Policy

Jaitley offers tax relief for debt mutual funds

Shishir Sinha New Delhi | Updated on March 12, 2018

Finance Minister Arun Jaitley (file photo)

Reprieve for late filing of income-tax returns too; Lok Sabha approves Finance Bill

In what could be seen as a relief to big investors, the high tax rate of 20 per cent will no longer apply to redemption of debt mutual fund units between April 1 and July 10 this year. There is some relief for late filers of income-tax returns, too.

These are among the 22 amendments moved during Finance Minister Arun Jaitley’s reply to the debate on the Finance Bill, 2014, in the Lok Sabha on Friday. The House later approved the Bill with amendments.

Now, the Rajya Sabha will discuss the Bill, but it cannot move any amendment. Once the Rajya Sabha also gives its nod, the Bill will be sent for Presidential assent.



Debt mutual funds

On debt mutual funds, Jaitley said: “The new tax regime will not be applicable to transactions of sale of units which have taken place between April 1 and July 10 this year.”

This means after holding units for more than 12 months, if an investor has sold these between April 1 and July 10 and made capital gains, he will pay tax at 10 per cent, not 20 per cent, as proposed in the new regime.

This provision will be applicable to unlisted shares too. If the holding period is less than 12 months for these units, the rate of capital gains tax will be the prevailing income-tax rate.

However, Jaitley did not accept India Inc’s demand for applying the new tax regime only on new investments, not those made between April 1 and July 10. The new regime has increased the short-term holding period to 36 months from 12 months, while the tax rate on capital gains has been hiked to 20 per cent from 10 per cent.

It was also proposed that the new regime be applicable from April 1, 2015. M Lakshminarayanan, Partner, Deloitte Haskins & Sells LLP, said that investors who invested before July 10, 2014, with the belief that the holding period for classification was 12 months and the rate of capital gains is 10 per cent are in for a nasty surprise.

“They are doubly impacted since not only do they have to pay taxes on those units which are redeemable within a period of just over one year, they have to pay capital gains tax at 20 per cent,” he said.

Currently, a daily penalty is imposed if an income-tax assessee files returns after the due date and has some dues. Jaitley said that at times the penalty amount becomes huge if returns are filed after some years.

At present, tax officials have no power to give relief. However, Jaitley has now proposed an amendment to offer some relief.

“Some discretion is being given to the CBDT in regard to that penalty, where cases of late filing of returns are involved. The penalty, as such, will remain,” the Finance Minister said. This means the rate of penalty will not change, but some waiver in the total penalty can be given by the assessing officer.

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Published on July 25, 2014
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