An abridged or shortened version of offer document is key information memorandum (KIM). It is attached along with the application. First time investors should compulsorily go through it before investing.
TAX ASPECTS OF MUTUAL FUNDS:
(1) Mutual funds do not pay tax on the income they earn; they are fully exempt from tax.
(2) An investor who holds units for 12 months or less than that and if on selling them he gains a profit then he gets a short term capital gain. And he will be taxed at a marginal rate of tax.
(3) An investor who holds the units for a period of more than 12 months has to pay long-term capital gain on those units. However long term capital gain can be indexed for inflation.
INDEXATION:
It refers to updating of purchase price based on cost of inflation index published by central board of direct taxes.
Formula: purchase price x (index price in year of sale/index price in the year of purchase)(4) Investors can pay 10% tax on capital gain without indexation or 20% tax on capital gain after indexation inclusive of surcharge which ever is low.
TAX ASPECTS OF MUTUAL FUNDS:
(1) Mutual funds do not pay tax on the income they earn; they are fully exempt from tax.
(2) An investor who holds units for 12 months or less than that and if on selling them he gains a profit then he gets a short term capital gain. And he will be taxed at a marginal rate of tax.
(3) An investor who holds the units for a period of more than 12 months has to pay long-term capital gain on those units. However long term capital gain can be indexed for inflation.
INDEXATION:
It refers to updating of purchase price based on cost of inflation index published by central board of direct taxes.
Formula: purchase price x (index price in year of sale/index price in the year of purchase)(4) Investors can pay 10% tax on capital gain without indexation or 20% tax on capital gain after indexation inclusive of surcharge which ever is low.
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