–Mukul Chikhalkar
Since you have been investing in mutual funds only for a year, it will not be a great idea to sell your investments. Since you have not shared the details of your investments, we will not be able to offer you a detailed response. However, here are some pointers you may find useful.
When you sell your mutual fund investments, you need to pay taxes. If you’re selling your equity mutual funds before a year, you need to pay a short term capital gains tax of 15%. If you sell it after a year, it will attract long term capital gains tax of 10%. If you are selling your debt mutual funds before three years, gains will be treated as short term capital gains and taxed at applicable individual tax slab. If investments are sold after three years, they will qualify for long term capital gains tax at 20% with indexation benefits.
As you can see, you need to include taxes before deciding to sell your investments. Next, you also should remember that equity mutual funds are meant for long term goals. These investments can be extremely risky and volatile, especially in the short term. For example, if you are selling your investments you have stated a year ago, you may be incurring a loss. Or at best, you may have made modest gains after taxes. Your debt mutual funds will attract high taxes as they have completed only a year.
A better way would be to divert your enquiry mutual fund investments to ELSS funds. ELSS funds also invest in stocks and the only difference they have is the mandatory lock- in period of three years. So, you can stop your SIPs in equity funds and start a SIP in ELSS funds. Remember, you can invest only Rs 1.5 lakh in ELSS funds and claim tax benefits in a financial year.
Your tax planning should be part of your overall financial planning. For example, if you have made provisions for investing in equity mutual funds, it should also include ELSS funds. Always try to increase your savings and investments in line with your salary increase every year. Try to save more instead of redeeming your investments to take care of your tax planning.
