Mutual Funds Taxation

Capital Gains Taxation

INDIVIDUAL / HUF COMPANY # NRI ^
Equity Oriented Schemes
Short term capital gain (Holding period <=12 months) 15% 15% 15%
Long term capital gain upto Rs 1 Lakh (Holding period >12 months) NIL NIL NIL
Long term capital gain exceeding Rs 1 Lakh (Holding period >12 months) * 10% 10% 10%
Other Than Equity Oriented Schemes
Short term capital gain (Holding period <=36 months) According to tax slab 30% According to tax slab
Long term capital gain (Holding period >36 months) 20% with indexation 20% with indexation
  • Listed - 20% with indexation
  • Unlisted - 10% without indexation
# Domestic companies are subject to minimum alternate tax not specified in above tax rates.
^ Short term/ long term capital gain tax will be deducted at the time of redemption of units in case of NRI investors.
* Gains incurred till 31st January 2018 will remain exempted from tax. All gains made thereafter this date will be taxed.

Tax implication on Dividend received by Investors

INDIVIDUAL / HUF COMPANY NRI
Equity oriented schemes NIL NIL NIL
Other than equity oriented schemes NIL NIL NIL

Indexation is a process of adjusting the purchase price for inflation mainly for calculating long term capital gains tax. This is done so that the investor is taxed only on the capital gain over and above the price rise caused by inflation.
The way it works is that it allows you to inflate the purchase price of the asset to take into account the impact of inflation. The end result is that you get the benefit of lowering your tax liability.

Indexed Purchase Price = Purchase Price * (CII for current year / CII for year of purchase)

Now,
Tax liability = Tax Rate * (Sale price – Indexed Purchase Price)