Taxation of Mutual Funds

In India, tax is applicable only on the realized capital gains. Let’s understand how taxation works for debt and equity mutual funds.

Taxation is a drain but still you should pay to have peace of mind

Debt Mutual Funds

Dividend

Dividend income is taxable income and is taxed at the slab rates applicable for FY 2022-23.

Short Term Capital Gains

When you redeem your investments within three years from the date of investment, you will have to pay tax on the gains. These gains will be added to your income and will be taxable as per your tax slab.

Long-Term Capital Gains

When you hold your investment for at least three years, those gains will be treated as long-term capital gains. Those investments will be taxable at 20 % after indexation. Keep in knowledge that your entire gains will not be taxable, but only your indexed gains will be taxable.

Equity Mutual Funds

Dividend

Dividend income is taxable income and is taxed at the slab rates applicable for FY 2022-23.

Short Term Capital Gains

When you redeem your investment within one year, you need to pay tax on your gains. Those gains are known as short-term capital gains. Short-term capital gains are taxable at the rate of 15%.

Long-Term Capital Gains

When you redeem your investment after holding them for a year, your gains are taxed at 10%.

MF taxation