Last date for tax filing for AY2009-10

The last date for filing income tax this year is July 31, 2009 - I think!  I have been trying to determine this date but there is no "official" place where I can confirm this.  None of the income tax websites provide this information so easy enough for me.  I did see another blogger mention the date as 31st July but I am not sure.  Anybody who can provide me with the link on the Income tax website?  Thanks

Oops! I have a long term capital loss

I just figured out that one of the scrips I hold is in the red and I have crossed one year period of holding it. The scrip over the year had only reached a modest 10% gain which was quickly wiped out by the recent market downturn and add to that we just celebrated one year of ownership! So I was contemplating selling it off and to my dismay I found that I cannot write the loss off against any other gain.

The way I see it, short term losses can be written off against short term gains but long term losses cannot be set off against long term gains since they are not taxable anyway! So it seems I need to just sell it and swallow my loss (and pride :-) )

Advance tax date is approaching

Well folks the individual advance tax due date is approaching soon. March 15th 2007 is the big day before you pay the last installment of advance tax. Please do so to avoid additional penalty later.

Update : You can pay advance tax online at NSDL website

Mutual funds - Growth vs Dividend - What should we choose?

Some time back I had posted an entry where I had recommended that in mutual fund world, choosing the 'Growth' option is the way to go and the 'dividend' option whether you take the cash out or you reinvest it, is really a pain from a management perspective. I have been thinking about this choice further and I want to refine my recommendation a little bit more considering the current tax laws prevalent in India.

Indian tax laws for equity mutual funds (funds that invest > 65% of their corpus on common stock) specify that

1. Short term ( less than one year) capital gains tax is 10%
2. Long term capital gains is 0%
3. Dividends paid are non-taxable
4. Security transaction tax (STT) of 0.1% has to be paid on all SELL transactions

Indian tax laws for debt mutual funds specify

1. Short term capital gains is treated as income (basically added to salary and taxed at the tax bracket you belong to)
2. Long term capital gains is 10%
3. Dividends paid are non-taxable in the hands of the investor but they undergo a tax called dividend distribution tax (DDT) (12.5% + surcharge + education cess) that the fund has to pay before declaring dividend. This effectively reduces the quantum of the dividend in your hands
4. There is no STT.

So if you are in the highest tax bracket, it might make sense to opt for the dividend option when you are buying debt mutual funds since effectively you pay onl 13.xx% as tax on the dividend as DDT as compared to growth option.

For equity mutual funds, the verdict is very clear folks - growth is the direction in which you should be going.

Gold funds in India - Unanswered questions

With the Indian government appoving gold based mutual fund schemes, there is obviously a rush by various mutual fund companies to start Gold funds and Gold ETFs in India. Knowing Indian and their love for gold, this could be a huge success story for the fund houses. There are still a few questions that I don't have an answer for today but it would be good to know.

1. What is the tax implication for buying gold? Do we get tax rebates for buying a gold MF?
2. Would a gold MF be treated as an equity MF or a debt MF with associated tax implications?
3. When I sell my holding in the fund, do I have any extra exit loads because of liquidity risks?
4. Will the price of the fund ever differ from the gold price? Considering this is more liquid than physical gold and traded mostly electronically, I would imagine that such advantages should allow the price of the fund to be at a premium to actual gold. Would this be the case?

So many unaswered questions in my mind. Any prudent reader would point out that we never asked such questions when we bought and sold gold so why now? The answer is that by bringing a structured investment tool, I would like to peg my risk level to that of buying and holding gold while leveraging the capabilities that a financial instrument can give me. Hence the questions.

You can always buy gold in T.Nagar... that institution would exist as long as Indians abound!