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TAX IMPLEMENTATION |
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DBS Cholamandalam Asset
Management Ltd.
27th Floor, Unit 1,
World Trade Centre, Centre 1
Cuffe Parade.
Mumbai – 400 005. |
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Debt Schemes: |
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Dividends |
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Though an investor doesn’t have to pay tax on dividend, he pays it
indirectly. This is because the government has levied dividend
distribution tax of 14.1625 percent* for individual mutual fund
investors and 22.66 percent* for corporate mutual fund investors.
This tax is paid by the mutual fund directly to the government
before making the dividend payout. |
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Capital gains |
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If an investor holds on to his mutual fund investment for more than
one year, it is considered to be a long-term capital asset and vice
versa. Sale of a long-term capital asset attracts long-term capital
gains or losses and sale of a short-term capital asset attracts
short-term capital gains or losses. Long-term capital gain on sale
of your mutual fund investment attracts tax at 20 percent* with
indexation benefit or 10 percent* without indexation benefit.
Indexation is simply using the cost inflation index tables published
by the government to increase your investment cost to the extent of
inflation. Short-term capital gain is taxed at the tax rate
applicable to your total income. While long-term capital losses can
only be set off against long-term capital gains, short-term capital
losses can be set off against, both, short-term capital gains as
well as long-term capital gains. There is no securities transaction
tax on debt funds. |
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Equity Schemes |
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Dividends |
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Dividends received from equity schemes of mutual funds (i.e. schemes
with equity exposure of more than 65%) are completely tax-free for
the Investor. |
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Capital gains |
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Long-term capital gain is completely tax-free in case of investment
in equity mutual funds. Securities transaction tax of 0.25% is being
levied on all redemptions (including switch outs) in equity mutual
funds. Short-term capital gains are taxable at 10 percent*. Since
long-term capital gain is tax-free, long-term capital loss will not
be available for set off against capital gain. Short-term capital
loss will, however, be available for set-off against short-term
capital gain.
* plus surcharge @ 10% of the tax
as applicable and education cess @ 2% of tax plus surcharge and
secondary and higher education cess @ 1% of tax plus surcharge as
per the Income Tax Act. |
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SECTION 80C |
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The DBS Chola Tax Saver Fund, is launched as an Equity Linked Tax
Savings Scheme under Section 80C(2)(xiii) of Income Tax Act 1961.
Thus, individuals and HUFs will be entitled to deduction from their
Gross Total Income as provided under clause (xiii) of section 80C(2)
of the Income Tax Act, 1961 for subscription to any units not
exceeding Rs. 100,000/ - in a year, depending upon the gross total
income of the assessee. The deduction is available only if the
investment is made out of income chargeable to tax. |
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