Capital Protection Funds Taxation India
Many readers have asked me that, how the capital protection funds are treated for Tax?
In fact, many readers have a misbelieve that, capital protection funds are tax FREE. Well, this is a Myth. The reality is that, capital protection fund are not at all tax free. Basically they are taxed just like the regular debt fund.
Tax treatment for Capital Protection Funds -
Just like debt funds, the long term capital gains are taxed as 10.30% without indexation and 20.6% with indexation whichever is lower.
Basically the debt allocation in capital protection funds is higher than 65% and that’s why they are not treated as Equity funds but debt fund. Whenever, the equity allocation of any fund is more than 75% (I don’t remember exactly that weather it’s 75 or 65..Please confirm it), they are treated as equity funds and the long term capital gains tax (Investments for more than a year time horizon) is NIL in these funds.
Capital protection funds are nothing but a kind of close ended debt funds only and that’s why they are treated as debt funds when it comes to charge a tax.
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