Realized profit / loss in Mutual Funds being shown separately in Demat account.?

Kindly explain the difference between realized and unrealized profit/loss of mutual funds (Growth) being shown separately in Demat account. What are the implications of both, as far as return on investment and taxability are concerned?

Consider this example:

You have invested $1000 in XYZ Fund (Growth) which does not pay dividends but accumuates its value.

Now Vlue of the fund rises to $1200 and you decide to sell half of your investment. So in this case you $500 worth of investment will have a value of $600 that means you have a gain of $100. This gain is called realised gain because you have sold off the funds. And in case of another $500 which is still invested and the gains on it is unrealised because yo have not yet sold this investment and it can move up further and may come down too.

So in your portfolio the realised gain will not change once it is realised but the unrealised gain may change next time you get your statement because the market value of the remaining $500 investment may change.

The returns on Investment.

In first case it would be 20% annualised realised and in the other case it would be 20% annualies unrealised. (assuming the investment is one year old). Next time you get statement it may change. and for that you will have to do some more calculation for annualised rate of return.

Now the tax matter.

You dont have to pay any taxes on unrealised gain as it is not yet encashed/earned. You have to pay taxes as per the law on the amount of realised gain.

In India, Long Term Capital Gain on Mutual Fund is exempt from tax. Long term means holding for more the one year.