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Consider the following statements.
- Indexation means adjusting the cost of mutual funds after taking into account inflation in the redemption cost.
- SEBI provides the benefit of indexation for calculation of long-term capital gains (LTCG) on debt mutual funds.
Which of the above statements is/are incorrect?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'B'. Can you explain this answer?
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Most Upvoted Answer
Consider the following statements. Indexation means adjusting the cost...
Incorrect Statement:
b) 2 only: SEBI provides the benefit of indexation for calculation of long-term capital gains (LTCG) on debt mutual funds.
Explanation:
Indexation refers to the adjustment of the cost of an asset, such as mutual funds, to account for inflation. It is a method used to calculate the long-term capital gains (LTCG) on investments.
Statement 1: Indexation means adjusting the cost of mutual funds after taking into account inflation in the redemption cost.
This statement is correct. Indexation is a method used to adjust the cost of mutual funds to account for inflation. It helps in reducing the tax liability on the capital gains made from the redemption of mutual funds. By adjusting the cost of acquisition using the Cost Inflation Index (CII), which is provided by the Income Tax Department, the investor can increase the acquisition cost and reduce the taxable capital gains.
Statement 2: SEBI provides the benefit of indexation for calculation of long-term capital gains (LTCG) on debt mutual funds.
This statement is incorrect. SEBI (Securities and Exchange Board of India) is the regulatory body for the securities market in India. While SEBI regulates and oversees the functioning of mutual funds, the benefit of indexation for calculation of long-term capital gains on debt mutual funds is provided by the Income Tax Department, not SEBI. The Income Tax Act allows indexation benefit for debt mutual funds, which helps investors in reducing their tax liability.
Therefore, the correct answer is option 'B' - 2 only.
b) 2 only: SEBI provides the benefit of indexation for calculation of long-term capital gains (LTCG) on debt mutual funds.
Explanation:
Indexation refers to the adjustment of the cost of an asset, such as mutual funds, to account for inflation. It is a method used to calculate the long-term capital gains (LTCG) on investments.
Statement 1: Indexation means adjusting the cost of mutual funds after taking into account inflation in the redemption cost.
This statement is correct. Indexation is a method used to adjust the cost of mutual funds to account for inflation. It helps in reducing the tax liability on the capital gains made from the redemption of mutual funds. By adjusting the cost of acquisition using the Cost Inflation Index (CII), which is provided by the Income Tax Department, the investor can increase the acquisition cost and reduce the taxable capital gains.
Statement 2: SEBI provides the benefit of indexation for calculation of long-term capital gains (LTCG) on debt mutual funds.
This statement is incorrect. SEBI (Securities and Exchange Board of India) is the regulatory body for the securities market in India. While SEBI regulates and oversees the functioning of mutual funds, the benefit of indexation for calculation of long-term capital gains on debt mutual funds is provided by the Income Tax Department, not SEBI. The Income Tax Act allows indexation benefit for debt mutual funds, which helps investors in reducing their tax liability.
Therefore, the correct answer is option 'B' - 2 only.
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Community Answer
Consider the following statements. Indexation means adjusting the cost...
- Indexation means adjusting the cost of funds after taking into account inflation in the redemption cost. It helps to calculate the new value of investment after considering inflation over the same period.
- The benefit of indexation for calculation of LTCG on debt mutual funds is not available for investments made on or after April 1, 2023 — in those debt mutual fund schemes where less than 35% of the total proceeds is invested in equity shares of domestic companies.
- These investments will now be taxed at income tax rates applicable to your income slab. This will bring investments in debt mutual funds at par with investments in bank fixed deposits.
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Consider the following statements. Indexation means adjusting the cost of mutual funds after taking into account inflation in the redemption cost. SEBI provides the benefit of indexation for calculation of long-term capital gains (LTCG) on debt mutual funds.Which of the above statements is/are incorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'B'. Can you explain this answer?
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