The Central Board of Direct taxes (CBDT), the apex administrative body for taxation in India, recently issued Circular No. 6 of 2015 (dated 9 April 2015), clarifying that rollover of fixed maturity plan (FMP) in accordance with the applicable SEBI (Mutual Funds) Regulations, 1996 (Regulations) will not amount to transfer under the provisions of the Income Tax Laws (ITL) and investors will not be liable to capital gains tax at the time of exercising their option to continue in the same mutual fund scheme.
This alert highlights the above CBDT Circular.
This is a welcome clarification from the CBDT and it addresses the concern which had arisen on account of rollover proposed by AMCs of debt oriented mutual funds post the amendment in the ITL in July 2014 whereby the holding period for the units of FMP to turn long term was extended from 12 months to 36 months. The CBDT Circular being clarificatory in nature would also apply to rollover option exercised by the investors in the past. This clarification is in line with the intent of the present Government to provide certainty and stability of tax regime in India
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