I have a question on MF’s that seem may trivial but here it is. MF houses usually move in and out of stocks right.so just like retail traders if they move out of stocks with in one year of BUY will STCG apply on them just like for other retail transactions and affects the NAV or are the MF’s exempted from the STCG?
Mutual funds are pass-through vehicles. Meaning the taxes are passed on to the investors.
SO @Bhuvanesh does that mean these gets reflected in the NAV price,because as end user we are not exiting /selling the mutual to accure STCG .Please let me know if my understanding is correct.The reason i was asking this question is I was analyzing DSP tax saver fund in MoneyControl and there i seen that the fund manager has moved in and out of the stocks more than any of the other funds in the category.So just wanted to now how these frequent moving out of stocks impacts the returns finally?
The AMC does not pay STCG or LTCG, so it’s not factored in the NAV. You pay these taxes when you sell the units.
Churn impacts fund performance. That’s because the AMC still pays brokerage, STT etc.
Clarified .Thanks @Bhuvanesh