If you have mutual funds in these types of accounts, you pay taxes only when earnings or pre-tax contributions are withdrawn. If you hold shares in a taxable account, you are required to pay taxes on mutual fund distributions, whether the distributions are paid out in cash or reinvested in additional shares.
Both equity funds and debt funds can be technically withdrawn as soon as the fund is available for daily sale and repurchase. Forget about 1 month; you are also permitted to withdraw within a day of your investment reflecting in your mutual fund statement.
If you withdraw from your equity MF units after 12 months, you will not be taxed. If you withdraw from your debt funds before 3 years, the profit on the withdrawn units will be taxed at the rate for your income slab.
The short-term capital gains (STCG) on redemption of equity fund units is taxable at the rate of 15%. The long-term capital gains (LTCG) on equity fund up to Rs 1 lakh is tax-free. However, LTCG on equity fund redemption in excess of Rs 1 lakh is taxable at the rate of 10% without the benefit of indexation.
Tax consequences
If your mutual fund has realized significant capital gains in the past, you may be subject to capital gains taxes if the fund is held within a taxable account. When you redeem units of a fund that has a value greater than the total cost, you will have a taxable gain.In any case, the process is pretty straightforward.
- Find Your Account Number. Your mutual fund account number should be on your account statement.
- Look For Your Accounts.
- Enter Your Withdrawal Amount.
- Choose Your Payout Method.
- Withdrawing Money Online.
- Watch for Tax Ramifications.
You should redeem funds when the financial goal you are saving for is just around the corner. At that time, it is better to start moving your money out from equity mutual funds to safe investment avenues like Debt Mutual funds.
- 3 year lock-in means you can't redeem before maturity.
- Such funds are listed on the exchange and you can try to get a buyer for it.
- You can pledge it with a bank and get a loan against security - however, only some banks will lend money like that ans usually only if there are less than 6 months left till maturity.
All that an investor has to do is log in to his online mutual fund account, press the redemption button and confirm the transaction. Redemption amount will be credited to his bank account within turn-around time. Investors can visit the websites of mutual fund houses and RTAs to redeem their funds online.
Yes it can be stopped anytime. You have to cancel your SIP few days in advance which normally ranges from 2 weeks to 1 month depending on the AMC. So confirm the exact dates required for SIP cancellation about your fund from your AMC customer care. There is no penalty or charges for discontinuing your SIP.
Advantages of SIP Over Lump Sum Investment
Whereas with a lump sum investment, your money would buy fewer units of the mutual fund when markets are up and more units when they are down. Thus, a SIP enables you to lower the average cost of your investment and reduce the risk of your investment.Unlike stocks and ETFs, mutual funds trade only once per day, after the markets close at 4 p.m. ET. If you enter a trade to buy or sell shares of a mutual fund, your trade will be executed at the next available net asset value, which is calculated after the market closes and typically posted by 6 p.m. ET.
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An investor willing to take high risks for high returns can ideally consider investing in equity. If investors have significant corpus lying idle, then they can invest in mutual funds in a lump sum. If they are willing to invest a fixed amount at regular intervals, then they can invest in SIPs.Here's When You Should Sell Off Your Mutual Funds
- The fund is underperforming relative to its peers. Some funds are duds.
- You need cash and your portfolio is your only source. Life throws curveballs.
- You reached a financial goal.
- You need to manage your tax bill.
- You're rebalancing your portfolio.
- Say no to emotional selling.
When mutual fund investors seek higher returns, they invest in equity mutual funds. Since they are market-linked, these funds get affected when the market goes down and this is why your mutual funds are going down in value too.
Directly through AMC. If you have invested in a mutual fund directly with the asset management company (AMC), then you can redeem using their online portal. You can choose to sell some units or all as per your requirement. One can also redeem units offline by visiting the AMC office.
So, where should you move your money? Mutual fund advisors believe you can switch to safer debt funds. By safer funds they mean funds without duration risk and credit risk. “For a duration of two to three years, you can move your money to short duration funds.
In a nutshell, mutual funds are safe. Investors should not be worried about short-term fluctuations in the returns while investing in them. You should choose the right mutual fund, which is sync with your investment goal and invest with a long-term horizon.
