Applicability of capital gain

[Guest]

Whether switching to another find in mutual fund for a portfolio leads to transfer and to invite capital gain or loss even if no transaction takes place?

[CAGOPALJI AGRAWAL]

No,since for transfer, there must be two parties, transferer and transferee hence one can not transfer any asset to oneself.

[DEV KUMAR KOTHARI]

If a unit holder switches from X units to Y unit- there is exchnage involving two transactions - sale of X unit and purchase of Y unit. Therefore, computation of profit or loss or capital gain or loss has to be made for transfer of X unit. Consideration being agreed value of Y units acquired in exchnage of X. In case there is a conversion by MF, then matter can be different, in that case the cost of original units will become cost of new units and the period of holding will be reckoned from date of acquisition of old units.

[Guest]

Switching of fund scheme even within the Fund is also equal to transfer and would attract capital gains/loss provisions.

AI Summary

Debate on Capital Gains: Does Switching Mutual Funds Count as a Transfer Under Tax Law? Different Views Explored. A discussion on the applicability of capital gains in mutual fund switches raised questions about whether switching funds within a portfolio constitutes a transfer. One expert argued that a transfer requires two parties, thus switching does not qualify. Another countered that switching involves selling and purchasing units, necessitating capital gain or loss computation. A third contributor agreed, asserting that switching schemes within a fund is a transfer, triggering capital gains or loss provisions. The discussion highlighted differing interpretations of tax implications in mutual fund transactions.