Taxation Of Debt Mutual Funds After 1 April 2023
- sn ps
- Apr 2
- 1 min read
The Budget 2023 has brought about certain amendments that imply that a Specified Mutual Fund will no longer receive indexation benefits when computing long-term capital gains (LTCG). Therefore, debt mutual funds will now be taxed at the applicable slab rates. Moreover, indexation benefits will not be available for LTCG on gold mutual funds, hybrid mutual funds, international equity mutual funds, and funds of funds (FOF).
Taxation Of Debt Mutual Funds Before 1 April 2023
Earlier, the taxation of debt mutual funds was governed by the holding period rule:
Short-Term Capital Gains: If the debt mutual fund unit is sold within 36 months (three years) of purchase, the gains are termed short-term capital gains (STCG). These STCGs were taxed at slab rates.
Long-Term Capital Gain: However, if they were sold after 36 months, then the gains were termed long-term capital gains (LTCG). These long-term capital gains were taxed at 20% with an indexation benefit. Indexation benefit means the gains made by investors were adjusted for inflation.
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