Capital gains in respect of units of Mutual Funds under the Fixed Maturity Plans on extension of their term:-
Subject: Capital gains in respect of units of Mutual Funds under the Fixed Maturity Plans on extension of their term
As per the provisions of the Income-tax Act, 1961 (hereinafter referred to as the Act) prior to the amendment made by the Finance (No.2) Act, 2014, assets in the nature of shares, listed securities, units of mutual funds and zero coupon bonds qualified as long term capital assets if held for a period of more than twelve months as against the holding period of more than thirty-six months in case of other assets. Accordingly, units of a mutual fund under the Fixed Maturity Plans (FMPS) held for a period of more than twelve months qualified as long term capital asset. The amendment in sub-section (42A) of section 2 of the Act by the Finance (No.2) Act, 2014 changed the period of holding in case of unlisted shares and units of a mutual fund (other than an equity oriented fund) for their qualification as long term capital asset to more than thirty-six months. As a result, gains arising out of any investment in the units of FMPs made earlier and sold/ redeemed after 10.07.2014 would be taxed as short-term capital gains if the unit was held for a period of thirty-six months or less.
(4) A close ended scheme shall be fully redeemed at the end of the maturity period:
Provided that a close-ended scheme may be allowed to be rolled over if the purpose, period and other terms of the roll over and all other material details of the scheme including the likely composition of assets immediately before the roll over, the net assets and net asset value of the scheme, are disclosed to the unitholders and a copy of the same has been filed with the Board:
Provided further that such roll over will be permitted only in the case of those unitholders who express their consent in writing and the unitholders who do not opt for the roll over or have not given written consent shall be allowed to redeem their holdings in full at net asset value based price.”
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