[shashant]

Would it make sense to increase my part in VPF now as a debt instrument. 8.1% pre tax and compounding.

Liquidity is not a concern.

[thanixravindran]

Originally Posted by shashant

Would it make sense to increase my part in VPF now as a debt instrument. 8.1% pre tax and compounding.

Liquidity is not a concern.

If you are crossing the threshold of 2.5L with EPF and VPF together, it will be taxed at marginal tax rate which is the same with debt funds after 3 years now. So what is the difference in going with VPF or Debt funds for long term as liquidity is out of equation? May be only better guarantee of returns in VPF because of sovereign backing?

[shashant]

Originally Posted by thanixravindran

If you are crossing the threshold of 2.5L with EPF and VPF together, it will be taxed at marginal tax rate which is the same with debt funds after 3 years now. So what is the difference in going with VPF or Debt funds for long term as liquidity is out of equation? May be only better guarantee of returns in VPF because of sovereign backing?

Yes for guaranteed safe returns. Unless there are other secure instruments that can generate over 9-10%>

[carboy]

How exactly is 3 years for debt funds calculated? It is like 365 x 3 days? Or is it date based? Or something else? I purchased a debt fund on 16th Apr 2020. If I sell it today, will be taxed as Long Term Capital Gains or is it best to wait for a few days to make sure?

[DigitalOne]

Originally Posted by carboy

Or something else?

It is based on the financial year when it is bought and when it is sold. There should be a gap of 3 completed FYs. In your case, you bought it in FY 2020-21 and now the open FY period is 2023-24, you are still not eligible for LTCG. Instead, if you had bought the fund just 18 days earlier, i.e on 30-Mar-2020 (FY 2019-20), it would have been eligible for LTCG starting 1-Apr-2023.

[carboy]

Originally Posted by DigitalOne

It is based on the financial year when it is bought and when it is sold. There should be a gap of 3 completed FYs. In your case, you bought it in FY 2020-21 and now the open FY period is 2023-24, you are still not eligible for LTCG. Instead, if you had bought the fund just 18 days earlier, i.e on 30-Mar-2020 (FY 2019-20), it would have been eligible for LTCG starting 1-Apr-2023.

Are you sure about this? The Financial Year consideration comes in for Indexation but I don't think it's there in the calculation of your holding period for classification of LTCG & STCG

[DigitalOne]

Originally Posted by carboy

Are you sure about this?

I was reasonably sure till you asked again . Will wait for other experts to pitch in.

[carboy]

I found quite a few articles which use "holding period of 36 months" as the line between STCG & LTCG - https://cleartax.in/s/tax-on-debt-funds

if they were sold after 36 months, then the gains were termed as long-term capital gains (LTCG).

Does anyone know any online calculator where one can input dates & calculate, that would be helpful to figure out exactly what's ST or LT.

[mtripathi13]

Originally Posted by carboy

How exactly is 3 years for debt funds calculated? It is like 365 x 3 days? Or is it date based? Or something else? I purchased a debt fund on 16th Apr 2020. If I sell it today, will be taxed as Long Term Capital Gains or is it best to wait for a few days to make sure?

Sire!

please refer to my reply in the income tax thread.

[carboy]

Originally Posted by mtripathi13

Sire!

please refer to my reply in the income tax thread.

I am adding a link your post there so it's easy for others - https://www.team-bhp.com/forum/shift...ml#post5533520 (All Income Tax Queries (refunds, disputes, rates etc...))

So you say 36 lunar months + a 15 day buffer.

I think that's good advice.

I am also thinking of selling a small amount (say 1000 Rs worth) of the fund I purchased in Mid April 2020 & then generating the Capital Gains report from the AMC to see if they show it as STCG or LTCG.

[mtripathi13]

Originally Posted by carboy

I am also thinking of selling a small amount (say 1000 Rs worth) of the fund I purchased in Mid April 2020 & then generating the Capital Gains report from the AMC to see if they show it as STCG or LTCG.

I hope you are aware about the changes made in Finance Act,2023 wrt debt mutual funds and their taxability. The changes only apply to investments post April 1,2023.

Regards
Manish

[carboy]

Originally Posted by mtripathi13

I hope you are aware about the changes made in Finance Act,2023 wrt debt mutual funds and their taxability. The changes only apply to investments post April 1,2023.

Yes, obviously.

Originally Posted by carboy

I am also thinking of selling a small amount (say 1000 Rs worth) of the fund I purchased in Mid April 2020 & then generating the Capital Gains report from the AMC to see if they show it as STCG or LTCG.

I sold 10K worth of 16/04/2020 purchased MF on 21/04/2023 & downloaded the Capital Gains Statement & it shows it as Long Term CG with Indexation. So the calculation is surely not 3 financial years but 36 months but it still isn't 100% clear as to how exactly a month is defined.

[carboy]

I have some Kotak Low Duration Funds & also some Liquid funds purchased around 6 months back. When I bought them, I bought them as something temporary till the interest rates peak or are near peak.

After the last interest rate hike, I was thinking of selling them & putting that money into Corporate Fixed Deposits like Bajaj Finance & the likes so as to lock in the high interest rate for 4-5 years. Is this a good idea - has anyone worked out the pros & cons of this.

[skumare]

Originally Posted by carboy

So the calculation is surely not 3 financial years but 36 months but it still isn't 100% clear as to how exactly a month is defined.

As per my auditor's norms, any investment is considered one year old on the same calendar day next year - i.e if you invest on 16/04/2020, it will complete one year by midnight 15/04/2021 and it is considered "held for one year" from 16/04/2021 onwards.

[adithya.kp]

I believe debts funds are better than FD even after the removal of indexation benefits. To keep things simple, one could use a combination of liquid/ultra short term funds ( so that the interest rate/default risk is minimised) and dynamic/gilt funds (assuming the holding period is long and you don't buy when the bond yield/interest are very low. Because sooner or later it will go up and you don't want to see a negative return on debt portfolio even though its a notional paper loss. Of course, nobody can predict the interest rate cycle)

Having said that, FD is FD. It has this feel good factor. I am curious to know, are there people who don't use FD at all in their debt portfolio. ( I don't want to use other debt instruments like PPF, PF etc in this discussion). If FD has to be there in one's debt portfolio, what is a decent FD allocation in % terms? ( I mean within debt. Not at the overall net-worth level)