Start Tax implications liquidating mutual funds

Tax implications liquidating mutual funds

When selling, it is best to know the different methods of calculating the basis of shares sold ahead of time, since some methods require that you designate which shares are to be sold.

This is applicable to any asset -- property, stocks, bonds, mutual funds, art, gold, and so on and so forth.

In other words, when you sell your mutual fund units, you incur a capital gains tax.

Debt funds The non-equity funds qualify as debt funds for the purpose of taxation.

So this would include all types of debt funds, international funds, monthly income plans, or MIPs, and Gold ETFs.

Equity funds An equity oriented mutual fund is one where a minimum 65 per cent of the investible corpus is invested in domestic equity.

So gold exchange traded funds, or Gold ETFs, are not treated as equity funds for taxation.

As of now, long-term capital gains on equity funds is nil. If you sell your equity mutual fund before this period, then it qualifies for short-term capital gains, which is 15 per cent.

Another feature of an equity fund is that dividends are not taxed.

All the tax rates mentioned above do not include surcharge and education cess.

After careful consideration, Vanguard has decided to close and liquidate Vanguard Ohio Tax-Exempt Money Market Fund ("the fund").

Mutual funds also distribute dividends received and their own realized capital gains, usually at the end of the year; these distributions, whether taken in cash or reinvested, are taxable (note that the nontaxability of municipal bond funds applies only to dividend distributions; capital gain distributions are always taxable).