![\"\"](\"https://wp.mprofit.in/wp-content/uploads/2019/08/Cap-Gains-rate-table-v2.png\")
Every year, regardless of whether markets perform or not, investors often find themselves scrambling to compute and report capital gains accurately and on-time. One thing we can all agree on is how enormously tedious this process can be. So let’s break it down. What are the key things you need to keep in mind?
\n\n\n\nFirstly, capital gains must be computed using the First-In-First-Out method. Simply put, this means that when you sell your shares/units, you sell your oldest shares/units first and do your calculations accordingly.
\n\n\n\nSecond, you need to account for various Corporate Actions while computing capital gains as per Income Tax rules; these transactions include Bonus, Split, Merger and De-merger.
\n\n\n\nThird, for Debt MF & Gold Bonds, you must compute your capital gains with Indexation. To add to this, capital gains on Debt MF & Gold Bonds sold after April 1st 2017 must use revised CII numbers with the updated base year of 2001, as recently mandated in Budget 2017.
\n\n\n\nIn 2018, the Indian Government introduced a 10% LTCG tax on Stocks and Equity MF with the caveat that any gains accumulated until January 31st 2018 will not be taxed. This is where the complexity of grandfathering capital gains comes into play.
\n\n\n\nYour Stock and Equity MF long term capital gains on assets sold on or after April 1st 2018 are now subject to Grandfathering.
\n\n\n\nThis means that for any such assets that you have held prior to January 31st 2018, you must deduce the real Cost of Acquisition (CA) by comparing your original Purchase Price (PP) and your Selling Price (SP) with the price of the asset on January 31st 2018 (FMV). For a more detailed overview of Grandfathering, click here.
\n\n\n\nNot only is this an immensely tedious process, accounting for corporate actions also complicates things further.
\n\n\n\nFor example, if you’ve held Bharat Electronics since August 2015 and its price on 31st January 2018 was ₹ 169. Now if Bharat Electronics were to declare a stock split in the ratio of 1:2, your FMV will consequently change and this could also change your Cost of Acquisition for Bharat Electronics.
\n\n\n\nIn this example, we have only one security with one corporate action. But you might hold a large portfolio comprising many stocks and mutual funds, each with a history of multiple corporate actions. You can realize how enormously difficult it is for you to calculate your Grandfathered gains for all your holdings.
\n\n\n\nIn addition to accurately computing your capital gains on stocks, mutual funds and traded bonds (with indexation), MProfit supports capital gains with Corporate Actions and Grandfathering for all Stocks and Equity MF. MProfit also gives you detailed Capital Gain reports, including one that presents your gains sorted by long-term, short-term and intra-day in an Income Tax Return (ITR) format (see image below). You can simply provide this to your CA for tax-filing purposes.
\n\n\n\nMProfit keeps up-to-date with the latest regulatory changes. For instance, to help you stay current with a recent mandate, MProfit gives you ISIN details for all assets in our Capital Gains ITR Format report. If you are an MProfit user, you do not need to tediously procure such details yourself. MProfit helps you ensure that your returns filed are accurate and saves you a significant amount of time while doing so!
\n\n\n\n![\"\"](\"https://wp.mprofit.in/wp-content/uploads/2019/08/Capital-Gains-ITR-sample-1-1024x645.png\")
So here’s what you need to do:
\n\n\n\nAlways know that our Support Team is here to help! If you have any questions, give us a call at (022) 4002-4149 during our business hours or email us anytime at support@mprofit.in and we will respond to you shortly.
\n","wordpress_id":7107,"tags":null,"featured_media":{"localFile":{"childImageSharp":{"fluid":{"aspectRatio":1.811023622047244,"src":"/static/4fcb6fd457156eb482b468fe4961c5db/63f01/ca-2x.png","srcSet":"/static/4fcb6fd457156eb482b468fe4961c5db/75015/ca-2x.png 230w,\n/static/4fcb6fd457156eb482b468fe4961c5db/65062/ca-2x.png 460w,\n/static/4fcb6fd457156eb482b468fe4961c5db/63f01/ca-2x.png 920w,\n/static/4fcb6fd457156eb482b468fe4961c5db/35a91/ca-2x.png 1380w,\n/static/4fcb6fd457156eb482b468fe4961c5db/49775/ca-2x.png 1840w,\n/static/4fcb6fd457156eb482b468fe4961c5db/34ba7/ca-2x.png 2394w","sizes":"(max-width: 920px) 100vw, 920px"}}}}},"allWordpressPost":{"edges":[{"node":{"title":"Decoding the Mutual Fund Factsheet","excerpt":"The Mutual Fund Factsheet houses crucial details about the scheme, encompassing its objectives, portfolio, risks, returns, & more. In this blog, we delve into the key indicators in the MF Factsheet that shed insights on equity and related MF schemes. The Mutual Fund Factsheet includes quantitative parameters that provide statistical insights into a mutual fund’s […]
\n","slug":"decoding-the-mutual-fund-factsheet","content":"\nThe Mutual Fund Factsheet houses crucial details about the scheme, encompassing its objectives, portfolio, risks, returns, & more.
In this blog, we delve into the key indicators in the MF Factsheet that shed insights on equity and related MF schemes.
The Mutual Fund Factsheet includes quantitative parameters that provide statistical insights into a mutual fund’s performance, composition, and structure.
Here are a few important metrics to look out for while making investment decisions:
Beta is the volatility of the Mutual Fund with respect to its benchmark indices like Nifty or Sensex.
Beta > 1 indicates that the MF is more volatile than the benchmark.
Beta < 1 indicates that the MF is less volatile than the benchmark.
SD indicates how much the fund’s returns deviate from its average return over a specific period.
A higher SD suggests that the fund’s returns have fluctuated widely from the average, indicating higher volatility or risk.
In simple words, the Sharpe Ratio is the return delivered by the mutual fund per unit of risk taken.
A higher Sharpe Ratio suggests a better risk-adjusted return because the fund is generating more return per unit of risk taken.
In simple terms, it means the number of times the mutual fund has bought/sold equity and related instruments.
Lower Portfolio Turnover means the fund is not buying/selling too many stocks in a year.
TE refers to the divergence between the fund’s performance and its benchmark index.
A lower TE suggests that the fund closely mirrors the benchmark’s returns.
It is one of the most important metrics when choosing index funds.
The MF Factsheet also tells you some important facts about the scheme like:
In actively managed schemes, a fund manager plays a crucial role as he manages the money pooled in by investors.
Any change in the fund manager is updated in the factsheet.
It is the total money managed by the scheme on behalf of the investors.
AUM is a significant metric used to assess the size and scale of an Asset Management Company (AMC) and its ability to manage assets for its clients.
This is a percentage that denotes the fee paid to the AMC to manage your investments.
i.e. the per-unit expense of operating and managing the mutual fund.
Expense Ratios vary from 1 – 2 % depending on the mutual fund scheme.
Portfolio holdings refer to the stocks, bonds, cash equivalents, or other financial instruments that the fund owns.
Understanding portfolio holdings helps investors comprehend the fund’s diversification, risk exposure, and investment strategy.
It is the fee charged by the fund house at the time of buying or selling the MF units.
These loads are subtracted from the invested amount or the redemption proceeds, reducing the returns for investors.
The factsheet contains the scheme returns since inception and returns wrt to the benchmark for a specific period.
It is crucial to note that a fund’s past performance does not guarantee future returns.
The riskometer scale represents the risk associated with the scheme as per SEBI product labelling guidelines.
Each scheme is assigned a specific position on the scale based on its risk profile, & factors such as volatility, market risk, liquidity, etc.
![\"\"](\"https://wp.mprofit.in/wp-content/uploads/2023/12/Riskometer-SEBI.png\")
The Mutual Fund Factsheet is an excellent tool which the AMC publishes for every scheme each month.
One must always read the factsheet before investing and make informed decisions based on your financial goals and risk-return profile.
In the world of investing, there has been a massive shift in recent years towards passive mutual fund strategies, specifically index funds. With the growth of the internet and ease of access to financial education, more investors are becoming aware of the advantages of low-cost, diversified investing. Active vs. Passive Funds First, let’s differentiate between […]
\n","slug":"active-vs-passive-funds-explained","content":"\nIn the world of investing, there has been a massive shift in recent years towards passive mutual fund strategies, specifically index funds.
With the growth of the internet and ease of access to financial education, more investors are becoming aware of the advantages of low-cost, diversified investing.
First, let’s differentiate between the two primary investment strategies: active and passive.
Active investing involves a hands-on approach with a portfolio manager striving to outperform the market’s average return.
Passive investing, on the other hand, involves taking a non-active approach by investing in a diversified portfolio with low costs and a long-term horizon, aiming to match the market’s average return.
![\"\"](\"https://wp.mprofit.in/wp-content/uploads/2023/04/active-vs-passive-investing-1024x1024.jpg\")
One type of passive investment strategy that has gained significant popularity is index funds. Index funds invest in stocks that mimic a stock market index, such as Nifty or Sensex. These funds are passively managed, meaning the fund manager invests in the same securities present in the underlying index, in the same proportion.
Recent reports suggest that passive assets under management (AUM) could grow to ₹ 25 trillion by 2025, potentially representing 37% of overall assets in the MF industry. This significant growth highlights the appeal and advantages of index funds for investors.
![\"\"](\"https://wp.mprofit.in/wp-content/uploads/2023/04/passive-investing-in-India.png\")
![\"\"](\"https://wp.mprofit.in/wp-content/uploads/2023/04/active-fund-performance.png\")
While index funds provide numerous advantages, it is crucial to keep in mind certain factors when investing in them.
Firstly, tracking error (TE) measures the difference between the return of the index fund and the benchmark index it is tracking. Secondly, there is little or no room for alpha in index funds.
By investing in an index fund, the investor is accepting returns that are in line with the index the fund is tracking.
In conclusion, investors should consider a mix of both active and passive funds in their portfolios.
Index funds are an attractive strategy for low-cost, passive equity mutual funds that decrease the likelihood of underperforming the benchmark. Index funds provide an effective and straightforward approach to capture broad market returns with minimal cost and risk.
As per the new Finance Bill, it seems that Taxation rules for Mutual Funds might be changing in the near future. It seems that starting 1st April 2023, gains on Debt Mutual Funds might no longer receive a long term benefit with indexation, and they’ll be taxe as per one’s income tax slab rate. If […]
\n","slug":"understanding-the-basics-of-capital-gain-reporting-in-mprofit","content":"\nAs per the new Finance Bill, it seems that Taxation rules for Mutual Funds might be changing in the near future. It seems that starting 1st April 2023, gains on Debt Mutual Funds might no longer receive a long term benefit with indexation, and they’ll be taxe as per one’s income tax slab rate.
If this change is indeed confirmed, be rest assured that we will accordingly update our Capital Gain reporting in MProfit!
And while we are on the topic, why not a quick refresher on Capital Gains and how MProfit can help you automate this?
If you are short on time, kindly note the following 4 points to automate your Capital Gains:
Now, if you have the time to learn more about Capital Gains, please read ahead.
\n\n\n\nKey points to keep in mind:
\n\n\n\nCurrent taxation structure for FY 2022-2023:
\n\n\n\nThe guidelines below are for FY 2022-23. We will update you separately about changes for the next FY.
![\"\"](\"https://wp.mprofit.in/wp-content/uploads/2023/03/CapitalGains_2020_LatestImage_20_Oct_2020-1024x588.png\")
Simple enough so far? Here’s some more detail
You must compute Capital Gains using the First-In-First-Out method. Simply put, this means that when you sell your shares, you sell your oldest shares first and compute Capital Gains accordingly.
Second, you must account for any applicable corporate actions (like Bonus, Split, Merger or Demerger) while computing Capital Gains for stocks.
MProfit provides an awesome feature that auto-applies corporate actions for your Stocks. While computing your capital gains, we also properly handle each corporate action.
![\"\"](\"https://wp.mprofit.in/wp-content/uploads/2023/03/unnamed-1024x681.png\")
Everyone’s talking about Indexation. But what is it?
Indexation simply put is a means to adjust the cost price of an investment to reflect the impact of inflation on it. This is done to pass on a benefit to investors by considering the effect of inflation on investment returns!
For FY 2022-23, you can get an indexation benefit on your Capital Gains for Debt Mutual Funds and Gold Bonds, as per India’s Cost Inflation Index (CII). Capital Gains in MProfit currently adjust for Indexation where applicable, by using the latest CII data.
And if debt mutual fund taxation guidelines are changing in the near future, we will update our capital gain reporting accordingly. Be rest assured!
MProfit provides Capital Gain reporting for your Stocks, Mutual Funds, Traded Bonds, REITs and InvITs!
Here’s what a sample Capital Gain report in MProfit looks like:
![\"\"](\"https://wp.mprofit.in/wp-content/uploads/2023/03/unnamed-1-1024x385.png\")
Income Tax guidelines are dynamic and investors must adapt!
Last week exemplifies the fact that taxation will always be an evolving topic and that investors must adapt, in order to comply with the latest guidelines.
If you’re an MProfit user, you don’t need to worry! We take care of the details.
Regardless of whether you file your return directly or via a CA, MProfit makes the computation of Capital Gains seamless & automated, as per the latest IT guidelines.
To learn more on the proposed changes to Mutual Fund taxation, read this detailed article.