What is the tax on STCG from a hybrid fund with 40% equity allocation?
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EXPLANATION
Tax treatment is binary — not proportional. If a hybrid fund has less than 65% equity allocation, ALL gains (both STCG and LTCG) are taxed at the investor's slab rate, regardless of the actual equity percentage. A fund with 40% equity and 60% debt is treated entirely as a debt fund for tax purposes. The 65% threshold is the only dividing line.
What is the tax treatment of Fund of Funds (FoF) investing in domestic equity funds?
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EXPLANATION
Domestic Fund of Funds (FoF) investing in other mutual fund schemes are NOT treated as equity-oriented funds for tax purposes, even if all underlying schemes are equity funds. FoF gains are taxed at the investor's slab rate regardless of holding period (post April 2023 rules). This is a key tax disadvantage of FoF vs directly investing in the underlying schemes.
What is the 'SEBI exemption' from PAN for micro-SIP investments and its tax implications?
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EXPLANATION
SEBI's simplified KYC (Aadhaar-based) for micro-SIPs (up to ₹50,000/year) waives the PAN requirement for investment purposes. However, tax compliance obligations remain unchanged — when investors redeem and have taxable capital gains above the basic exemption, they must file an ITR and pay applicable taxes. The PAN waiver is purely a KYC/investment access provision, not a tax exemption.
What is the 'wash sale' rule and does it apply to mutual funds in India?
A.Wash sale rules strictly prohibit claiming losses within 30 days of repurchase — same as US law
B.India does not have a specific wash sale rule for mutual funds — investors can sell at a loss and immediately repurchase the same scheme to harvest losses and reset the holding period
C.SEBI prohibits selling and repurchasing the same scheme within the same day
D.Wash sales in mutual funds attract 30% penalty tax in India
What is the treatment of 'unrealised gains' in mutual fund portfolios from a taxation perspective?
A.Unrealised gains are taxed annually for the fund
B.Unrealised gains (appreciation in NAV not yet converted to cash by redemption) are not taxable — capital gains tax arises only when units are actually redeemed by the investor
C.Unrealised gains above ₹1 lakh must be reported annually
D.Unrealised gains attract a 1% wealth tax annually
What is the tax treatment of mutual fund investments made by Provident Fund Trusts?
A.Provident Fund Trusts pay 25% tax on all investment returns
B.Recognised Provident Fund Trusts are exempt from income tax on their investment income (including capital gains from mutual funds) under Section 10(25) of the Income Tax Act
C.PF Trusts pay standard corporate tax rates
D.PF Trust investments in equity funds are prohibited by EPFO regulations
What are the tax implications for trusts and institutions investing in mutual funds?
A.Trusts and institutions are always exempt from capital gains tax
B.The tax treatment depends on the nature of the trust/institution — charitable trusts registered under Section 12A/80G may be exempt; business trusts and corporate entities pay tax at applicable corporate rates
C.All trusts pay LTCG at 20% with indexation regardless of scheme type
D.Trusts cannot invest in mutual funds under Indian tax law
What is 'Section 112A' and how does it apply to equity mutual fund LTCG?
A.Section 112A provides full exemption on equity LTCG
B.Section 112A taxes LTCG exceeding ₹1.25 lakh from equity-oriented mutual funds and listed shares at 12.5% without indexation — the ₹1.25 lakh annual exemption is available
C.Section 112A taxes all equity gains at 30% slab rate
D.Section 112A applies only to NRI investors' equity gains
What was the 'Dividend Distribution Tax' (DDT) regime and when was it abolished?
A.DDT was a tax paid by investors on dividend income — abolished in 2015
B.DDT was a tax paid by AMCs on dividends declared before distributing to investors — abolished from April 1, 2020; now dividends are taxable in investors' hands
C.DDT was a SEBI-imposed fee on dividend schemes — still applicable
D.DDT is a 10% flat tax on all investment gains — still in force
What is 'Section 194K' and its relevance to mutual fund distributions?
A.Section 194K mandates TDS on all mutual fund redemptions
B.Section 194K requires AMCs to deduct TDS at 10% on IDCW (dividend) payments exceeding ₹5,000 per year to resident individuals from mutual fund schemes
C.Section 194K exempts mutual fund returns from all TDS