Do you need to pay tax on capital gains of Rs 2 lakh? | Value Research Read on to find out if your capital gains from mutual funds below Rs 2.5 lakh attract tax liability
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Do you need to pay tax on capital gains of Rs 2 lakh?

Read on to find out if your capital gains from mutual funds below Rs 2.5 lakh attract tax liability

My mother has long-term capital gains of Rs 2 lakh from the sale of mutual funds. She has no other income. Does she have to file an IT return? - Anoop Othayoth

Most individuals are required to file their income tax return by July 31 for the income earned during the previous year. Income tax returns need to be filed only when your gross income (annual income without any deductions) is more than Rs 2.5 lakh in a financial year.

Your gross income can include income from salaries, capital gains, other sources, etc. If your annual total income is less than the Rs 2.5 lakh limit and your only source of income is capital gains from mutual funds, you do not have to pay tax. Rs 2.5 lakh is the basic exemption limit, after which your income gets taxed. Even though you don't have any other income for the period and just capital gains, they are not taxed since your total income is less than the exemption limit.

Further, one must note that capital gains are taxed at a special rate (long-term equity at 10 per cent and short-term equity at 15 per cent). In case there is no other income besides capital gains, the same is adjusted against the basic exemption limit of Rs 2.5 lakh. So, irrespective of the tax treatment on equity-oriented or non-equity-oriented funds, if your income is less than Rs 2.5 lakh, you are not liable to pay tax. But if your total income crosses Rs 2.5 lakh where the only income source is the capital gains from mutual funds, you have to file the income tax return.

Suggested read:
Do you have to pay tax when fund managers sell stocks in a fund?
Tax implications while switching from one scheme to another

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