Now Reading: SWP for home loan prepayment may risk tax exemption, warns expert
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SWP for home loan prepayment may risk tax exemption, warns expert
SWP for home loan prepayment may risk tax exemption, warns expert
Taxpayers considering Systematic Withdrawal Plans (SWPs) from mutual funds for monthly home loan prepayments risk losing capital gains exemption under Section 54F, says Cleartax founder Archit Gupta. Each SWP payout is treated…
The Story in Brief
Taxpayers considering Systematic Withdrawal Plans (SWPs) from mutual funds for monthly home loan prepayments risk losing capital gains exemption under Section 54F, says Cleartax founder Archit Gupta. Each SWP payout is treated as an independent transaction, potentially conflicting with the section's reinvestment timelines and the Capital Gains Account Scheme. Gupta recommends a single, consolidated lump-sum redemption of long-term capital gains within the prescribed one-year window before or two years after the property sale. This approach provides a clearer audit trail and reduces compliance risks, though the full or proportionate exemption remains available under both old and new tax regimes if core investment criteria are met.
The Indian Opinion
The loudest narrative here is that SWPs simplify home loan payments without tax consequences. Archit Gupta punctures that. Each monthly withdrawal is a separate tax event that can break Section 54F's reinvestment timeline and trigger income-tax scrutiny. The test is simple: can a consolidated lump-sum redemption within the required window beat the convenience of staggered payouts? The taxman's automated flags will decide.
Source: livemint.com
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