Stock Analysis, IPO, Mutual Funds, Bonds & More

Does switching from one mutual fund scheme to another attract capital gains tax?

An individual can switch from one mutual fund scheme to another. The money is redeemed and directly reinvested.

Last Updated: Jan 13, 2020, 10.15 AM IST
Getty Images
Capital gains tax for the scheme that is sold, dependd on the period of holding.
In mutual funds investment, when we switch from one fund to another, does it amount to sale and attract capital gains?

Vidya Bala, Co-Founder, PrimeInvestor.in replies, "When you switch from one scheme to another, it is nothing but a sale of one scheme and purchase of another scheme. The only difference is that the money does not hit your bank account. It is redeemed and directly reinvested. So, for all tax purposes, there is a sale— whether it is a switch from regular to direct plan or from an equity fund to a debt fund or vice versa. Capital gains tax for the scheme that is sold, depending on the period of holding, would therefore be applicable. The same holds good for STT for equity funds as well."

My daughter is 21 and wants to pursue higher studies in the US. I am an Indian citizen. Can I take an education loan to fund her studies and claim tax exemption on the interest paid?

Shubham Agrawal, Senior Taxation Advisor, TaxFile.in replies, "Yes, you can avail the interest paid on higher education loan for your daughter as a deduction from your taxable income. It can be done for 8 consecutive years from the year in which you start the repayment or until the interest is fully repaid, whichever is earlier. It does not matter whether the loan is taken for higher studies in India or abroad. The loan should be taken from any bank or financial institution or any approved charitable institutions. Loans taken from friends or relatives don’t qualify for this deduction. Only the interest paid can be claimed under Section 80E."
Click here for all the information and analysis you need for tax-saving this financial year
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

Also Read

Relaxation, clarification on capital gains tax needed in Budget 2020: EY

I am selling a flat I bought in 1989. How should I calculate capital gain tax?

Govt could change holding period for capital gains tax to 2 years: Rajesh Gandhi, Deloitte India

Tax queries: Will switching between mutual fund schemes attract capital gains tax?

Hope capital gains tax and STT will go: Jimmy Patel of Quantum Mutual Fund on Budget 2020

Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links

Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service