Taxation must be assessed before investing in SIP in order to maximize your returns. Dividends paid by mutual funds are added to total income and tax is calculated based on the income tax plate.
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SIP or Systematic Investment Plan is one of the most searched investment terms on the internet. Many investors in the country want to make huge profits by investing money in mutual funds. But this information is not available to everyone. That is why today we inform you about investment funds SIP. Also tell about their scheme of mutual funds in which they invest money VAT is also saved. SIP (Systematic Investment Plan) If you have invested in mutual funds above that, you also get an exemption under 80C. But let us tell you that not all SIPs are exempt under this.
However, before you start investing, tax liability needs to be assessed in order to maximize your returns. The amount of tax payable on investments in SIP depends on whether the capital is invested in equity funds or debt funds, or both. Dividends paid by mutual funds are added to total income, and tax is calculated based on the income tax plate.
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How long does it take to start SIP?
All open ELSS programs give investors the opportunity to invest through SIP. Some fund houses ask to select a date of the month for SIP. To do this, investors must fill out an application form specifying SIP and ECS mandates. Banks typically take 21 to 30 days to register this ECS mandate. You can also start SIP online.
Tax mathematics for investment funds
After taxation, divide the mutual fund into two parts. Equity-oriented funds go in the first part and all other retail funds in the second. If you invest 65% in a listed domestic company, they are equity-oriented schemes. Prizes will not be redeemed for longer than 12 months. In this case, it is considered long-term. If you redeemed the prize within 12 months, then this will be included in the short-term.
Aside from stock-based schemes, all other schemes fall into the second category. These include debt, liquid short-term debt, income funds, government bonds, fixed-term plans. It also includes Gold ETF, Gold Savings Fund, International Fund. Investments in this category become long term when they are 36 months old and if sold before 36 months they are considered short term.
If you invest via SIP or STP, each SIP/STP is considered a new investment. Here we see the share allocation date for tax purposes. The blocking period is based only on the grant date of the shares.
Suppose you started investing in SIP a year ago. Your first SIP is long-term after one year. Subsequent SIPs will not be permanently connected to the first SIP. The profit of the SWP, i.e. the systematic payout plan, is determined by the first-in-first-out (FIFO) method. In such a situation, the unit purchased first will be taken back first. Shares are held in different demat accounts. In this case, the holding period depends on the respective account entry.
tax on dividends
This amount is tax-free for the dividend recipient. Because the investment fund house already pays DDT (dividend distribution tax).
STCG tax
STCG, ie the short-term capital gains tax, is also calculated in two different categories. Equity-oriented plans are taxed at 15% and gains from funds in other categories are taxed. The profits from these funds count as your regular income. In this case you will be taxed according to your tax rate.
LTCG tax
Long term capital gains up to 1 lakh on an equity based scheme are tax free. After 1 lakh it will be taxed at 10%. A tax exemption for this is only available if the STT (securities transaction tax) is paid.
For equity-oriented funds, the NAV (net asset value) as of January 31, 2018 is taken into account. The indexing benefit is not available for the LTCG Equity program. The funds in the second category are subject to 20% tax.
Capital gain below 80C
Tax exemption is available under Section 80C, 80CCD, 80TTB. A tax exemption against capital gains cannot be claimed in these sections. Can only be taken on the basis of STCG of the second category of funds. Non-residents must pay full tax on the LTCG-STCG.
The discount will be available in Section 87A
12500 tax exemption is available under Section 87A. Rebate can be taken against capital gains. Only an equity-oriented scheme does not receive this benefit at LTCG, and non-residents do not receive this benefit.
what is indexing
Indexing significantly reduces the tax burden. Sometimes the tax is waived altogether. The amount invested is increased in proportion to inflation. If you show more investments, the profit goes down and then the tax liability goes down as well.
