Ch.8 · Capital Gains Tax on Mutual Funds · hard
What is 'tax-efficient investing' using mutual funds for an investor approaching retirement?
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EXPLANATION
Tax-efficient pre-retirement planning involves: (1) Gradually realising equity LTCG annually within the ₹1.25 lakh exemption to avoid large tax bills at retirement; (2) Using STP to gradually move from equity to balanced/debt funds; (3) During retirement, using SWP from equity funds calibrated to keep LTCG within exemption limits; (4) Avoiding IDCW option which attracts full slab rate taxation. This multi-step approach minimises lifetime tax on wealth accumulated in equity mutual funds.
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