34.1 As stated in para 32.1, any exchange or conversion of a capital asset is liable for capital gain tax. In case of Mutual Fund (MF), Finance Act 2016 had provided that consolidation of plans of mutual funds will not be chargeable to tax. However, corresponding provisions of period of holding the unit of MF and cost of acquisition were not amended.
34.2 Finance Bill therefore provides the following:
i) Period of holding the units of consolidated plan of MF scheme will be considered from the date of acquiring the units before consolidation.
ii) Cost of acquiring units will be the original cost of purchase of units.
This amendment will be effective from FY 2017-18 onwards. However, the main provision exempting such transfers came in to force from last year, i.e., FY 2016-17. It seems to be a lacunae and the Finance Act should ideally correct the date of applicability of this provision.