How Much Tax Do You Pay on Mutual Fund Gains in India?

Learn about mutual fund tax rules: equity funds taxed at 10% LTCG, debt funds at 20% after indexation, and short-term gains per income slab.

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Taxability of mutual funds depends on the type. Equity funds held for over a year incur a 10% long-term capital gains tax on gains exceeding ₹1 lakh. Debt funds held for more than three years attract a 20% tax after indexation benefits. Short-term gains on both are taxed according to your income slab.

FAQs & Answers

  1. What is the long-term capital gains tax on equity mutual funds? Equity mutual funds held for more than one year are subject to a 10% long-term capital gains tax on gains exceeding ₹1 lakh.
  2. How are debt mutual funds taxed in India? Debt mutual funds held for over three years are taxed at 20% after applying indexation benefits on the gains.
  3. Are short-term gains from mutual funds taxable? Yes, short-term gains from both equity and debt mutual funds are taxed according to your individual income tax slab.
  4. What is indexation benefit in mutual fund taxation? Indexation adjusts the purchase price of debt mutual funds for inflation, reducing the taxable capital gain and thereby lowering the tax liability.

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