Home / Mutual Funds / News /  Booked profit over 1 lakh in Mutual Fund investments? Here's how you can save taxes on capital gains
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Capital gains earned over and above 1 lakh on your investments are taxed at 10%. But if the calculations and further investments are done properly, the same can be reduced significantly.

Here are the two ways to do it:

if the calculations and further investments are done properly, the same can be reduced significantly. Experts often refer to this method as the smartest way of saving taxes on capital gains. To use this method calculatively, the investors who have gained significant profit from their MF investments can redeem that to reinvest again, and this way a chunk of money as taxes can be saved. 

Let’s suppose, for a particular year, you have booked a profit of 4.9 lakh from an MF investment of 4 lakh. Since the gains are below the 1 lakh threshold, hence, not taxable. But calculating for the next cycle, you redeem the entire amount and invest it again in the same fund. And the next year, you make gains 70,000 on the 4.9 lakh investment and the total corpus becomes 5.6 lakh. Again, since the profit is less than 1 lakh, it is not taxable.

But, if you hadn't used this method, your gains would stand at 1.6 lakh, of this, 60,000 would be taxable. 

Tax-loss harvesting: Through tax-loss harvesting, capital loss from one fund can be used to adjust taxable capital gains from another. 

Let us say that in a year, one incurred capital gains worth 2,50,000 from a particular equity mutual fund investment. And for this, the taxable capital gains would be 1,50,000.

At the same time, he incurred a capital loss worth 1,20,000 from another fund in the same year. Then, this loss would be adjusted against the taxable capital gains of 1,50,000 from the previous fund.

So, this way, even in a bad year, a bad investment can add value to your portfolio. 



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