The Indian Budget 2024 has significantly changed how mutual funds are taxed. These changes aim to simplify and clarify the tax rules for people who invest in mutual funds. Different types of mutual funds will feel the effects of these changes in different ways, both for short-term and long-term investments.
The Indian Budget 2024 has introduced some major updates to the taxation of mutual funds, making the system much simpler for investors.
Previously, mutual funds were taxed under various categories, including long-term and short-term capital gains, with rates varying based on your income level and the timing of your investment sales. A significant change brought by the Indian budget is the removal of indexation, which previously allowed investors to adjust the purchase price of their investments for inflation before calculating taxable gains. This change is part of the broader simplification of the tax rules for mutual funds under the new budget.
Here’s how the new Indian budget impacts mutual fund taxes:
1. Equity Mutual Funds: If a fund has more than 65% of its money in stocks, it’s taxed as a capital asset. If you sell these funds within a year, the tax is 20%. If you hold them longer than a year, the tax drops to 12.5%.
2. Debt Mutual Funds: Funds that invest more than 65% in debt are taxed at your usual income tax rate, whether you sell them quickly or after a long time. This hasn’t changed from last year.
3. Other Funds: This includes gold index funds, gold ETFs, funds that invest in other funds, international funds, and some mixed funds. These are taxed at your normal tax rate if sold within two years and at 12.5% if held longer than two years.
Gupta pointed out that these new rules are especially good for people who invest for more than two years in the third category of funds. Instead of paying taxes based on their income level, they will only pay a 12.5% tax on any gains they make.
Comments