Tax Harvesting on Mutual Funds

Should all readers who invest in Mutual Funds be doing Tax Harvesting on Mutual Funds: a food for thought

Tax Harvesting : A way to reduce Long term gain tax on mutual fund gains .

Smart Harvesting : To re invest the "saved amount" back and make ur money work harder . 

Long term capital gain tax on mutual fund gains : if u hold a mutual fund for more than 12 months and then u redeem , u will be taxed at the rate of 12.5% on the gains exceeding 1.25 Lakhs  , ie, u can avail tax benifit on gain of 1.25 lakhs every year . 

Illustration:

Assume u have invested Rs 11 lakhs in mutual fund in 2023 , and , in 2024 value of investment goes to 12.5 lakhs , if u redeem this ur gain will be 1.5 lakhs . 1.25 lakhs gain is tax free . U will be taxed at 15% on .25 lakhs . What if u had sold those units only where the gain is just 1.25 lakhs ? 

U don't have to pay any tax . 

Now , let's calculate the tax on 1.25 lakhs @ 12.5 %

It's 15625 

And if u save this amount every year and start an yearly sip for next 20 years 

This amount will swell to Rs 16 lakhs ( calculation based on modest return of 15%)

Execution :

U should redeem mutual funds units every year where u are making a gain of 1.25 lakhs . Redeem today and buy next day 

If u are sensitive to market redeem in ur account nd buy in ur wife's account...same day !! 

Happy Investment

Happy Learning