Taxation on capital gains depends on the time for which you stay invested in them, which is known as holding period of mutual funds. Below table gives a specific classification of short-term and long-term

Holding Period

Short-term

Long-term

Equity & Balanced Fund

Less than 12 months

12 months & more

Debt Fund

Less than 36 months

36 months & more

Image Source: cleartax

For example, if you opt to redeem your Equity funds after 2 years, then the tax-rate applicable to your long-term capital gain amount would be 10% after deducting 1 lakh. So, if your gain is 1.2 lakhs then 10% will be taxed on Rs. 20000 as 1 lakh is exempted and so no tax to be paid for 1 lakh rupees.

shrinidhi Rajananswered.Taxation on capital gains depends on the time for which you stay invested in them, which is known as holding period of mutual funds. Below table gives a specific classification of short-term and long-term

Holding PeriodShort-term

Long-term

Equity & Balanced Fund

Less than 12 months

12 months & more

Debt Fund

Less than 36 months

36 months & more

Image Source: cleartax

For example, if you opt to redeem your Equity funds after 2 years, then the tax-rate applicable to your long-term capital gain amount would be 10% after deducting 1 lakh. So, if your gain is 1.2 lakhs then 10% will be taxed on Rs. 20000 as 1 lakh is exempted and so no tax to be paid for 1 lakh rupees.