Tax on Equity Mutual Funds

  • Profit earned from Mutual Fund held for Long Term which more than 12 months is completely tax free.
  • Profit earned from Mutual Fund held for Short Term, which is less than 12 months has a flat tax rate of 15% under Capital Gain whether Domestic investor/ NRI
  • Dividends derived from Equity Mutual Fund is completely Tax Free.

Tax on non-equity Mutual Funds

  • (Debts Funds, Liquid Funds, Money Market Funds and Infrastructure debt Funds)
  • Profit earned from non-equity Mutual Fund held for more than 3 years come under long Term Capital Gains, at 20% Indexation/10% without Indexation.
  • Profit earned from selling/redeeming non-equity Mutual Fund investments before three years, short-term gains are taxed as per your tax slab.
  • Dividends are tax free in the hands of Investors but the Fund House incurs a Dividend Distribution tax of 28.4% which includes Surcharges and Cess.

Equity linked Mutual Fund Savings scheme (ELSS)

  • (Tax Saving Mutual Funds) ELSS
  • Income Tax Act Sec 80 C allows to claim deductions from a taxable income up to Rs.1,50, 000/- in certain Investments.
  • Popular 80 C investment is Tax Saving Mutual Funds or Equity Linked Savings Scheme (ELSS).
  • ELSS schemes will have a compulsory lock of 3 years compared to other investments and it is an equity diversified providing benefits of Capital appreciation and tax benefits.

Tax Implications on Investing Directly in Equity/trading through Brokers

  • Dividends derived out of investments in shares are completely tax free
  • Long-term capital gain (Holding a share more than a year) is tax free
  • Short-term capital gain (Selling of Shares for a profit before 12 months) incurs a tax @15%
  • Short-term capital gain derived out of equities can be set off against short-term capital loss of different form of investment.
  • Capital gains derived out of sale of shares can be carry-forward to settle offset, the capital losses on sale of shares up to 8 consecutive years.