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If the investor needs to modify schemes, he’s obligated to pay capital positive factors tax. There are two methods an investor can swap schemes. A method is by redeeming models themselves after which investing the quantity in one other fund, and the opposite is by requesting the fund home to modify schemes.
Even when the brand new scheme is from the identical fund home, the investor has to pay the capital positive factors tax. Switching funds is taken into account as redemption as we’re exiting the unique funding. The tax quantity will depend on the kind of fund – if the outdated scheme was an fairness fund or a non-equity fund.
An fairness fund, if held for multiple 12 months qualifies for long-term capital positive factors. If buyers’ acquire is greater than Rs 1 lakh, they need to pay 10 per cent as tax. If the holding interval is a 12 months or much less, then the positive factors are termed as short-term capital positive factors and are taxed on the fee of 15 per cent.
In case of a non-equity fund, if the holding interval is lower than three years, the positive factors are termed as short-term capital positive factors. They’re added to the revenue and taxed as per the investor’s revenue slab. If the holding interval is greater than three years, it’s counted as a long-term capital acquire and is taxable at 20 per cent after indexation.
Recommended watch: When ought to I alter mutual fund schemes?
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