DOUBLE INDEXATION BENEFITS

Download Tax Saving Mutual Fund Application Forms

Invest In Tax Saving Mutual Funds Online

Buy Gold Mutual Funds

Leave a missed Call on

94 8300 8300

 

 

Double indexation simply means getting the benefit of two years of indexation when the holding period for investments has been substantially less than two years.

 

Concept of Double Indexation

1. If Mr. ABC had bought 10 units of mutual fund for Rs. 10,000 on 1st April 2011 and sold them for 11,000 on 1st April 2012. (Holding period- 1 year).
2. If Mr. ABC had bought 10 units of mutual fund for Rs. 10,000 on 31st March 2011 and sold them for 11,000 on 1st April 2012. (Holding period- 1 year and 1 day)

In the two examples given above, the information is same except the year of purchase, which differs by just one day.The difference in one day changes the financial year of purchase for Mr. ABC, which changes the CII numbers to be used for indexation.

 

Case A: Single Indexation

	Particulars		Amount (Rs.)
Cost of Purchase		10,000
CII- year of purchase (2011-12)*		785
CII-year of sale (2012-13)*		852
Adjusted cost of purchase		10,854
Taxable return - with indexation (Rs.11,000 - Rs,10,854)		146

*Source: Central Board of Direct Taxes (CBDT)

 

Case B: Double Indexation

	Particulars		Amount (Rs.)
Cost of Purchase		10,000
CII- year of purchase (2010-11)*		711
CII-year of sale (2012-13)*		852
Adjusted cost of purchase		11,983
Taxable return - with indexation (Rs.11,000 - Rs.11,983)		(983)

*Source: Central Board of Direct Taxes (CBDT)

Here is a small comparison between Fixed Deposits & FMP with Double Indexation Benefits:

 

			Fixed Deposits (assumed for investor at highest tax bracket)		FMP With Double Indexation
Amount Invested		100,000		100,000
Tenor in Days		500		500
Assumed Returns		9.50%		9.50%
Maturity Value		113,014		113,014
Interest Gains		13,014		13,014
Indexed Costs*		Nil		119,831
Indexation Gain/Loss		Nil		(6817)#
Tax Rate		30.09%		20.60%
Tax on interest income		4,021
Tax on capital gains
Post Tax Income		8,993		13,014
Post Tax Return (Simple Interest)		6.56%		9.50%

* CII in 2010-11 was 711 and CII in 2012-13 is 852. Source: Central Board of Direct Taxes (CBDT).
#Investors can set of Long Term Losses with Long Term Gains

 

^@ Investors should be aware that the fiscal rules/tax laws may change and there can be no guarantee that the current tax position may continue indefinitely. In view of the individual nature of tax consequences, each investor is advised to consult his/her professional tax advisor.

 

 

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

 

 

Leave a missed Call on 94 8300 8300

 

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

 

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

 

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

 

Best Performing Mutual Funds

1. Largecap Funds             Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Franklin India Bluechip
4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds         Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
4. Birla Sun Life Front Line Equity Fund
5. Franklin India Prima

C. Mid and SmallCap Funds          Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
5. Birla Sun Life Dividend Yield Plus
6. SBI Emerging Businesses Fund
7. HDFC Mid-Cap Opportunities Fund
8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds   Invest Online

1. DSP BlackRock MicroCap Fund

2.       Franklin India Smaller Companies

E. Sector Funds          Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds      Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

3. DSP BlackRock Tax Saver Fund
4. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds        Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund
4. Birla Sun Life Gold

H. International funds         Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF