Defining Long-term Gains
Mr. Gupta wants to know about the tax treatment on debt funds when held for more than a year
By Research Desk | Sep 29, 2008
If I hold an FMP, a liquid fund, or a debt fund for more than a year, what will be the tax treatment? Please consider dividend as well as growth plans. The tax comparisons on your site assume that liquid funds are held for less than one year (usually true). So, I could not figure this out.
- D. Gupta
Debt funds including Fixed Maturity Plans (FMPs) and liquid funds when sold after 365 days from the date of purchase; then any capital gains/loss made on it would be treated as Long-Term in nature and the investor would be liable to pay Long-term Capital Gains Tax at the time of the redemption of units.
For Long-term investment in Liquid fund we can clearly see that the investors in the growth option would be better-off than the Dividend option. Tax calculation for Long term capital gains for both dividend as well as growth options are as follows: