Mutual Funds are divided in two most important categories:
- Equity Funds: – Any mutual fund that invests more than 65 per cent of its asset in equity shares is called Equity Funds.
- Debt Funds: – Any mutual fund that invests less than 65 per cent of its asset in equity is called Debt
Funds.
Capital Gain Taxation on Equity Funds & Debt Fund:
A capital gain is profit received by an investor after selling the units of the mutual funds at a greater price than the purchase price. Profit can be earned by investor in Short Term Capital Gain (STCG) as well as in Long Term Capital Gain but the tax calculation is different in STCG & LTCG. The taxation rate of capital gains of mutual funds depends on the holding period and type of mutual fund. The holding period is the duration for which the mutual fund units were held by an investor.
| Asset Type | Details | Short Term Capital Gain(STCG) | Long Term Capital Gain(LTCG) |
| Equity Funds | Holding Period | Up to 12 Months | Over 12 Months |
| Tax Rate | 15% | Above 1lac 10% | |
| Debt Funds | Holding Period | Up to 36 Months | Over 36 Months |
| Tax Rate | Added in Income and Taxable according to Income Slab Rate | Flat 10% or 20% after Indexation |
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