Mutual fund investment like all other investment whether movable or immovable in nature have to reported while filing ITR and on some of the mutual fund types say for eg: ELSS or tax saving mutual funds, investors are allowed a deduction up to Rs. 1.5 lakh invested in a year under the provisions of Section 80C.
Interestingly, investors off late have been claiming deductions on other mutual fund categories which as per the provision of Section 80C allow deduction only for ELSS.
So, while you may be considering to file the ITR for the financial year 2017-18, as the deadline of July 31, 2018 is fast approaching, here is a quick checklist to help you understand how to go about your mutual fund investment when computing tax liability.
1. Investment in debt funds allows indexation benefit i.e. price is adjusted for with respect to inflation and taxed accordingly whereas equity funds attract LTCG if held for over a year's time @ 10% in case the gains are over and above Rs. 1 lakh mark.
2. Tax savings through allowed deductions is allowed only in case of ELSS or tax saving funds under section 80C. ELSS have a lowest lock-in of 3 years amongst all other 80C options.
3. Dividend earned from investment in mutual fund dividend schemes need to be reported and declared in the ITR.
4. Equity mutual funds will attract LTCG but will remain exempt in case of profits booked until March 31, 2018.
5. Liquid fund investments if redeemed also need to be declared with respect to short or long term capital gains.