Fund homes do not deduct any taxes on capital gains except for investments made by NRIs exactly where TDS is applicable.
I have been investing in ELSS for the previous 5 years. As the lock-in is for 3 years, can I withdraw my 1st year’s investment and reinvest the quantity? —K S Singh Yes, considering the fact that the ELSS investment has completed 5 years, you can withdraw the 1st year’s investment and re-invest it. Long term capital gains tax would be applicable for capital gains of more than Rs 1 lakh in a monetary year. If the re-investment is in an ELSS fund, a fresh 3-year lock-in would be applicable on it. If target is to produce extended-term wealth with equity investments, it is much better to make fresh investments into the portfolio alternatively of withdrawing and re-investing the exact same.
If I withdraw some revenue from my lump sum investments, do I have to calculate the capital gains and spend the quantity or will the fund property deduct the capital gains quantity? —Ramesh Anand Yes, capital gains tax computation and payment (if applicable) on withdrawals of mutual fund investment have to be carried out by the investor. Fund homes do not deduct any taxes on capital gains except for investments made by NRIs exactly where TDS is applicable.
If I withdraw more than Rs 1 lakh from my mutual fund units, do I have to spend capital gains tax? —C R Ranjan For equity, capital gains tax has to be paid on capital gains exceeding Rs 1 lakh and not on withdrawn quantity. For debt, capital gains tax is applicable if the investment has been held more than 3 years, and is taxed at 20% post indexation of charges or at 10% without the need of indexation. If held for much less than 3 years, the gains are added to earnings and taxed at marginal tax price as applicable.
How can I save on expense ratio by investing in a direct program? —Aditya Kapoor A direct program is the one that an investor buys straight from the mutual fund. Since there is no intermediary involved in this transaction, the AMC does not have to spend any commission or trailing charges. If you are investing by means of a bank that is registered as a distributor you are investing in a standard program (with greater expense ratio) and not a direct program (with reduce expense ratio). On the other hand, if the bank is a Registered Investment Advisor the investment could be in the ‘direct’ program.
The writer is director, Investment Advisory, Morningstar Investment Adviser (India). Send your queries to