Mutual Funds are broadly categorized into two types for taxation:
1. Equity Mutual Funds
(Where equity exposure is 65% or more)
Short-Term Capital Gains (STCG):
If held for less than 1 year, taxed at 15%.Long-Term Capital Gains (LTCG):
If held for more than 1 year, gains up to Rs. 1 lakh per year are tax-free.
Gains above Rs. 1 lakh are taxed at 10% (without indexation).
2. Debt Mutual Funds
(Examples: Liquid Funds, Corporate Bond, Gilt Funds)
As of April 1, 2023, no indexation benefit is available.
All capital gains, regardless of holding period, are taxed as per your income tax slab.
3. ELSS – Tax Saving Mutual Fund Option
Equity Linked Savings Scheme (ELSS)
Eligible under Section 80C for tax deduction up to Rs. 1.5 lakh per year.
Lock-in period: 3 years (shortest among tax-saving options).
Market-linked returns with potential for long-term wealth creation.
Taxed as an equity mutual fund on redemption after 3 years.
4. Dividend Taxation
All dividends are added to your total income and taxed as per your income tax slab.
Mutual fund companies deduct TDS at 10% on dividend income above Rs. 5,000/year.
5. SIP (Systematic Investment Plan) Taxation
Each SIP installment is considered a separate investment.
The holding period for taxation is calculated from the date of each SIP.
✅ Smart Tax Planning Tips
Choose ELSS for dual benefits – tax saving + wealth creation.
Hold equity funds for over 1 year to benefit from LTCG exemption.
Use SWP (Systematic Withdrawal Plan) smartly in debt funds to manage tax efficiently.
Diversify your Section 80C investments across EPF, PPF, ELSS, NPS, etc.
📇 For Expert Guidance, Contact:
Mohan Eswaran
AMFI Registered Mutual Fund Distributor
📞 9894472653
🌐 www.fundmen.in
📧 emohan1975@gmail.com