Income plus arbitrage fund FOF taxation

Taxation
1

In this type of FOF, after 24 months the taxation is 12.5%. However, is there an exemption on the first 1.25 lakh? @Quicko

2

@siva @Quicko Request you to pls help with my query.

3

As FoFs are also part of section 112A of income tax act, the exemption available under it will be applicable to FoFs as well. So, I think the answer is Yes. @Quicko

4

But the arbitrage fund component in all income plus arbitrage funds is less than 65%. Thus the doubt.

5

Hello @ron94

Fund of Funds (FoFs), like Income Plus Arbitrage FoFs with less than 65% equity are debt oriented, and thus ₹1.25 lakh LTCG exemption under section 112A does not apply.

If you invested on or after April 1, 2023, any capital gains, irrespective of your holding period, are taxed at your slab rate.

If you invested before April 1, 2023:

  1. And sold between April 1 and July 22, 2024, gains held for over 36 months are taxed at 20% with indexation, otherwise slab rate.
  2. If sold on or after July 23, 2024, the holding period for long-term is reduced to 24 months, and such gains are taxed at 12.5% without indexation.

Hope this helps!

2 Likes
6

Thank you for explaining this.

7

Can the capital gains on the income plus arbitrage fund which is to be taxed at 12.5 % after 24 month holding be set off against LTCG loss from equity shares? @Quicko

8

Hello @ron94 Yes, it can be set off since both are long term.

Hope, this helps.

Thank you.

1 Like