Mutual fund tax depends on the type of fund and how long you hold it. The rules below apply to sales after 23 July 2024; from tax year 2026-27 they sit in the Income-tax Act, 2025.
Key takeaways
- Equity-oriented funds: 20% STCG (under 12 months); 12.5% LTCG on gains above ₹1.25 lakh a year.
- Debt funds bought on/after 1 April 2023: taxed at your slab rate regardless of holding period.
- Other funds (gold/international FoFs, some hybrids): 12.5% LTCG after 24 months.
- IDCW is taxed at slab rate; TDS 10% above ₹10,000 per AMC per year.
Tax table
| Fund type | Long-term after | STCG | LTCG |
|---|---|---|---|
| Equity, aggressive hybrid, arbitrage | 12 months | 20% | 12.5% above ₹1.25 lakh |
| Debt (bought on/after 1 Apr 2023) | — | Slab | Slab |
| Debt (bought before 1 Apr 2023) | 24 months | Slab | 12.5% |
| Gold/silver ETF | 12 months | Slab | 12.5% |
| Gold/international FoF, other funds | 24 months | Slab | 12.5% |
Example: equity fund redemption
Gains of ₹3 lakh on units held 3 years:
- Exempt: ₹1.25 lakh
- Taxable: ₹1.75 lakh × 12.5% = ₹21,875 + cess
SIP units
Each SIP instalment is a separate purchase; units are redeemed on a first-in, first-out basis, so some units may be short-term and others long-term.
Tax-harvesting
Redeem and reinvest equity units each year to use the ₹1.25 lakh exemption (watch exit loads and costs).
Other points
- STT of 0.001% applies on equity fund redemptions.
- Switches between schemes are redemptions.
- Budget 2026 removed the deduction for interest expenses against dividend and MF income.
Your action checklist
- Estimate your income and eligible deductions for the year.
- Compare tax under both regimes before declaring to your employer.
- Keep proofs of investments, rent, insurance and loan certificates.
- Pay advance tax on time if you have non-salary income.
- Check AIS/Form 26AS before filing your return.
FAQs
Is ELSS taxed differently?
Gains are taxed like equity funds; investments qualify for deduction only in the old regime.
Do I pay tax if I don't redeem?
No capital-gains tax until you redeem (IDCW payouts are taxed when received).
Full details: mutual fund taxation.
