EXCHANGE TRADED FUNDS (ETF)

The tax on redemption of equity ETFs depends on the period of holding. If the holding period is more than a year, then there is long-term capital gain. It is exempt if the gain is up to Rs.1 lakh. For long-term capital gain of above Rs.1 lakh, the tax liability is 10% without indexation benefits. However, if the holding period is less than 12 months, then 15% tax liability arises from short-term capital gain.

In ETF (other than equity) and FOF, if the holding period is less than 36 months, there is short-term capital gain. Income from such sales is included in the normal income, and tax is calculated as per normal slab rates. Also, the tax liability of 20% (with indexation benefits) is calculated if long-term capital gain arises from selling such assets. The FOFs are treated as debt funds regardless of any of the schemes they invest in.

* subject to tracking errors

Net asset value (NAV)

Like a mutual fund, an ETF also has an end of the day Net Asset Value (NAV).NAV tells you the total value of all the fund’s assets and yours. An ETF trades real-time, whereas NAVs are only announced at the end of the day. So how do you figure out if the price you are paying for an ETF is fair in real-time?

Check iNAV

Intraday or indicative net asset value (iNAV)

Given that ETFs trade real-time, you need a reference point to see if the market price you see on your trading platform is a fair one and the indicative or intraday NAV (iNAV) serves as that reference. AMCs usually calculate this every 10-15 seconds and publish it on their websites. This serves as a real-time NAV so that you can use this as a fair value reference to compare it with the current market price on the stock exchanges.

ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. AMFI Regn. No.: ARN-0845. We are distributors for Mutual funds. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Please note, Mutual Fund related services are not Exchange traded products and I-Sec is just acting as distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein mentioned are solely for informational and educational purpose.