Capital Gains Tax for Debt Mutual Fund Returns

Debt funds Capital gains tax

Short-term capital gains (if exit is within 3 years) on debt funds will be added to your income and taxed as per your applicable tax slab

f you sell them within 3 years, capital gains on debt funds are treated as short term. It will be added to your income and taxed as per your applicable tax slab. Long term capital gains (if exit is after 3 years) are taxed at 20 per cent with an indexation benefit on your cost.

	Investment holding period	Taxation
Short Term Capital Gain	36 months or lesser	added to income and taxed as per applicable slab rate
Long Term Capital Gain	more than 36 months	20% with indexation or 10% without indexation

Let us take an example, Since we do not have the Cost Inflation Index for future years, we will take an example of past. Say you invested R10 lakhs in 2010-2011. Assuming the fund returned 9 percent a year, and you redeem it for R15,38,624 in 2016-17, your long term capital gain would be R5,38,624.

However, if you index the cost with the Cost Inflation Index (provided by the IT department) for 2010-11 and 2015-16, then the cost would be R1,52,0393 (R10 Lakh * 1081/711). Then the long term capital gain would be R18231 (1538624-1520393). A 20 percent tax on this would be R3646.

So, as per this example, your capital gains tax for this financial year will be R3646.

For further information contact SaveTaxGetRich on 94 8300 8300

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