Finance Minister Arun Jaitley has proposed that 10 percent tax will be levied on capital gains in excess of Rs 1 lakh in a financial year on selling one's investment in the specified instruments.
It has been specified that taxability would arise only if the transfer of such assets occurs after April 1, 2018.
Moreover, capital gains up to January 31, 2018 will be grandfathered, meaning any gains having accrued on an investment up to January 31, 2018, which is sold after 1 April 2018, would be exempt from tax.
The Income Tax Department has clarified that the gains will be computed without providing the benefits of indexation, which links your acquisition price to the cost inflation index.
So, how would the new tax structure impact your mutual fund investments? Well, firstly one has to be clear that it is limited to equity-oriented funds. The budget does not change the tax incidence on debt fundholding.
Investors have to be clear that LTCG tax is only on equity-oriented funds. As far as debt funds are concerned, there is no change in the taxation structure compared to what is was prior to the Budget. For debt funds, short-term capital gains are taxed as per the individual's tax slab and the long-term capital gains are taxed at 20% if held for over 3 years and after adjusting for indexation
Any mutual fund scheme holding more than 65% of assets in equity is classified as equity-oriented scheme.
Here is a explaining the new tax regime on mutual funds:
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