This is another post from the Suggest a Topic page, and this time weâ€™re going to take a look at how capital gains â€“ short term and long term as well as dividend distribution taxes are charged on shares, equity mutual funds, debt mutual funds, and Gold ETFs.
The way I have gone about creating this list is to look at the tax section of various mutual funds, and then refer back to the relevant act.
In a few cases Iâ€™ve been unable to make heads or tails of the act so I have not linked back to the act in those cases.
The most helpful page to get started was the UTI Tax page which has laid out the mutual fund taxation in very good detail. You can find similar pages on all mutual fund websites, but Iâ€™m linking to them because I found them quite useful.
Before you go on to read the table I should remind you that Iâ€™m not a tax expert and while this table can serve as a good starting point you shouldnâ€™t file taxes just based on this!
|Asset Class||Classification as Short term or Long term||Long Term Capital Gains||Short Term Capital Gains||Dividend Distribution Tax|
|Shares||Less than a year is short term and more than a year is long term||Exempt under section 10 (38)||15% under section 111A||15% Under Section 115 â€“ O|
|Equity Mutual Fund||Less than a year is short term and more than a year is long term||Exempt under section 10 (38)||15% under section 111A||Exempt under section 115 R|
|Debt Mutual Fund||Less than a year is short term and more than a year is long term||10% without indexation or 20% with indexation whichever is lower plus surcharge and cess||Gains taxed on investorâ€™s slab.||12.5% under section 115 R|
|Money Market Funds & Liquid Funds||Less than a year is short term and more than a year is long term||10% without indexation or 20% with indexation whichever is lower plus surcharge and cess||Gains taxed on investorâ€™s slab.||25% under section 115 R|
|Gold ETFs||They are treated exactly like Debt Mutual funds.|
You donâ€™t pay the dividend distribution tax â€“ the company or the mutual fund pays that, but it still reduces the amount of income you will get so I have included it here. Dividends are not taxable in your hand since such tax has already been paid by either the company or the mutual fund.
The original question also touched upon how someone with multiple transactions could keep track of the taxes, and calculation, but Iâ€™m afraid I donâ€™t have any input on that.
Please do let me know if you see any errors or have any other comments!
41 thoughts on “Capital Gains and Dividend Taxes on Shares and Mutual Funds”
I have received dividend on MF in February 2014 and sold the units in May 2014 and made some profit. Do I have to consider this as STCG and pay tax @15% on this profit? Please advise.