Post Budget 2024 Mutual Fund taxation has changed. What is the new Mutual fund Tax FY 2024-25 / AY 2025-26? What are the latest TDS and Dividend distribution tax on Mutual Funds?
Table of Contents
Mutual Fund Taxation depends on three factors:
- Type of Mutual Fund
- Holding period
- Residential Status
Type of Mutual Funds
| Type Of Fund | Assets it holds |
|---|---|
| Equity Mutual Fund | The fund that invests and maintains a 65% portfolio in listed equity shares of domestic companies |
| Debt Mutual Fund | The fund invests 65% of assets in bonds or Money Market instrument |
Equity Mutual Funds
For tax purposes, the fund that invests and maintains 65% of its assets invested in the listed equity shares of domestic companies, is called an Equity Mutual Fund. In the case of Fund of Fund (FOF), the fund invests 90% of its assets in funds that, in turn, invest 90% of its assets in domestic equity (like Equity ETFs or Equity MF).
Debt Mutual Funds
If the fund invests in 65% portfolio in bonds or Money Market instruments, it is called as a debt mutual fund, including FoF.,
Other Mutual Funds
If any fund does not fall under the above-mentioned two categories, then they are considered as “Other Mutual Funds”.
Holding Periods of Mutual Funds
The other factor which determines the tax on mutual funds is the holding period.
| –Fund Type | Short Term Capital gain | Long Term Capital gain |
|---|---|---|
| Equity Funds | Shorter than 12 months | 12 months or Longer |
| Equity Oriented Hybrid Fund | Shorter than 12 months | 12 months or Longer |
| Debt Funds | Always Short term | Always Short term |
| Debt-Oriented Hybrid Fund | Always Short term | Always Short term |
Equity Mutual Funds
If you sell equity mutual funds before the competition of 12 months, the gains are called Short Term Capital Gain (STCG).
If you sell an Equity Mutual fund after completion of one year or 12 months, the gains will be termed as Long Term Capital Gain (STCG).
Debt Mutual Funds
The holding period does not matter in Debt mutual funds. The gains are taxable whenever you sell a debt mutual fund. The gains will be added to income and tax as per the income tax slab rate.
Other Mutual Funds
If you sell within two years or 24 months, the gain is considered short-term capital gain (STCG). If you sell after two years or 24 months, then the gain is considered as Long Term Capital Gain (LTCG).
Equity Mutual Fund -Taxation of Mutual Funds FY 2024-25 / AY 2025-26
| Fund Type | LTCG Eligibility | STCG Before Budget 2024 | LTCG Before Budget 2024 | LTCG Eligibility | STCG After Budget 2024 | LTCG After Budget 2024 |
|---|---|---|---|---|---|---|
| Equity Mutual Fund Arbitrage Fund Equity FoF ( that invest 90% in Domestic equity orETFs) | 12 months | 15% | 10% ( above Rs 1 lac) | 12 months | 20% | 12.5% ( Over & above Rs 1.25 lac) |
| Bought on or after 1 st April 2023 Debt Mutual Fund or Debt FoF ( holding 65% in Bonds or Money market instruments) | 36 months | As per tax Slab | with Indexation | NA | As per slab rate | As per slab rate |
| Bought before 1st April 2023 Foreign Equity ETFs ( Listed in India) ) | 36 months | As per tax Slab | 20% with Indexation | 12 months | As per Slab Rate | 12.5% |
| Bought before 1st April 2023 Foreign Equity Funds Or FoF | 36 months | As per tax Slab | 20% with Indexation | 24 months | As per Slab Rate | 12.5% |
| Bought on or After 1st April 2023 Foreign Equity ETFs ( Listed in India) ) | NA | As per tax Slab | As per tax Slab | 12 months | As per Slab Rate | 12.5% |
| Bought on or after 1st April 2023 Foreign Equity Funds Or FoF | NA | As per tax Slab | As per tax Slab | 24 months | As per Slab Rate | 12.5% |
Debt Mutual Fund -Taxation of Mutual Funds FY 2024-25 / AY 2025-26
| Fund Type | LTCG Eligibility | STCG Before Budget 2024 | LTCG Before Budget 2024 | LTCG Eligibility | STCG After Budget 2024 | LTCG After Budget 2024 |
|---|---|---|---|---|---|---|
| Bought on or after 1st April 2023 Debt Mutual Fund or Debt FoF ( holding 65% in Bonds or Money market instruments) | 36 months | As per tax Slab | with Indexation | NA | As per slab rate | As per slab rate |
| Bought on or After 1st April 2023 Debt Mutual Fund or ETF or Debt FoF ( hold more than 65% in Bonds | 36 months | As per tax Slab | 20% with Indexation | 24 Months | As per tax Slab | 12.5% |
| Bought on or After 1st April 2023 Debt Mutual Fund or ETF or Debt FoF ( hold more than 65% in Bonds | NA | As per tax slab rate | As per tax slab rate | NA | As per tax slab rate | As per tax slab rate |
| Bought before 1st April 2023 Debt ETFs | 36 months | As per tax Slab | 20% with Indexation | 24 months | As per Slab Rate | 12.5% |
| Bought on or After 1st April 2023 Debt ETFs | NA | As per tax Slab | As per tax Slab | NA | As per Slab Rate | As per Slab Rate |
| Bought before 1st April 2023 Gold ETF | 36 months | As per tax Slab | 20% with Indexation | 12 months | As per Slab Rate | 12.5% |
| Bought on or after 1st April 2023 Foreign Equity Funds Or FoF | NA | As per tax Slab | As per tax Slab | 12 months | As per Slab Rate | 12.5% |
| Bought before 1st April 2023 Gold Mutual Fund | 36 months | As per tax Slab | 20% with Indexation | 24 Months | As per tax Slab | 12.5% |
| Bought on or after 1st April 2023 Gold Mutual Fund | NA | As per tax Slab | As per tax Slab | 24 Months | As per tax Slab | 12.5% |
Security Transaction Tax (STT) for FY 2024-25
Security Transaction Charges or STT is levied whenever we buy or sell securities (excluding commodities and currency) through a recognized stock exchange.
These securities includes:
- Equity-oriented mutual funds
- Shares, scrips, stocks,
- Government securities of equity nature
- Bonds, debentures, debenture stock or other marketable securities
- Derivatives
- units or any other instrument issued by any collective investment scheme to the investors in such schemes;
- Security receipt as defined in section 2(zg) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
- Rights or interest in securities;
On every purchase of sell we pay STT.
What are the latest Security Transaction Tax (STT) FY 2024-25
| transaction type | Security Transaction Tax Rate | Who will pay |
|---|---|---|
| Purchase / Sale of equity share ( delivery Base) | 0.1% | Purchaser/seller |
| Purchase of equity Mutual Fund | Nil | Purchaser |
| Sale of Equity Mutual Fund | 0.001% | Seller |
| Sale of equity Shares, units of business trust, units of Equity oriented mutual fund (non-delivery based) | 0.025% | seller |
| Sale of options ( security) | 0.10% | seller |
| Sale of options in securities ( option is exercised) | 0.125% | purchaser |
| sale of futures in securities | 0.02% | seller |
| Sale of equity oriented Mutual Fund | 0.001% | seller |
| Sale of unlisted shares | 0.2% | seller |
