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In case of short term gains from equity funds do my father need to pay taxes

My apology for circling back to you. I have a question on the structure suggested by you i.e. invest Rs. 3 Lakhs in Liquid Fund to be exhausted fully in 12 months by equated withdrawal and invest rest in SWP with withdrawal starting after 12 months. I have a question which may sound a bit naive (or even stupid!) - please pardon me! Instead of a combination of Liquid Fund + SWP - a) Can I look at only SWP in an Equity Fund or a Balanced Fund (Equity oriented) and start withdrawal from the first month itself (say Rs. 25000 pm i.e. Rs. 3 Lakhs pa). b) From a taxation angle, this withdrawal will be treated as STCG (< 1 year). c) The total income of my father for the year will be approx Rs. 6 Lakhs (Rs.3.00 Lakhs he presently receives from Bank FDs + Rs. 3.00 Lakhs SWP). d) I can look at investing further in one of the avenues available under Section 80C to cover the excess of Rs. 1 Lakh over and above the exemption limit of Rs. 5.00 Lakhs available to Super Senior Citizens. Am I missing something in the above thought? I shall appreciate your time and feedback on the above?

Jun 5, 2017 by R Kumar,   |   Mutual Fund

No problem with your writing back to us as long as your queries are not resolved/ answered. Please note the following –

A) Yes, you can look at doing SWP from equity or balanced funds. But, what if you do not get the desired returns and still continue to withdraw? There could be capital erosion.

B) The withdrawals will not be taxable – only the gains (if any) made out of each SWP withdrawal will be treated as short term capital gains tax. For example – you have withdrawn Rs 25,000 in a month and say, you made only Rs 2,000 profit in that particular SWP. Therefore, only Rs 2,000 will be treated as short term capital gain tax.

C) As we mentioned in point B, only the gains made out of each SWP are taxable, therefore, the total income of your father will not be 6 Lakhs!

D) Refer point C, as because his income is less than taxable slabs, you need not save for taxes

Refer point B, read this thread to know how to calculate short term capital gain taxes ? https://www.advisorkhoj.com/post-your-queries...

We guess, all the points that you have missed in your query has been answered.

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