Redeeming equity funds? Here’s how to track gains before withdrawal

I want to redeem equity mutual funds this financial year but keep gains under ₹1.25 lakh to avoid capital gains tax. How can I check the split between principal and gains before withdrawing? Is there a portal, app or website for easy calculation?

—Name withheld on request

While there is no specific portal or app to compute the capital gains that comes to mind, you can easily compute the amount of gains yourself by accessing your account statement. 

This can be accessed either on the website of the mutual fund or as consolidated account statement from the website of the Registrar and Transfer Agency (such as CAMS or KFintech). 

This statement may have also been sent by the mutual fund directly to you in case you have undertaken any transaction. If you have invested through a broker, they may also be able to assist you in obtaining such a statement.

The gains on redemption of mutual fund units would be computed on a First-In-First-Out (FIFO) basis wherein the units acquired first would be considered as redeemed or sold first. 

The difference between the NAV as on the date of purchase and on the date of sale would be your gains. You would also need to keep in mind that the exemption upto INR 1.25 lakh applies only in the case of long-term capital gains i.e. if the units of the equity mutual fund are held for a period of more than 12 months.

While the cost of the mutation fee may be deductible while computing the capital gains, no such deduction can be claimed for the fees paid to the valuer for determining the fair market value as on 1 April 2001. One is allowed to deduct the cost of acquisition, cost of improvement and any cost incurred wholly and exclusively in connection with the sale. 

The mutation fee, which updates the ownership record with the Government, would generally be considered as a cost of acquisition in a case of purchase. In your particular case, as the property was inherited by you, the cost of mutation can be considered as cost of improvement as mutation improves the title of the owner to the inherited property. 

However, the fair valuation fee cannot be considered as incurred in connection with the sale, as such valuation is used to compute the capital gains to pay tax arising from the sale and not related to the transaction of sale itself.

—Mahesh Nayak, chartered accountant, CNK & Associates