Is taxation same for International ETF and International FoF?
For example Mirae Asset NYSE FANG+ ETF and Mirae Asset NYSE FANG+ETF FoF.
Hi @rahul8
International ETFs and FoFs are taxed in the same manner as debt funds @ applicable slab rates without any indexation benefit
1 Like
Hi @Meher_Smaran , is there a buy limit on the international funds and the FOFs considering that the new tax law limits the outward remittance to 7L? Or is this taken care already by the ETF or the FoF as the expense ratio?
Thanks.
Is MON100 classified as debt fund or equity fundfor taxation?
I sold my position in it after holding for an year and zerodha has classified the profits as long term gain in its console reports. Ideally debt fund should be classsifed as short term at slab rate. Is that a bug in zerodha or MON100 is classified as equity fund for taxation,
They are treated as debt funds.
Taxation would depend on whether the investment was made before April 1st, 2023. But as you rightly pointed out, Short terms are taxed at slab rates in both cases while Long term gains tax for investments before April 1st, 2023 would be at 20% with indexation.
Will check this once with team
LRS and TDS don’t apply to international funds. You can invest the amount of your choice subject to restrictions from the AMC.
2 Likes
Hello everyone,
I have a query regarding the taxation of unrealized gains on International ETFs. Currently, I have 1.5L of unrealized gains on an International ETF (MAFANG). I understand that International ETFs are taxed as debt funds in India, which means the gains are subject to the applicable slab rate.
However, I have no other income this year. My question is: if I book the 1.5L profit this year, will I still have to pay tax on it? Since my total income (including the booked gains) will be within the basic exemption limit, do I still need to worry about taxes, or will this gain be exempt?
Looking forward to your advice and insights!
Thanks in advance!
Hey @rahul8,
If this is your only source of income and the total income falls below the basic exemption limit which is ₹2.5L, there will be no tax liability on these gains.
1 Like
Interesting tax planning idea here:
For those who have a lower slab rate than capital gains rate (15 STCG or 10 LTCG), it will make more sense to invest in international and debt funds rather than good old equity funds, right?
Wrong.
Investment should be done based on your financial requirements and risk appetite, not based on tax.
Which return will make you happy? 8% with 0 tax OR 15% with 30% tax?
1 Like
If there are two sources of income (salary + stock market gains) but the total income falls below 2.5 Lakh, will there be any tax liability on the stock market gains?
I do see some Hybrid funds taxed at slab rate rather than Equity CG rate.
Yes you are right your risk appetite should dictate your investments but tax is an important factor too. For example, I invested in an arbitrage fund to keep some funds parked for ~3 months. I got taxed at 15%. If this was a debt fund, the tax would have been 0%. And they give the same return.
For people like me with less slab rate than CG rate, international equity is a very interesting opportunity given it will essentially be tax free.
If you are comparing instruments with similar risk & return profile and trying to invest in one having less tax → it makes sense.
But choosing between equity and debt funds, because of taxation does not make sense
Again, wrong way to analyze. If you are interested in international equity, you should invest. But investing because of zero tax, does not make sense.
Also, remember equity investments are made generally for longer duration of time
Not sure what your age / income profile is, but chances are very high that when you decide to redeem you investments, you may not be in a low tax bracket.
Hi,
Yes. But the funds you are looking at are tech and huge volatility stocks. So you do have a risk factor. Yes, profit can be taken out within 1L exempt . There can also loss if the etf falls and negative returns. It’s my understanding only . I do not know much more details.