Taxation on mutual finds

Personal finance
1

Hi I have a 2 part question:

  1. If I already transfer my existing equity MF holdings (which are not in Demat account) to a zerodha demat account, is it considered a withdrawal-reinvestment transaction and liable to capital gains tax? Or is it just a transfer with no tax implications?

  2. When I pledge my long-term equity MFs (which are exempt from capital gains tax), and use it as a collateral, I am guessing that this it won’t be considered as redeeming the MF units and won’t attract any capital gains tax. But if I make any profits from the trades that I make using this collateral margin, would it be considered a regular income or capital gains?

Thanks

2

  1. No, conversion of physical units to demat will not be considered as withdrawal-reinvestment. No tax implications. It’s just the method you’re holding them in.

  2. Again no. When you pledge units, its an off market transfer that gets initiated which means that you haven’t sold units in the market for you to pay any capital gains tax on it.

If you make profits from the trades, it’ll be considered business income.