Income Tax News: The amount of people making investments in mutual funds is rising quickly. Through SIP investing, people are also making enormous long-term profits. Taxes must be paid on the money received from investments in it. It is possible that people will wonder how this income is taxed. Which income tax head does it fall under?
Introduction to Mutual Fund Taxation
Mutual fund income is subject to income tax capital gains. The application of either short-term or long-term capital gains depends on how long the taxpayer has held the asset. The most significant type of mutual funds are thought to be equity-oriented funds. Equity oriented mutual funds are defined by the Income Tax Act as mutual fund schemes that allocate at least 65% of their assets to equity shares of Indian listed companies. Similar to shares, tax must be paid upon withdrawal from such a fund.
Long-Term Capital Gains (LTCG) on Equity Mutual Funds
A customer must pay long-term capital gains if he withdraws money from equity mutual funds after investing for longer than a year. which requires the payment of 10% tax on any profit exceeding Rs 1 lakh. A unit of an equity mutual fund held by investors for less than a year is considered a short-term capital gain. On the money received from this, taxes at the rate of fifteen percent will be due.
Indexation Benefit for Debt Mutual Fund Investors
You can benefit from indexation if your debt mutual fund investment is made on or before March 31, 2023. A debt fund unit will be included in long-term capital gain and subject to a 20 percent tax liability if it is sold after being held for more than 36 months. In contrast, the profit will be included in short-term capital gain if the asset is sold before the full 36-month period has passed. which tax will be imposed, taking into account the taxpayer’s income and the tax slab.
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