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  • Abhinesh Kumar

Income tax benefit from a Debt Mutual has been removed wef 1st April 2023

This is an important announcement related to your investments in Mutual Funds : Income tax benefit from a Debt Mutual has been removed wef 1st April 2023


In order to understand this in simple manner, let us first understand the two basic categories of Mutual Funds in terms of Taxation :

  1. Mutual Funds having Indian Equity or Equity related exposure of 65% or more

  2. Mutual Funds having Indian Equity or Equity related exposure of less than 65%

As per earlier Taxation law,
any gains from Mutual Funds having Equity or Equity related exposure of 65% or more were treated as Long Term Gain ( if units are redeemed after 1 Year or more).
any gains from Mutual Funds having Equity or Equity related exposure of less than 65% are treated as long-term investments if held for more than 3 years and taxed at the rate of 20% along with indexation benefits or 10% without indexation. For those with a holding period of less than 3 years, they are taxed according to their tax slab

What has changed now ?


Firstly , the taxation rules for funds having 65% or more Indian Equity remains unchanged.


Secondly, a new category is introduced i.e funds having 35% or more Indian Equity. Such funds will enjoy the Long term capital gain with indexation rules, which were earlier applicable to Debt Funds ( if held for > 3 Yrs)


Thirdly, the tax advantage from any funds having less than 35% Equity or Zero equity, is completely removed wef 1st April 2023.


This means that all gains from pure Debt Mutual Funds will be added in your Tax Slab and will be taxes as actual.


" Suggestion : If you are looking to enjoy the existing Tax advantage of Debt Funds then must explore the best schemes under this category and invest before 31st March 2023"

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market including the fluctuations in the interest rates. The past performance of the mutual funds is not necessarily indicative of future performance of the schemes. The Mutual Fund is not guaranteeing or assuring any dividend under any of the schemes and the same is subject to the availability and adequacy of distributable surplus. Investors are requested to review the prospectus carefully and obtain expert professional advice with regard to specific legal, tax and financial implications of the investment/participation in the scheme.


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