Due to LTCG tax implication beginning April 1, the net inflows in the otherwise popular equity mutual funds category tanked to a 20-month low of Rs. 2,954 crore in the last month of the FY 2017-18. This clearly is an indication that a major chunk of investors redeemed their positions in profitable equity schemes held for more than year to claim the exemption available in respect of LTCG until March 31, 2018.
It was in July 2016 when this figure had dropped below the Rs.3,000 crore mark to Rs. 2,221 crore on a monthly basis.
The Union Budget 2018-19 reinstated long term capital gains tax on equity sold after a year @ 10% on gains over Rs. 1 lakh. Previously, long-term capital gains on equity did not attracted tax liability.
Between July 2017 and February 2018, the net inflow into equity category remained above Rs. 12000 crore in each of the month and in August and November of 2017 even crossed the Rs. 19500 crore mark in net inflow.
As per an asset management company, investors in equity mutual funds had in total put a redemption request for mutual funds worth more than Rs. 36,000 crore in March 2018.
Meanwhile, tax-saving funds in the last month of the FY 2017-18 witnessed a heavy inflow to the tunes of Rs. 3,703 crore in March, which is a more than 100% increase in comparison to Rs. 1,585 crore aggregated in February 2018, thanks to the tax planning regimen of most taxpayers during the month