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CBDT Circular about capital gains- suitable amendment is desirable A liberal circular about exemption from capital gains on extension of term of units in any Fixed Maturity Plans (FMPs) of mutual funds – binding on AO but seems to be beyond authority of CBDT- amendment in Income-tax Act or Income-tax Rules is desirable

CBDT Circular about capital gains- suitable amendment is desirable A liberal circular about exemption from capital gains on extension of term of units in any Fixed Maturity Plans (FMPs) of mutual funds – binding on AO but seems to be beyond authority of CBDT- amendment in Income-tax Act or Income-tax Rules is desirable - Income Tax - Direct Tax Code - DTC - By: - CA DEV KUMAR KOTHARI - Dated:- 3-6-2015 - REFERENCES AND LINKS: Relevant provisions: Section 2(42A), 45, 47, 295 of Income-tax Act, 19 .....

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ons of the Income-tax Act, 1961 (hereinafter referred to as the Act) prior to the amendment made by the Finance (No.2) Act, 2014, assets in the nature of shares, listed securities, units of mutual funds and zero coupon bonds qualified as long term capital assets if held for a period of more than twelve months as against the holding period of more than thirty-six months in case of other assets. Accordingly, units of a mutual fund under the Fixed Maturity Plans (FMPs) held for a period of more tha .....

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tal gains if the unit was held for a period of thirty-six months or less. 2. FMPs are closed ended funds having a fixed maturity date wherein the duration of investment is decided upfront. The funds collected by FMPs are invested by the Asset Management Companies (AMCs) in securities having similar maturity period. To enable the FMPs to qualify as a long-term capital asset, some AMCs administering mutual funds have offered extension of the duration of the FMPs to a date beyond thirty-six months .....

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s informed that Regulation 33(4) of the SEBI (Mutual Funds) Regulations, 1996 allows the rollover of close-ended schemes. Such regulation provides the following:- (4) A close ended scheme shall be fully redeemed at the end of the maturity period: Provided that a close-ended scheme may be allowed to be rolled over if the purpose, period and other terms of the roll over and all other material details of the scheme including the likely composition of assets immediately before the roll over, the net .....

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resaid regulation the scheme remains the same and it does not constitute a different scheme. 4. In the case of mutual funds, the unit of a mutual fund constitutes a capital asset and any sale, exchange or relinquishment of such unit is a 'transfer' under clause (47) of section 2 of the Act. The roll over in accordance with the aforesaid regulation will not amount to transfer as the scheme remains the same. Accordingly, it is hereby clarified that no capital gains will arise at the time o .....

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be redeemed as per terms and conditions agreed at the time of issue, That on scheduled date of redemption the unit will be a short-term capital asset, That if unit is redeemed on scheduled date, there will be short term capital gains. That if the tenure or term is extended by mutual fund in any manner say by issue of new units under the same scheme or by rollover of the old units into new units though under the same and / or similar scheme That as per meaning of transfer such rollover involv .....

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