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Fund schemes' merger and taxation

When you redeem units from a surviving fund scheme, you pay the applicable capital gains tax and STT...

The units of UTI Master Index Fund (MIF) have recently merged into UTI Nifty Index Fund (NIF). I have been investing in the MIF via SIP. After the merger, my SIP is going in Nifty Index fund. Units of MIF have been converted into NIF. Please tell me about taxation of merged schemes.
-Vipin Malaviya

UTI Mutual Fund merged two of its schemes -- UTI Sunder Index fund that tracked the Nifty index and UTI Master Index Fund that tracked the Sensex into UTI Nifty Index Fund in March, 2012. Investors were given the option to exit without paying exit load around the same time.

Your previous investment was in a passively managed equity fund, which merged into a similar passively managed scheme. Every time a scheme is merged, the fund house bears the Securities Transaction Tax (STT) because the merger is a redemption and then a purchase.

Your investments in the surviving fund will be considered a part of the scheme since the effective date of merger. So if you decide to redeem units, you will have to pay the STT on redemption from current scheme.

Long term capital gains tax will be nil on investments older than 12-months but you have to pay Short term capital gains tax on investments that less than 12-months old.



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