capital gains tax is
Rs.1 Lakh Mutual fund officials say that
there is no mechanism to calculate capital gains tax after deducting the stamp duty
amount from the cost of investments.
From July 1, 2020, the cost of
investment in mutual funds has gone up for investors due to the incidence of
double stamp duty taxation.
Simply put, mutual fund investors
will have bear the burden of stamp duty tax twice – at investor level (when he
purchases MF units) and at portfolio level (when the fund manager executes
transaction). While the first taxation will be levied upfront, it will be
adjusted to scheme’s TER in the second instance.
Mutual fund officials say that introduction
of stamp duty will affect short term investors because the stamp duty tax is
levied at the time of issuance of units. However, if holding period is more,
say 3 years, the impact will be miniscule, say officials.
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