In a major relief to investors, the rollover of fixed maturity plans (FMPs) offered by fund houses beyond 36 months will not attract capital gains. A tax of 20% will be charged at the time of redemption of FMPs. The Central Board of Direct Taxes has issued the clarification with regard to taxation on rollover of FMPs beyond 36 months. FMPs are closed-ended funds having a fixed maturity date where the duration of investment is decided upfront.
Finance minister Arun Jaitley had last increased the concessional capital gains tax rate from 10% to 20% on debt-oriented MFs and also the holding period from 12 months to 36 months. Short-term capital gains are taxed at the rate of individuals.
As a result, gains arising out of any investment in FMPs made before 7 July 2014 and sold/ redeemed after the date would be taxed as short-term capital gains if the investment was held for a period of 36 months or less.