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Reliance Mutual Funds and Taxes
Welcome to Reliance Mutual Fund
Liabilities? Taxes? TDS? Presenting the answers to the frequently asked questions about the legal aspects in mutual fund investment. An easy-to-understand guide with important information that will help you understand the process and plan your investments better.
- What is the tax liability on receipt of income distributed on mutual fund units?
As per Section 10(33) of the Income Tax Act, 1961 (“Act”) income received in respect of units of a mutual fund specified under Section 10(23D) is exempt from income tax in India and the mutual funds are subject to paying distribution tax in debt-oriented schemes. Hence all the dividends are tax-free in the hands of Non-Resident Investors and no Tax Deduction at Source (TDS) is applicable on the same.
- What is the tax liability on redemptions? What is the rate of Tax Deduction at Source for NRIs/Persons of Indian Origin (PIOs)? What is the tax-rate on capital gains for NRIs/PIOs?
Under Section 2(42A) of the Income Tax Act, units of the scheme held as a capital asset, for a period of more than twelve months immediately preceding the date of transfer, will be treated as a long-term capital asset for the computation of capital gains – thus attracting long-term capital gains tax rate. In all other cases it would be treated as a short-term capital asset and would attract short-term capital gains tax rate. Hence depending on the period of investments, long-term or short-term capital gains and tax thereon are applicable on redemptions.
| Type of Schemes |
Nature of Income |
Rate |
| Equity-oriented Schemes |
Short-term capital gains |
Capital gains tax at 15%* (applicable to all investors including Foreign Institutional Investors) |
| Long- term capital gains |
No capital gains tax payable by any investor. |
| Other Schemes |
Short-term capital gains |
- In case of FIIs, 30%*
- In case of other, taxed at normal tax rates
(as explained in Note 1). |
| Long- term capital gains |
- In case of FIIs, 10%* (without indexation)
- In case of others, 20%* (with indexation) or, 10%* (without indexation), whichever is less.
| * The said tax rate would be increased by an applicable Surcharge and Education Cess.
- Is there any tax liability on switching from one option to the other?
Yes. On switching from one option to the other option, the investor is liable to capital gains tax and TDS at the applicable tax rate.
- Is Securities Transaction Tax applicable to NRI investors?
Yes
| Sr.No. |
Taxable Security Transaction |
Rate |
| 1 |
Purchase of an equity share in a company or a unit of an equity oriented fund, where (a) the transaction of such purchase is entered into in a recognized stock exchange; and (b) the contract for the purchase of such share or unit is settled by the actual delivery or transfer of such share or unit |
0.125% |
| 2 |
Sale of an equity share in a company or a unit of an equity oriented fund, where (a) the transaction of such sale is entered into in a recognized stock exchange; and (b) the contract for the sale of such share or unit is settled by the actual delivery or transfer of such share or unit |
0.125% |
| 3 |
Sale of a derivative, where the transaction of such sale is entered into in a recognized stock exchange |
0.017% |
| 4 |
Sale of unit of an equity oriented fund to the Mutual Fund |
0.25% |
- Where can an investor get the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000 and Schedule 5 thereof?
Investors can visit Reserve Bank of India’s (RBI) website http://www.rbi.org.in for all the details.
- What is the proof for Tax Deduction at Source?
A TDS certificate is issued in the name of the investor mentioning the details of the transaction and the tax deducted. The TDS certificate is commonly known as Form16 A.
- When will the TDS certificate be issued?
A TDS Certificate in Form 16A is dispatched in the month following the redemption date to the registered address of the investor. To obtain a duplicate TDS certificate, an investor can write a letter to the Registrar or the Asset Management Company quoting the folio number requesting for a duplicate TDS Certificate.
- Is the indexation benefit available to NRIs?
Yes, in case the units are held for more than twelve months i.e. on long-term capital gains for debt schemes only.
- Are mutual fund units chargeable to Wealth Tax?
No. Units issued to investors (including NRIs) etc. are not treated as assets as defined under section 2(ea) of the Wealth-Tax Act, 1957 and hence are not liable to wealth tax.
About us
Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group (R-ADAG) is one of the fastest growing mutual funds in the country. Reliance Mutual Fund offers investors a well-rounded portfolio of products to meet varying investor requirements. Reliance Mutual Fund has a presence in over 80 cities across the country, an investor base of over 2 million and manages assets over Rs. 26,314 crore as on June 30, 2006 (Source: www.amfiindia.com).
Reliance Mutual Fund constantly endeavours to launch innovative products and customer service initiatives to increase value to investors. Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Ltd., a wholly-owned subsidiary of Reliance Capital Ltd.
Reliance Capital Ltd. is one of India’s leading and amongst the fastest growing private sector financial services companies, and ranks among the leading private sector financial services and banking companies, in terms of net worth. Reliance Capital Ltd. has interests in asset management and mutual funds, life and general insurance, private equity and proprietary investments, stock broking and other financial services.
Sponsor: Reliance Capital Limited.
Trustee: Reliance Capital Trustee Co. Limited.
Investment Manager: Reliance Capital Asset Management Limited.
Statutory Details:The Sponsor, the Trustee and the Investment Manager are incorporated under the Companies Act 1956.
General Risk Factors:
Mutual Funds and securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on the factors and forces affecting the capital markets. Past performance of the Sponsor/AMC/Mutual Fund is not indicative of the future performance of the Scheme. The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond their initial contribution of Rs.1 lakh towards the setting up of the Mutual Fund and such other accretions and additions to the corpus. The Mutual Fund is not guaranteeing or assuring any dividend/bonus. The Mutual Fund is also not assuring that it will make periodical dividend/bonus distributions, though it has every intention of doing so. All dividend/bonus distributions are subject to the availability of distributable surplus in the Scheme. For scheme specific risk factors, please refer to the provisions of the Offer Document. Please read the Offer Document carefully before investing.
Only for Non-Resident Indians.
For more information contact your financial advisor.
Rep. Office:
Reliance Capital Asset Management Limited,
P.O. Box 124296,
603, Al Mussalla Towers (Office Complex),
Khalid Bin Al Waleed Street (Bank Street) Dubai, United Arab Emirates,
Tel. No.: 00971-4-3971120.
Email: nri@reliancemutual.com
www.reliancemutual.com
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