Is a capital gain on sale/transfer of units of mutual fund liable to tax? If yes, at what rate?
Section 2(42A): Under Section 2(42A) of the Act, a unit of a mutual fund is treated as short-term capital asset if the same is held for less than 12 months. The units held for more than twelve months are treated as long-term capital asset. Section 10(38): Under Section 10(38) of the Act, long-term capital gains arising from transfer of a unit of mutual fund is exempt from tax if the said transaction is undertaken after October 1, 2004 and the securities transaction tax is paid to the appropriate authority. This makes long-term capital gains on equity-oriented funds exempt from tax from assessment year 2005-06. Short-term capital gains on equity-oriented funds are chargeable to tax @15% (plus education cess). However, such securities transaction tax will be allowed as rebate under Section 88E of the Act, if the transaction constitutes business income. Short-term capital gains on debt-oriented funds are subject to tax at the tax bracket applicable (marginal tax rate) to the investor. Lon
