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Friday, July 25, 2014

Some tax relief for debt fund investors

FM rules out imposition of retrospective long term capital gain tax on debt mutual funds. 

In a partial relief to debt mutual fund investors, Union Finance Minister Arun Jaitley has ruled out imposition of retrospective long term capital gain tax on debt schemes. Simply put, investors who redeemed their debt fund investment between April 1 and July 10 will not have to pay long term capital gain tax on debt funds which was proposed in the Union Budget. 

That means these investors can get erstwhile taxation of 10% without indexation and 20% with indexation for long term capital gain tax.

Addressing the parliament, Jaitley said, “The new tax regime will not be applicable to transaction of sale of units which have taken place between 1 April and 10 July this year.”
Meanwhile, the Minister has announced to implement the proposed changes from July 11, 2014. However, Jaitley has not made any announcement on uniform tax treatment of mutual funds and retirement plans.

In order to end the arbitrage between debt funds and other fixed income instruments, the Finance Minister had proposed to increase long term capital gains tax for debt funds from 10% to 20% and changed the withholding period for long term from 12 months to 36 months. 

Earlier, SEBI had approached the Finance Ministry requesting to reconsider its decision regarding this matter. 

Source: Team CafeMutual
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