There are some unintended tax implications that are hurting investors. Especially those investors who have invested in Mutual funds. Let me enumerate them:

1. If a couple -say a Husband and Wife are holding the units jointly in a Mutual fund, and on the death of say the second holder, the surviving spouse wants to make it a Joint investment with his children or his sibling, he cannot do it. He cannot change the holding EXCEPT by redeeming and re-investing. This sounds odd, but it is true.
2. If an unit holder in a mutual fund wants to leave his mutual fund investments equally to his 2 children, he will have to create 2 folios! If one child gets everything, he/she will have to redeem and give the cash to the other kid. This will involve taxation.
3. If an investor shifts from investing through a distributor to ‘direct’, he/she will pay Income tax on that transaction – I am sure the law does not intend that, but as of now , that is the law.
4. If an investor withdraws from a poorly performing fund to invest in a well performing fund – there is no cash available to pay the tax! However he can re-invest only 90% as he/she will have to pay LTCG! The provision in respect of Real Estate is very different. Mutual funds and equities should also be brought under the ‘net taxation’ basis – like in the case of Fixed Assets (business) and Real estate.
6. ….many others, but this I thought was urgent…

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