Effective 1 April, your equity mutual funds and direct equity investments will attract 10% long-term capital gains (LTCG) tax on gains exceeding Rs1 lakh a year. Although many financial experts say that the impact on retail investors won't be much (it could be a dent for high networth individuals though), how does one calculate the LTCG? Help is at hand.
Computer Age Management Services (Cams; one of the largest registrar and transfer agents of the Rs22 trillion Indian mutual fund industry) is giving two statements.
When Budget 2018 introduced LTCG tax, it said gains till 31 January 2018 will be grandfathered (there would not be any LTCG tax on them). But gains made after that day would attract the LTCG tax. There were two problems with this. One: You have to ascertain the net asset value (NAV) of 31 January 2018 to calculate the grandfathered gains and to also see whether you have any further gains left from the mutual fund investments, for the period between 1 February 2018 till the time you withdraw. Two: the process of calculating LTCG tax has become cumbersome. You need to calculate the lower of the sale price and 31 January 2018 value, and then the higher of this value versus the actual cost price. Not only will it be difficult to get the 31 January 2018 value later (think about a sale you may make, say, 3 years later), you will also have to compute these three figures.
Two statements
Towards end of last week, Cams started giving two statements, which will help mutual fund investors know their LTCG tax. The first statement tells you the NAV and the total value of all your equity-oriented funds as on 31 January 2018. This is just a valuation statement for your existing equity investments. You can get it anytime by placing a request through Cams' website (just give your email and permanent account number). This statement helps you ascertain your LTCG or losses if you decide to sell your units.
The second statement tells you your gains or losses, after taking into account the grandfathering clause after you actually sell your units. Although it tells you which gains were exempted and which weren't, all you need to look at is the final tally of the capital gains or losses to ascertain if you need to pay tax. Both these statements are available for Cams' serviced funds only.
Cams as well as Karvy Computershare Pvt. Ltd (the other of the two biggest R&Ts) provide mail back services to investors of fund houses they service whereby they provide various statements, such as capital gains calculation statements, common account statements, transaction history, and so on. Karvy Computershare and other R&Ts are expected to soon start giving the 31 January statements.
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