How revenue tax on KVP is calculated

How is revenue tax on Kisan Vikas Patra (KVP) calculated. Can tax on its curiosity be paid on a yearly foundation?

                           — Rajiv Kaushik

If the taxpayer follows ‘cash basis’ of accounting, curiosity from Kisan Vikas Patra (KVP) could also be taxed within the 12 months of its maturity/pre-mature encashment. The similar shall be taxable on the relevant slab charges for such 12 months.

On the opposite hand, if the taxpayer follows ‘accrual basis’ of accounting, accrued curiosity for every year must be calculated foundation the relevant rate of interest and the identical shall be taxable on the relevant slab charges for such respective years.

I’ve invested round ₹1 lakh in mutual funds. While withdrawing the quantity, do I must pay revenue tax if returns are greater than ₹1 lakh after 10 years, particularly if I don’t have every other revenue?

— Name withheld on request

We have assumed that you’ve got invested in these mutual funds on or after 1 February 2018. Based on the restricted details obtainable, if the unit of a mutual fund is held for greater than 12 months (in case of an equity-oriented fund) or greater than 36 months (in case of every other mutual fund), then the identical would qualify as a long-term capital asset and taxation for the long-term capital beneficial properties revenue (LTCG) will likely be as follows:

a. Equity oriented mutual funds: As per part 112A of the I-T Act, 1961, LTCG exceeding ₹1 lacs will likely be taxable @10% (with out adjusting for the fee inflation index) – plus relevant cess and surcharge;

b. Other mutual funds: As per part 112 of the Act, LTCG from the sale of models will likely be taxable @ 20% (after adjusting for the fee inflation index) – plus relevant cess and surcharge

Further, assuming that you just qualify as a resident of India and you wouldn’t have any revenue apart from the LTCG from the sale of mutual fund models within the 12 months of such sale whereas computing the tax legal responsibility as specified above, the LTCG shall be lowered by the utmost quantity which isn’t chargeable to income-tax (i.e. presently ₹2.5 lakh for people under 60 years of age). Also, relying upon the revenue stage, reduction beneath part 87A (obtainable presently) could also be evaluated on tax legal responsibility arising beneath part 112 of the Act on the sale of  mutual funds apart from equity-oriented mutual funds. This is topic to the prevailing tax guidelines within the 12 months of sale.

Parizad Sirwalla is companion and head, world mobility companies, tax, KPMG in India.

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