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Time of Capital Gains

Mr. G. Kumar invested in Reliance Growth & then redeemed his investment within a year. He wants to know which date to consider & how to compute his taxes

I invested Rs 10,000 in the Reliance Growth (G) on October 1, 2006. I redeemed my investment on September 28, 2007. I received Rs 15,000 by direct credit on October 3, 2007. Which date will be considered for capital gains computation - the redemption date or the date I received the money in my bank account?
-G. Kumar


In case of mutual funds, short term capital gains tax is applicable when investment is held for a period less than 1 year. When the holding period exceeds one year, the tax on gains is termed as long term capital gains tax. As Reliance Growth is an equity oriented fund, you would be liable to pay short term capital gains tax of 10 per cent on the gains of Rs 5,000.

For the purpose of computation, the date of redemption is to be considered and not the date when you receive the redemption amount by cheque or direct bank credit. As the fund was held for a period less than a year, you should disclose the fact in your income tax return and pay tax of Rs 500 (plus surcharge) accordingly.



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