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In case if I have to redeem debt funds before 36months then will I have to pay tax

If I invest INR1000000 (Ten Lacs) in my sons name who is major studying in college, in one of the income funds for the expenses of his studies. In case if I have to redeem units before 36months then will he have to pay tax on short term capital gain. He is got no other source of income. Please advise?

Jul 27, 2016 by Nitin, Mumbai  |   Mutual Fund

1. Units held in debt mutual funds for less than 36 months will be treated as short term and will be taxed according to the income tax slab rate your son is falling in. Over and above this 15% surcharge and 3% Cess will be payable. Short-term capital gains will be added to the total income and taxed as per your son’s income tax slab. In case the total income is less than the taxable limit in a particular financial year, then naturally no tax will be payable.

2. In case the units of the debt funds are held for more than 3 years, then it will be treated as long term capital gain and taxed @20% with indexation + 15% Surcharge and 3% Cess will be payable.

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