As a tax payer in the income tax slab of 10%, is it sensible to hold a debt fund for long term as the long term capital gains are taxed at 20% with indexation. Will it not be better to sell it in the short term and pay the applicable tax rate of 10%?
- Pradeep Kumar Arora
You may redeem your investment before the completion of three years. Since you fall in the 10 per cent tax slab, it will help you to save taxes. If you redeem after three years, you will have to pay 20 per cent tax with the indexation benefit.
Applicable to investor falling in 10% tax slab rate
| Redemption before completion of 3 years | ||
| Purchase price | 01/08/2011 | 10000 |
| Redemption | 01/06/2014 | 17000 |
| Short Term Capital Gain | 7000 | |
| Tax@ Marginal tax rate | 0.1 | 700 |
| Redemption after completion of 3 years | ||
| Purchase price | 01/08/2011 | 10000 |
| Redemption | 01/10/2014 | 17000 |
| Long Term Capital Gain | 7000 | |
| Cost of index | 2010-11 | 711 |
| 2013-14 | 939 | |
| Indexed purchase price | 13207 | |
| Long Term Capitla Gain | 3793 | |
| Tax@ 20% with indexation | ||
This article was originally published on October 13, 2015.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
