Hello all, I have a query related to the way taxation works as a mutual fund, vs a person copying the same rebalancing
Assuming that over the year it has many rebalancing done, I assume as an individual, one has to pay LTGC / STGC based on the net gains and duration of holding
My question is if its done by mutual fund, why such taxes aren’t applicable?
How can retail people work like a mutual fund and only pay taxes when Units are completely redeemed?
Because it is a mutual fund, so it is exempt from such taxes, including taxes to be paid on dividend
By investing in mutual funds
or by establishing own Mutual Fund
it is because, Mutual fund is not end user. Investor is,
Tax is calculated when investor redeems units. This tax is exactly similar to what investor would have been taxed for profit (or loss) form his similar value stock profit (or loss).
Any materials for this please
Oh makes sense, thanks
Yeah I understand, the point is I want to rebalance according to my wish (not withdraw to bank account) stay invested but prevent paying CG Taxes
One of the many use case – Say a mutual fund A has 50 stocks, I’m only interested in 40 of them. So I invest in the 40 and then mimic the fund house
I don’t want to invest in the other 10 stocks picked by the fund house because they are stupid investments in my view
Can you comment on what could be done?
Nothing can be done.
Either you trust MF, invest with them and get relevant tax benefits during rebalance / dividends.
OR you don’t trust fund manager, invest in direct equity, and pay tax as direct equity investor.
Unfortunately there is no way to get best of both worlds.
Hey @Krishnakumar,
If you sell and buy stocks over the year, you will have to pay tax on STCG and LTCG as and when applicable.
However, in the case of mutual funds, the same will be taxable when the units are redeemed.
This is how the tax laws are applicable currently and further details are rightly mentioned by @Akash_Shah.
Hope this clarifies.
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