Mutual Funds Taxation: Complete Guide 2025#
Types of Mutual Fund Taxation#
1. Equity Mutual Funds#
Long-Term Capital Gains (LTCG)
- Holding period: More than 12 months
- Tax rate: 10% on gains above ₹1 lakh
- No indexation benefit
Short-Term Capital Gains (STCG)
- Holding period: 12 months or less
- Tax rate: 15%
2. Debt Mutual Funds#
Long-Term Capital Gains
- Holding period: More than 36 months
- Tax rate: 20% with indexation
Short-Term Capital Gains
- Tax rate: As per income tax slab
3. Dividend Taxation#
- Dividend received is added to income
- Taxed as per applicable slab
- DDT abolished from April 2020
Tax-Saving Mutual Funds (ELSS)#
- Lock-in period: 3 years
- deduction under Section 123
- Maximum deduction: ₹1.5 lakh
Comparison Table#
| Fund Type | STCG Tax | LTCG Tax |
|---|---|---|
| Equity | 15% | 10% |
| Debt | Slab rate | 20% with indexation |
| Hybrid | 15% | 10% |
Conclusion#
Understanding mutual fund taxation helps in making better investment decisions.