Mutual Fund Capital Gains Statement, Explained

The statement is prepared by the registrar or fund house from your transaction records. You do not have to create it yourself, and it is free. It is generated against your PAN, which is one reason PAN matters so much, as our page on investing without PAN explains.

Every time you redeem units or switch from one fund to another, it counts as a sale. The gain or loss on that sale may need to be reported in your tax return.

With a SIP, each monthly instalment is a separate purchase with its own date and price. When you sell, the oldest units go first. Calculating the exact gain by hand across dozens of purchases is slow and easy to get wrong. The statement handles it for you.

Realised gains come from units you actually sold during the year. These are what matter for your tax return.

Unrealised gains are on units you still hold. They show how your investment is doing, but are not taxed until you sell.

A capital gains statement focuses on realised gains. Some versions also show unrealised gains for information.

The two main registrars that maintain records for most fund houses each offer a free capital gains statement on their websites. You usually enter your PAN, email, the financial year, and a password for the file. The statement arrives by email.

Because each registrar covers different fund houses, you may need to request from both to cover all your folios. Your fund house website and investing platform also usually offer it.

Our page on the consolidated account statement explains the related statement that shows all your holdings in one place.

• Scheme name and folio number.
• Date and amount of each redemption or switch.
• The purchase date and cost of the units sold.
• The gain or loss on each sale.
• A split between short-term and long-term, based on how long the units were held.

Most statements also give a summary total at the end, which is the part many people use for their return.

Gains are classified by how long you held the units before selling. The holding period that separates short-term from long-term is different for equity and non-equity funds, and the rules have changed over the years.

The statement applies the classification for you. We do not quote tax rates, because they change and depend on your situation. Our page on mutual fund taxation explains the general structure, and a tax adviser or chartered accountant can confirm your position.

Many people are surprised to see gains on the statement when they never "withdrew" money. That is usually a switch: moving from one scheme to another is treated as selling one and buying the other.

The same applies to systematic transfer plans and systematic withdrawal plans, where every transfer or withdrawal is a small sale. Our pages on switching mutual funds and the systematic transfer plan explain these.

If you hold a fund in the IDCW option and receive payouts, those are generally treated as income rather than capital gains, and may not appear on the capital gains statement.

Check your account statement for any IDCW received. Our page on growth versus IDCW explains the difference between the two options.

If you sold some units at a loss, the statement shows that as well. Under the tax rules, some losses can be set off against certain gains, and some can be carried forward.

This is where a tax adviser adds real value. Do not ignore losses simply because they are negative numbers.

Besides tax filing, the statement helps when applying for a loan or visa that asks for proof of income or investments, when a chartered accountant is preparing your accounts, or when checking whether an exit load was charged on a sale.

It is also a quick way to confirm every redemption you made in a year actually reached your bank.

• Downloading from only one registrar and missing folios held with the other.
• Choosing the wrong financial year.
• Forgetting switches and STPs because "no money came out".
• Using the unrealised gains section instead of realised gains.
• Not keeping a copy for your records.

When you sell part of a holding built through a SIP, the units bought earliest are treated as sold first. This is often called first in, first out.

That is why the statement may show a long-term gain on some units and a short-term gain on others from the same sale. It is normal and the statement shows each part separately.

Save each year statement in one folder, along with your account statements. Tax queries can come up years later, and it is much easier to answer them with the documents at hand.

Our page on how to review your portfolio suggests a yearly routine that includes downloading these statements.

• What: a yearly list of every sale and its gain or loss.
• Where: free from the registrars, your fund house or platform.
• Check: both registrars, the right year, switches included.
• Use: for your tax return, with a tax adviser for the rules.

We are distributors rather than tax advisers. If you need help downloading your statements, get in touch.