Gains on investments in bond funds are subject to tax. Of late, a lot of retail investors are taking keen interest in bond funds. Many individuals have invested in gilt funds expecting a downward cycle in interest rates to begin in 2013 and 2014. As the rates are nearing bottom, many are booking profit. If you are one of them, you would be keen to know how to compute tax on the capital gains.
For beginners, the tax liability on capital gains arises only when the investor sells the units of mutual funds. Even switching from one scheme to another is considered a sale of units.
