Mutual Fund Capital Gains Calculator

Published: February 27, 2014 at 4:54 pm

Last Updated on September 4, 2018

If I were to redeem an amount today from your mutual fund holding,

  • What would be the short term capital gain?
  • What would be the long term capital gain?
  • What is the tax corresponding to these gains?
  • what amount is free to be redeemed from an ELSS fund?
  • How would I lose due to exit load?

Here is a calculator that answers the above questions (updated for FY 2015-16). Use  it to compute short term and long term capital gains with associated tax from equity and non-equity mutual funds. This sheet is part of the automated mutual fund and financial goal tracker. I thought it might be a good idea tofirst post the capital gains module as a stand-alone sheet. This might help one in understanding the difficulties involved in computing short-term and long-term capital gains (STCG and LTCG) tax for mutual funds.

This also gives me a chance to implement your feedback on this sheet in the tracker.  Dr.G.M.Ajit who reviewed the fund/goal tracker was insistent that I include LTCG taxation with indexation.  Although I was initially reluctant, I decided to put it in, as it would prove helpful. I thank him for pushing me to include indexation. Here is what this sheet can do: Inputs:

  1. Latest NAV with date
  2. All transactions in that holding.  This is a bit of a pain as it would involve getting the since inception account statement, copying it onto a blank excel sheet and then to this sheet. Unfortunately not much can be done about this as all transactions are necessary to calculate LTCG/STCG (see below). In the automated tracker, naturally the user will be spared from this trouble.
  3. Redemption amount
  4. Lock-in period if any
  5. Type of fund: equity or non-equity (all debt funds, fund of funds, gold funds, ETFs, balanced funds with less than 65% equity are non-equity funds)
  6. Tax slab
  7. Exit load information: multiple durations and loads can be entered.
  8. All redemptions from equity funds are subject to a securities transaction tax 0.001%. I had earlier neglectedbut I chose to put it in following a suggestion by Narendra Kondajji who runs Procyon Financial Planners Pvt Ltd. He suggested that I keep all tax-rates as inputs so that future changes in tax-rules can be accomodated.

Output:


Taking into account the above input, the sheet will give the STCG and LTCG along with corresponding tax to be paid.

The sheet will calculate the age of mutual fund units corresponding to each purchase and apply lock-in, exit load and taxation information based on the unit-age.

Equity Funds (min 65% Indian equity)

Short term capital gains: Any gain made within or equal to one year of purchase.

STCG =  Sale price – purchase price

STCG is taxed at the rate of 15.45% for those with a net taxable income of less than Rs. 1 Crore

STCG is taxed at the rate of 16.995% for those with a net taxable income of more than Rs. 1 Crore

Thanks to Soubhagya Kumar Patra, co-founder, Succinct Financial Planners for pointing out the above distinction.

Long term capital gains:

Any gain made after one year of purchase is tax-free Since April 2018, this is now 10% for gains above 1L after accounting for tax free gains up to Jan 31st 2018. See Equity LTCG Tax With Grandfathering Explained: Video + Calculator

Non-equity funds

Short term capital gains: Any gain made within or equal to 3 years of purchase.

STCG =  Sale price – purchase price

STCG is added to income and taxed as per slab

Long term capital gains:

Any gain made after 3 years of purchase for non-equity funds. This has to be computed with indexation.

Indexation means, I ask,

In the financial year of purchase the cost inflation index (CII) was 200 (say). Today, that is in the financial year of redemption the CII is 300 (say).  What is my purchase worth today?

This is given by (purchase price x 300)/200 = Indexed Purchase price

(same logic as elementary math: If five people eat 7 samosas, how many samosas will 13 people eat?!)

Therefore:

LTCG (without indexation) = Sale price (redemption value) – Purchase price (this is no longer available for debt mutual funds)

LTCG (with indexation) = Sale price – Indexed Purchase Price

With indexation, it is taxed at the rate of 20.6% (Thanks to Deepesh for pointing errors in this section).

Why input all transactions for calculating capital gains?

If I had made a single purchase a while back and seek to know capital gains if I redeem today, there is not much of a problem.

If I have a SIP running, I will be buying mutual fund units each month.

After a couple of years, some units will be subject to LTCG and some to STCG (depending on my redemption amount) owing to their different ages.

Some units will be subject to a lock-in (if applicable) and some free to be redeemed.

Some units will be subject to an exit load and some free from it. The exit load may differ among the units that will be subject to an exit load!

Some units subject to an exit load will be part of STCG and some part of LTCG!

If I have 1000 units, and want to redeem an amount worth 100 units (as per latest NAV), I will have to consider the first 100 units purchased.

That is redemption is on a first-in, first-out basis (FIFO). Therefore, everything hinges on the age of the units corresponding to each transaction.

When you try to compute LTCG with indexation, the financial year corresponding to each purchase and the cost inflation index also have to be considered.

Therefore, a mutual fund capital gains calculator should take into account all these factors!

This is what I have attempted to do in this sheet.

If you have only a handful of transactions (~ 25) to consider, you can use this sheet comfortably.

For more transactions, I suggest you wait for automated tracker.

In any case do use this sheet and let me know your feedback.

If you are interested in tax calculations and Excel, I request you to go through the computation cells and check the sheet.

Download the mutual fund capital gains calculator

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