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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.

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Last Updated: Jan 13, 2020, 10.15 AM IST
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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."
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(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.)

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