Mutual Funds

Could someone explain how are taxes calculated on mutual funds?

Answer

2 years ago

Mutual funds can be either Equity mutual funds or Debt funds, tax implications for both the funds can differentiate. Here’s how your funds will be taxed:

Equity mutual funds:

If investment in mutual funds is sold after a year, any gain realized on such investment shall be treated as Long-term Capital Gain and will be taxed at the rate of 10%. However, if the said investment is sold within 1 year of holding/buying, any gain realized on the same shall be treated as short-term capital gain and will be taxed at the rate of 15%.

Debt and other funds:

If investment in these funds is sold before the expiry of 36 months from the date of acquisition, any gain realized shall be treated as a short-term capital gain. Whereas, if the investment is sold after the expiry of 36 months, the same shall be treated as long-term capital gain and to be taxed at a rate of 10%.

Hedge funds have not been given pass-through status on tax in India. This means that any income from these funds becomes taxable at the investment fund level and tax-implications will not pass to the unitholders. Therefore, investors need not pay taxes on hedge funds. However, there is clarity on the way these funds are taxed.

If you are looking for professional assistance on your investment, I will suggest you should consider IIFL securities’ mutual fund platform for better assistance

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