Income from mutual funds is included in capital gains of income tax. Long term capital gain or short term capital gain is applied as per the taxpayer’s holding time.
The number of people investing in Mutual Fund Investments is increasing rapidly. People are also earning huge profits in the long term by investing through SIP.
Tax has to be paid on the amount earned by investing in it. These questions may arise in people’s mind that how is this income taxed (How Taxation On Mutual Fund Income). In which head of income tax is it included?
Income from mutual funds is included in capital gains of income tax. Long term capital gain or short term capital gain is applied as per the taxpayer’s holding time.
Equity Oriented Mutual Fund
Equity oriented mutual funds are considered to be the most important category of mutual funds. According to the Income Tax Act, mutual fund schemes which invest 65 percent or more of their assets in equity shares of companies listed in India are called equity oriented mutual funds. On withdrawal of money from such a fund, tax has to be paid just like on shares.
Tax on both types of capital gains
If a customer withdraws money after investing in equity mutual funds for more than 12 months, he will have to pay long term capital gains. In which 10 percent tax will have to be paid on any profit exceeding Rs 1 lakh.
If investors hold a unit of an equity mutual fund for a period of less than 12 months, it will be counted as short term capital gain. Tax will have to be paid at the rate of 15 percent on the income generated from this.
Debt mutual fund
If your investment in debt mutual funds is on or before March 31, 2023, then the benefit of indexation can be availed. If a debt fund unit is sold after holding it for more than 36 months, it will be included in long term capital gain and tax will have to be paid at the rate of 20 percent.
Whereas if sold before completion of 36 months period, the profit will be included in short term capital gain. On which tax will be levied keeping in mind the tax slab according to the income of the taxpayer.
