7Eleven Money - Taxation

Tax Slabs & Planning

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Taxes are the government’s way of earning an income which can then be used for various projects that the government needs to indulge in to help boost the country’s economy or its people. Taxes in India are decided on by the central and state governments with local governments, such as municipalities, also deciding on smaller taxes that can be levied within their jurisdiction.

Tax Saving Schemes

Most of the clients achieve their key financial goal through smart tax saving route ! Yes, you have heard it right - Your annual tax saving investment should serve some purpose !

Most important, your kids education & your retirement, at least.

# The value shown here is based upon the NAV as on date 25/12/2016.

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How to make your Tax-Saving Investments

Equity Linked Saving Schemes (ELSS) provide a good avenue for capital appreciation and tax benefit under section 80C of the Income-Tax Act, 1961.

Benefits of ELSS

How to make your Tax-Saving Investments
  • Deduction under section 80C
  • No tax on Capital gains
  • Dividends are tax free in the hands of investor
Better Return
  • Compared to all tax saving instruments under sec 80C
Lock in period (3 years)
  • Lowest among all tax saving instruments under section 80C
  • Long enough to minimize market volatility

TAX Slabs

A tax that governments impose on financial income generated by all entities within their jurisdiction. By law, businesses and individuals must file an income tax return every year to determine whether they owe any taxes or are eligible for a tax refund.

The Income Tax Department is the biggest revenue mobilizer for the Government. Income tax is a key source of funds that the government uses to fund its activities and serve the public.

Taxation Mutual Funds

Capital Gains Tax

If the units were held for more than a year, it would be a long-term capital gain; else it is short-term capital gain. Taxability of capital gains in the hands of the investor is as follows:

Dividend Distribution Tax applicable to Equity Oriented Schemes: NIL
Capital Gain Taxation applicable to Equity Oriented Schemes
Resident Individual / HUF $ Domestic Corporates @ NRI $/#
Long Term Capital Gains (Units held for more than 12 months) NIL NIL NIL
Tax deducted at Source = NIL Tax deducted at Source = NIL Tax deducted at Source = NIL
Short Term Capital Gains (Units held for 12 months or less) 15% + 15% Surcharge + 3% Cess = 17.7675% 15% + Surcharge as applicable + 3% Cess = 17.304% or 16.5315% 15% + 15% Surcharge + 3% Cess = 17.7675%
Tax deducted at Source = NIL Tax deducted at Source = NIL Tax deducted at Source = 17.7675%

Securities transaction tax (STT) will be deducted on equity oriented scheme at the time of redemption/switch to the other schemes/sale of units. Mutual Fund would also pay securities transaction tax wherever applicable on the securities sold.

$ - Surcharge at the rate of 15% is levied in case of individual, HUF , AOP, BOI, Articial juridical person unit holders where their income exceeds Rs 1 crore.
@ - Surcharge at the rate of 7% is levied for domestic corporate unit holders where the income exceeds ` 1 crore but is less than ` 10 crores and at the rate of 12%, where income exceeds ` 10 crores.
# - Short term/long term capital gain tax will be deducted at the time of redemption of units in case of NRI investors only.

Dividend Distribution Tax applicable to Schemes other than equity oriented schemes (payable by the scheme) *
Resident Individual / HUF Domestic Corporates NRI
25% + 12% Surcharge + 3% Cess = 28.84% 30% + 12% Surcharge + 3% Cess = 34.608% 25% + 12% Surcharge + 3% Cess = 28.84%
Capital Gain Taxation applicable to Schemes other than equity oriented schemes
Resident Individual / HUF Domestic Corporates NRI
Long Term Capital Gains [Units held for more than 36 months] (Listed Units) 20% with indexation + 15% Surcharge + 3% Cess = 23.690% 20% with indexation + Surcharge as applicable + 3% Cess = 22.042% or 23.072% 20% with indexation + 15% Surcharge + 3% Cess = 23.690%
Tax deducted at Source = NIL Tax deducted at Source = NIL Tax deducted at Source = 23.690%
Long Term Capital Gains [Units held for more than 36 months] (Unlisted Units) 20% with indexation + 15% Surcharge + 3% Cess = 23.690% 20% with indexation + Surcharge as applicable + 3% Cess = 22.042% or 23.072% = 17.304% or 16.5315% 10% without indexation + 15% Surcharge + 3% Cess = 11.845%
Tax deducted at Source = NIL Tax deducted at Source = NIL Tax deducted at Source = 11.845%
Short Term Capital Gains (Units held for less than 36 months) 30%^ + 15% Surcharge + 3% Cess = 35.5350% 30% + Surcharge as applicable + 3% Cess = 34.608% or 33.063% 30%^ + 15% Surcharge + 3% Cess = 35.5350%
Tax deducted at Source = NIL Tax deducted at Source = NIL Tax deducted at Source = 35.5350% (Listed and Unlisted) ^

Note: Tax implication on Dividend received by Unitholder - Tax free
The Finance Act, 2016 provides tax exemption on any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating plan of a mutual fund scheme, made in consideration of the allotment to him of a capital asset, being a unit or units, in the consolidated plan of that scheme of the mutual fund.
* - For the purpose of determining the tax payable, the amount of distributed income be increased to such amount as would, after reduction of tax from such increased amount, be equal to the income distributed by the Mutual Fund. The impact of the same has not been reflected above.
$ - Surcharge at the rate of 15% is levied in case of individual, HUF , AOP, BOI, Articial juridical person unit holders where their income exceeds Rs 1 crore.
@ - Surcharge at the rate of 7% is levied for domestic corporate unit holders where the income exceeds Rs 1 crore but is less than Rs 10 crores and at the rate of 12%, where income exceeds Rs 10 crores.
# - Short term/long term capital gain tax will be deducted at the time of redemption of units in case of NRI investors only.
^ - Assuming the investor falls into the highest tax bracket
Education Cess at the rate 3% will continue to apply on tax plus surcharge

DISCLAIMER: The information set out is neither a complete disclosure of every material fact of Income-tax Act 1961 nor does it constitute tax or legal advice. In view of the individual nature of the tax consequences, each investor is advised to consult his/her own professional tax advisor.

The government announces a cost inflation index number every financial year. This is used for determining taxability of long term capital gains in non-equity schemes. Suppose the investor invested in mutual fund units at Rs. 11 per unit in a financial year for which cost inflation index is 500. He sells the units at Rs. 14 per unit after holding them for more than a year. In the year of sale, the cost inflation index is 600.

Since the holding is for more than a year, it is a long term capital gain. In the case of long term capital gain, investors in non-equity mutual fund schemes are allowed to increase their cost of acquisition to the extent of inflation. This inflation-adjusted cost of acquisition of units in the above case would be Rs. 11 X 600 ÷ 500 i.e. Rs.13.20 per unit. While the actual capital gains of the investor are Rs. 14 minus Rs. 11 i.e. Rs. 3 per unit, the capital gains based on inflation adjusted cost is only Rs. 14 minus Rs. 13.20 per unit i.e. Rs.0.80 per unit. Tax is to be calculated on the inflation-adjusted capital gain at 20%. This works out to Rs0.80 X 20% i.e. Rs0.16 per unit.

The investor's tax is however capped at 10% of the actual capital gain. This amounts to Rs3 X 10% i.e. Rs0.30 per unit, which is higher than the Rs0.16 per unit calculated earlier. Therefore, the investor will pay long term capital gains tax at Rs0.16 per unit.

Thus, unit-holders holding units of non-equity schemes for more than 1 year, do not have to pay a tax higher than 10% on the actual capital gains. The tax can be lower than 10%, depending on the inflation levels in the country during the unit-holding period.

The capital gains tax, if applicable, is not deducted by the scheme when paying the repurchase proceeds to investors who are resident in India. Similarly, it is not deducted by the broker when the resident investor sells units of closed-end scheme in the stock exchange. The investor has to pay the capital gains tax to the income tax authorities on self assessment basis.

Income Tax Rules

The government of India imposes an Income tax on taxable Income of all persons including individuals, Hindu Undivided Families (HUFs), companies, firms, association of persons, body of individuals, local authority and any other artificial judicial person.

Many jurisdictions tax the Income of individuals and business entities, including corporations. Generally the tax is imposed on net profits from business, net gains, and other Income.

Tax Calculator

The Indian Annual Tax Calculator is updated for the 2016 / 2017 assessment year. You can calculate your Annual take home pay based of your Annual gross income, Education Tax, NIS and income tax for 2016 / 2017. Use the simple annual tax calculator or switch to the advanced annual tax calculator to review NIS payments and income tax deductions for 2016.

NRI Taxation

An Indian Citizen who stays abroad for employment/ carrying on business or vacation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident.

Liability to pay tax in India does not depend on the nationality or domicile of the Tax payer but on his residential status. Residential Status is determined on the basis of physical presence i.e. the number of days of stay in India in any year.

File Your Returns Online

Every person having taxable income and whose accounts are not liable to audit must file an Income Tax Return. If total income exceeds Rs. 5 lakh, it is mandatory to file the return online.