Gains from sale of gold ETFs or gold mutual funds are taxed similarly as that of physical gold

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Updated: October 15, 2019 8:34:28 AM

Short-term capital gains on units held for up to three years are added to investor’s income and taxed according to the applicable slab rate.

sip, mutual funds, SIP purchase instalment, NAV Recently, equity markets have corrected owing to the slowdown in the economy.

If I exit the fund after one year due to market volatility, will I have to pay any exit charges?
—Deepak Kumar

Typically, most funds have an exit load period of less than one year. If you exit a fund post this exit load period, you shall not be subjected to any exit charges. The current market has been volatile given the slowdown in the economy. If you have a long-term horizon, you should stay invested as equities tend perform well over longer periods. You may also look to invest more via an SIP in such a scenario to benefit from buying units which are available at cheaper rates. When market eventually recovers, you are likely to get wholesome gains on your investments.

I am investing through SIP but the gain is very less. Should I stop the SIP?
—Alok Bhan

SIPs are a mode of investment facilitating regular investments, enabling an investor to average out the cost of his investments. Investing via an SIP means a fixed amount is invested in a scheme periodically and investor receives units at the current NAV. If markets rally the NAV increases, and investor gets fewer units for each subsequent SIP purchase instalment. The reverse happens when the market corrects; more units are obtained for the same amount.

When you accumulate units in a correction phase, you are getting more units while prices are down. It is advisable to continue your SIP if you are investing for the long term as you would benefit from buying units cheap.

Recently, equity markets have corrected owing to the slowdown in the economy. You should evaluate the performance of the funds in your portfolio vis-à-vis that of their respective category peers. If a fund has been delivering below average performance on a consistent basis, you may switch to a more consistent one. Please consult your financial adviser for evaluating your portfolio in detail.

Do I have to pay any capital gains tax at the time of withdrawing units from gold exchange traded funds?
—A D Krinhnan

Gains from sale of gold ETFs or gold mutual funds are taxed similarly as that of physical gold. Short-term capital gains on units held for up to three years are added to investor’s income and taxed according to the applicable slab rate. Long-term capital gains on units held for more than three years are taxed at 20.8% (including cess) with indexation benefits.

(The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to fepersonal finance@expressindia.com)

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