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Do I need to show my capital gains from SWP in IT returns even if they are tax free

I have a query regarding tax implication of MF. Every financial year I used to file my tax paper through a Chartered accountant in my home town. As I am a retired Senior citizen during my filing I am providing the complete details of my investments like FD, Post office Deposits, NSC etc, due to the decrease of FD interest rate I started some MF through CAMS in the direct plans. I choose my MF based on the articles I saw in ADVISORKHOJ. I would like to opt SWP once the fund completes one year for avoiding capital gain tax. My question is next financial year while filing my tax paper whether I want to mention my MF investment return? Please clarify?

Aug 22, 2016 by P.K. Saseedharan, Palakkad  |   Mutual Fund

Thanks for the kind words about Advisorkhoj. Glad that you follow our articles which helps you in taking your financial decision and mutual fund selection.

For retired people like you, SWP is a strong tool to get regular return from your investments. The capital gains (if you are withdrawing after 12 months) arising from SWP withdrawals from Arbitrage, Balanced and Equity funds are totally tax free in the hands of the investors.

You must show all the capital gains – Short term and long term – even if they are tax free, while filing your Income Tax return. The rule is that, first, you will have to show all your income from different sources – like, pension, interest on fixed deposits, interest on postal savings, interest on savings bank account, dividends from shares and mutual funds, rental income, capital gains from shares and mutual funds etc. and so on. Once you have shown the total income/ gains under different heads you can claim exemptions applicable to different income heads and then pay the final tax after adjusting your savings under section 80C of the Income Tax Act 1961.

Therefore, you should show capital gains arising out of the SWP withdrawals even if these are long term in nature and tax free.

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