If I move my holdings in mutual funds from regular plan to direct plan, would there be an element of capital gains tax? Further, if I move my holdings in mutual funds dividend option to growth option (to decrease the incidence of tax on the dividends), would there be a capital gain?
Murli Krishnamurthy
Movement of mutual fund holding from regular plan to direct plan or from dividend option to growth option will be regarded as transfer and hence will attract capital gains tax. The amount of capital gain/loss would need to be determined considering type of mutual fund, period of holding and the difference between sale value and cost of acquisition.
Equity-oriented mutual funds held for a period of 12 months or more are categorised as long-term capital assets and the move would result in long-term capital gain/loss.
The writer is Partner, Deloitte India
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