The amalgamation of schemes is not regarded as transfer as per Section 47(xix) of the I-T Act
* Often Mutual Funds close one scheme and amalgate/switch over to another scheme of the same mutual fund, without paying and STT and without any instruction from the investor. However, investor makes LTCG in the process. My queries are: (a) Are these LTCG exempt from tax? If so, does he have to show the gain in exempt Income column in tax returns? (b) Are these cases covered under 10% LTCG although no STT is paid? (c) Are these cases fully taxable at 20% with indexation (holding period one year or three years)?
We are assuming that you are referring to equity-oriented mutual funds. Accordingly, the replies to your queries are below. (a) No, the exemption on transfer of units of equity oriented mutual funds has been withdrawn as per Finance Act, 2018, hence LTCG arising due to the transfer of units of equity oriented mutual funds due to switching from one scheme shall be subject to capital gains.
The amalgamation of schemes is not regarded as transfer as per Section 47(xix) of the I-T Act and there shall not be any capital gains in this case. (b) Yes, these cases will be covered under section 112A, hence LTCG shall be calculated at 10% on the amount exceeding one lakh.
(c) No, these all are eligible to get exemption of 10% under section 112A as indexation benefit is not allowed for equity oriented mutual funds.
* What is the investment period in bonds under Section 54 EC?
The investment period in Section 54EC bonds for saving capital gains tax is within a period of six months from the date of transfer of land or building or both. Investment must be made in specified bonds, like RECI and NHAI, not redeemable before five years and not sold before five years.
* Can I claim capital gains tax losses for losing money in mutual fund?
—Rajiv Kumar Luthra
Assuming that the loss occurred due to sale of MF investments, you can set off the loss against capital gains based upon the nature of capital gain. A short-term loss can be set off against both short-term and long-term gain but a long-term loss can be set off against only a long term gain. It can also be carried forward to the next financial year and set off against respective capital gains.
(The writer is partner, Ashok Maheshwary & Associates LLP. Send your queries to firstname.lastname@example.org)