The NAV on 31 January 2018 = Rs 60.
The investment amount = Rs 60 * 6000 = Rs 3,60,000.
The NAV on 09 August 2019 = Rs 80
Your investment amount = Rs 80 * 6000 = Rs 4,80,000
The value of capital gains considered for taxation = Rs 4,80,000 – Rs 3,60,000 = Rs 1,20,000.
You have Rs 1 lakh per year exempted from long-term capital gains
tax. You have to pay LTCG tax only on Rs 20,000 at the tax rate of 10%
which translates to Rs 2,000.
How to manage LTCG tax on Equity Funds
The introduction of the tax on long-term capital gains (LTCG) on
equity-oriented funds should not deter you from investing in equity
funds. You can still build wealth in a stress-free manner. Depending on
the manner in which you do the equity mutual fund investment, you can
easily reduce the effect of the LTCG tax on your returns considerably.
These tips will help you to face the challenge in a streamlined way:
Ensure a complete understanding of the equity fund scheme
before making an investment decision. This will prevent you from
sticking to the wrong equity funds so that there are no unplanned exits
that attract tax liability. Analyse the fund both qualitatively as well
as quantitatively. In case you find it challenging to make the right
choice, consult a professional financial adviser to reduce the
probability of incurring losses.
Avoid frequent buying and
selling of units of the equity fund. Investing in equity funds should be
looked upon as a long-term investment.
Select only those
equity funds that have a track record of performance for an extended
period (at least five years). This will ensure that the equity funds
have faced both ups and downs of the market resiliently.
It
would be best if you kept in mind that the upper limit of tax exemption
of long-term capital gains is Rs 1 lakh annually. Try to make the best
use of this upper limit effectively by selling the units of the equity
fund that are not meeting your expectations.
Invest in equity
funds from an overall financial planning point of view. Your entry and
exit have to be timed as per your investment horizon and personal goals.
Under
ordinary conditions, equity investments have given a better
inflation-adjusted performance over the long term. Also, owing to higher
after-tax returns, equity funds have performed better than debt funds
over some time.
For more information on this, visit TAXAJ
Posted by Aashima
Team TaxaJ