Capital Gains Tax calculated on Folio or consolidated

Hey Folks,

I have invested in some mutual funds via normal route. Let us say it has some units brought last year

Recently have started investing in the same mutual fund via demat route via Coin. this creates a new folio and I did some transaction last month. Its showing in loss. Now since the market is low , I want to book some short term capital loss so I am thinking of redeeming the demat holdings and invest it via regular route.

Question is : Is this a valid short term capital loss or income tax treats the fund as same irrespective of folio or route and FIFO (First In First Out) kicks in across all holdings and due to this it will be long term capital gains as some units were brought last year in regular physical format ?

@San78 Can you.

@Quicko : Can you please take this simple query. No one has answered this yet :frowning:

Hi,

As per this circular (Circular No. 768, dated 24-6-1998) issued by the Income Tax Department to address queries in relation to period of holding of securities:

“…In the depository system, the investor can open and hold multiple accounts. In such a case, where an investor has more than one security account, FIFO method will be applied accountwise. This is because in case where a particular account of an investor is debited for sale of securities, the securities lying in his other account cannot be construed to have been sold as they continue to remain in that account…”
[Sub-clause (b) of Clause 5 of the Circular]

I think the above principle can be applied even in your case, and therefore, the transactions result in a valid capital loss.

2 Likes

Hi @dexter007,

You can redeem demat holdings and book short term capital loss to reduce your overall tax liability. Thus, validity may not be challenged due to FIFO method and tax loss harvesting benefit. Moreover, nature of capital gain classification shall be made by complying with FIFO method.

LTCG may come into play If units were brought last year and redeemed in current year (If holding period is more than 12 months) considering demat route.

I hope it helps!