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I invested in an FMP with a tenor of 370 days in March 2014, hoping to get double indexation benefits. How much will I be taxed now, given the changes made in the Budget on FMP, and will I get a double Indexation benefit?
Mayank Joshi
As per the recent amendment in the provisions of the Income Tax Act, 1961 (the Act), a debt fund should be held for 36 months to qualify as a long-term capital asset. As per the new provisions, Fixed Maturity Plans (FMPs) with a tenure less than 36 months will no longer be eligible for the indexation benefit and the redemption proceeds will be subject to tax at a marginal rate of tax applicable to the assessee (instead of 20 per cent as per earlier provisions).
In your case, we understand that the redemption of your investment in Reliance FMP will be in April 2015. Hence, it will qualify as a short-term capital asset and will accordingly not get the indexation benefit while computing the capital gain on such redemption. Also, the capital gain so computed shall be taxed at the applicable slab rate.
Please note that several mutual fund asset management companies (AMCs) are offering investors the option to roll-over and invest the amount for 36 months to get the benefit of indexation and, accordingly, lower taxation.
The writer is a practicing chartered accountant. Send your queries to >taxtalk@thehindu.co.in
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