In a relief to the mutual fund investors when it comes to merger of schemes, the government has proposed in Union budget to take into consideration the holding period of the units held in the erstwhile schemes for taxation purposes. Further, the cost of acquisition of the units in the consolidated plan will be the cost of units in the merged plan. The amendments will come into effect from April 1, 2017 and will be applicable in the assessment year 2017-18.
A Balasubramanian, chief executive officer (CEO) of Birla Sun Life Mutual Fund, told Business Standard, “It is effectively to clarify that consolidation of schemes taking into account the holding period of consolidating schemes and it is a clarification to the earlier section …It is a good move and there is no grey area (left).”
According to Sundeep Sikka, CEO of Reliance Nippon Mutual Fund, “This is a clarificatory amendment to last year proposal wherein consolidation of plan (merger of plan within the same scheme) was exempted from capital gains. However the provision failed to recognise the original period of holding and the cost of the acquisition. With the current provision exemption of holding period as original cost of acquisition is extended to consolidated scheme whereby making it tax neutral to the investor and will now pave the way for MF to consolidate various plans like daily dividend, monthly dividend, among others.”