With effect from April 1, 2018, equity fund investors have to pay a 10 per cent tax on long-term capital gains above Rs.1 lakh per annum. The LTCG made till January 31, 2018, however, remains grandfathered, i.e., those gains remains tax-exempt.
Since most of your clients must be in a process of filling their annual tax returns, they would require capital gains statements on their mutual fund investments to calculate their LTCG tax liability.
You can help your clients with such statements through RTAs like CAMS, Karvy Fintech, Franklin Templeton and Sundaram BNP Paribas Fund Services.
These R&T agents offer a modified capital gain/loss statement that includes LTCG for equity funds and consolidated statement for grandfathered equity schemes. The enhanced or modified capital gain/loss statement allows investors to view their consolidated capital gains/losses across all mutual funds that are serviced by the respective RTAs.
In addition to providing short term and long-term capital gain /loss, the statement also provides the original cost and the net asset value as on 31st January 2018. As the statement is available for perpetuity, investors can access the statement at any time in the future.
While distributors can download long term capital gains statement on behalf of their clients through mailback services offered on CAMS and Franklin Templeton, they can generate such statements on their own by visiting Karvy Fintech and Sundaram BNP Paribas Fund Services websites.
Mailback services help distributors get their business reports in an email. From gross commission statements across to assets under advisory at the fund house level, mailback services take care of all business details.
For CAMS serviced fund houses, distributors can use WBR-91 report. Similarly, distributors can click on queries tab to generate capital gains statement from the dropdown menu on Karvy Fintech website. This option facilitates the download of the capital gain statement for the single folio for selected fund and for selected date and is available in PDF format.
For Sundaram BNP Fund Services, distributors can click on e-statement to download capital gains statement of your clients.
Alternatively, the Central Board of Direct Tax (CBDT) has given four different scenarios to calculate long gains tax on mutual funds.
Let us look at the scenarios:
Scenario 1: Your client has bought an MF unit on November 15, 2016 at Rs.100, its fair market value is Rs.200 on January 31, 2018, and he has sold it on March 31, 2019 at Rs.250. As the actual cost of acquisition is less than the fair market value as on January 31, 2018, you will have to take the fair market value of Rs.200 as the cost of acquisition and the long-term capital gain will be Rs.50 (Rs. 250 – Rs.200).
Scenario 2: Again, your client has acquired MF unit on November 15, 2016 at Rs.100, its fair market value is Rs.200 on January 31, 2018, and it is sold on March 31, 2019 at Rs.150. In this case, the actual cost of acquisition is less than the fair market value as on January 31, 2018. However, the sale value is also less than the fair market value as on January 31, 2018. In such a case, you will have to take the sale value of Rs.150 as the cost of acquisition and the long-term capital gain will be NIL (Rs. 150 – Rs. 150).
Scenario 3: MF unit is acquired on November 15, 2016 at Rs.100, its fair market value is Rs.50 on January 31, 2018, and it is sold on March 31, 2019 at Rs.150. In this case, the fair market value as on January 31, 2018 is less than the actual cost of acquisition, and therefore, the actual cost of Rs.100 will be taken as actual cost of acquisition and the long-term capital gain will be Rs.50 (Rs. 150 – Rs. 100).
Scenario 4: MF unit is acquired on November 15, 2016 at Rs.100, its fair market value is Rs 200 on January 31, 2018, and it is sold on March 31, 2019 at Rs.50. In this case, the actual cost of acquisition is less than the fair market value as on January 31, 2018. The sale value is less than the fair market value as on January 31, 2018 and the actual cost of acquisition. Therefore, the actual cost of Rs.100 will be taken as the cost of acquisition in this case. Hence, the long-term capital loss will be Rs.50 (Rs. 50 – Rs. 100) in this case.
Such a loss can be set-off against any other long-term capital gains and you can carry it forward to subsequent eight years for set-off against long-term capital gains.
