The Long Term Capital Gain in mutual funds are going to be taxable (at 10%) from FY18–19 onwards, with an exemption on the first one lakh. The gain is accounted only in the year you make any redemption.
While this has shocked some people, there is not much reason to worry. The average folio size in equities itself is less than one lakh which means the gains will be well below the one lakh exemption limit. So majority of people won’t be impacted by this.
Note that Short Term Capital Gains tax on withdrawals before one year will continue to be at 15%.
A smart investor needs to strategise on how to withdraw in the most tax efficient manner. Such a strategy needs to address how to offset gains in one bucket against possible losses in another thereby making the overall portfolio very tax efficient. Taking the help of a SEBI Registered Advisor can help boost your portfolio returns.
