What Is the Tax Rate on Mutual Fund Withdrawals? Explained with Holding Periods

Learn the tax rates on mutual fund withdrawals based on fund type and holding period for effective tax planning.

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The tax rate on mutual fund withdrawal varies based on the type of fund and the holding period. For equity mutual funds held for more than a year, the long-term capital gains tax is 10% on gains exceeding ₹1 lakh. For debt mutual funds and those held for less than a year, the gains are added to your income and taxed according to your income tax slab rates.

FAQs & Answers

  1. What is the tax rate on long-term capital gains from equity mutual funds? Long-term capital gains on equity mutual funds held for more than one year are taxed at 10% on gains exceeding ₹1 lakh.
  2. How are short-term gains from mutual funds taxed? Short-term gains from mutual fund withdrawals, including those held for less than a year, are added to your income and taxed according to your applicable income tax slab rates.
  3. Are debt mutual fund withdrawals taxed differently from equity mutual funds? Yes, gains from debt mutual funds are added to your income and taxed according to your income tax slab rates unless held for the long term with different tax treatment.

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