Mutual fund advisors face tough time dealing wth LTCG tax calculation

Mutual fund advisors are flooded with queries from their clients about the actual computation of the new long term capital gains tax on equity mutual fund schemes. “Investors are curious and are coming up with a lot of questions on the calculation of the tax. It is a big a task for us to go through each client’s case separately”, says Shweta Jain, Founder & CEO- Investography.

According to several mutual fund advisors, it is difficult for them to go through so many client cases without proper infrastructure to assist in calculating the long term capital gains tax, after taking into account the grandfathering clause.

Tarun Birani, founder of TBNG Capital Advisors, says, “they want to know how capital gains will be calculated after factoring in the ‘grandfathering’ clause.” But, at present, we do not have a proper mechanism for the actual calculations in place.” “We will have to see what infrastructure will be provided by the industry participants and regulator for ease of calculation of long term capital gains in mutual funds,” he adds.


As of now, it is not tough to take out a scheme’s NAV as on Jan 31, 2018. However, as time passes, searching NAV for an old date becomes a task. MF advisors say the Asset Management Companies (AMCs) and registrars should make available the Jan 31st NAV in account statements so that one can easily calculate the gains according to the changed rules.

NAV as on Jan 31, 2018 became important after the Finance Minister in his budget speech announced that all gains up to 31st January 2018 will be grandfathered. According to the clause, any long term gains exceeding Rs 1 lakh earned after January 31 will be taxed at 10 per cent.

MF advisors also believe that the AMCs and registrars will have to make changes to the capital gains statement provided to investors. The capital gains statement must show the capital gains to be taxed as per the changed rules, they say.

LTCG tax has become a talking point among mutual fund investors. There is a lot of confusion about the new tax. See story: Mutual fund investors confused about LTCG tax calculation

According to mutual fund advisors, the confusion is going to remain for some more time till investors get used to the new taxes.

“They need a lot of hand holding now, else they will end up exiting equities and may fall for other products which might not even suit their risk profile and goals. Once investors get used to the process, this will become our new normal,” says Shweta Jain.