Did you roll over your FMP post 10th July?

As per the Budget announcements for financial year 2014-15, any Debt Fund sold after 10th July 2014 shall be considered long term if held for more than 36 months. Whereas, Debt Funds sold on or before 10th July 2014 shall be considered long term if held for more than 12 months.

This change is also applicable for FMPs or Fixed Maturity Plan funds.

{Do note that earlier all mutual funds were treated similarly; treated long term when held for a period of more than 12 months}.

It is in the budget of 2014-15 that finance minister announced the change for Debt Funds which also covered FMPs.

This change impacted FMPs which were maturing after 10th July but were not held for more than 36 months. Therefore if these matured after 10th July but were not held for 36 months – their maturity would result in a short term capital gain for investors. Short term capital gains are taxable at the slab rate applicable to total income, whereas long term capital gains on debt funds or FMPs are 20% with indexation when sold after 10th July.

Since FMPs have a fixed maturity date – some MF companies rolled over the dates for maturity so that investors don’t end up paying short term capital gains tax on them.

The Income Tax Department has clarified that such roll over is not a sale/transfer of FMP and there shall be no capital gains in such a case.

Capital gains shall only arise on redemption of these FMPs.

Do you need help with calculating your capital gains tax for 2014-15, reach out to us support@cleartax.in and our experts will help you!

(This is as per the Circular 6 of 2015, F No 133/39/2014-TPL of CBDT dated 9th April 2015)

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