Calculate Tax On Mutual Fund Withdrawal

Capital Gains Tax Formula:

\[ Tax = (Withdrawal - Cost Basis) \times LTCG Rate \]

Tax (INR):

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1. What is Capital Gains Tax on Mutual Funds?

Capital gains tax is levied on the profit earned from the sale of mutual fund units. In India, long-term capital gains (LTCG) from equity-oriented mutual funds held for more than 1 year are taxed at 10% without indexation benefit.

2. How Does the Calculator Work?

The calculator uses the capital gains tax formula:

\[ Tax = (Withdrawal - Cost Basis) \times LTCG Rate \]

Where:

\( Withdrawal \) — Redemption amount received (INR)
\( Cost Basis \) — Original investment cost (INR)
\( LTCG Rate \) — Long-term capital gains tax rate (%)

Explanation: The calculator determines the capital gain by subtracting the cost basis from the withdrawal amount, then applies the specified LTCG rate to calculate the tax liability.

3. Importance of Tax Calculation

Details: Accurate tax calculation helps investors understand their net returns after taxes, plan their investments better, and comply with Indian tax regulations for mutual fund redemptions.

4. Using the Calculator

Tips: Enter the total withdrawal amount in INR, the original cost basis (purchase price) in INR, and the applicable LTCG rate (default is 10% for India). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the difference between STCG and LTCG?
A: Short-term capital gains (STCG) apply to holdings less than 1 year and are taxed at 15%, while long-term capital gains (LTCG) apply to holdings over 1 year and are taxed at 10%.

Q2: Is there any exemption limit for LTCG?
A: Yes, LTCG up to ₹1 lakh per financial year is exempt from tax. Gains above this threshold are taxed at 10%.

Q3: How is cost basis determined for mutual funds?
A: Cost basis is typically the purchase price of the mutual fund units. For multiple purchases, you can use FIFO (First-In-First-Out) method to determine cost basis.

Q4: Are debt mutual funds taxed differently?
A: Yes, debt mutual funds have different holding periods (3 years for LTCG) and tax rates (20% with indexation benefit for LTCG).

Q5: When is the tax payable?
A: Tax on capital gains is payable when filing your income tax return for the financial year in which the redemption occurred.