Taxes on Mutual Fund - In India

Tax on the Indian mutual fund is divided into Two categories Tax on Equity Mutual Fund If the investment is done for more than 1 year before withdrawal, then it will fall under Long Term Capital Gain. The tax will be 10% on the profit exceeding Rs-1 lakh. If the investment is done for less than 1 year before withdrawal, it will fall under Short Term Capital Gain. The tax would be flat 15% on the profit. Tax on Debt Mutual Fund If the investment is done more than 3 years before withdrawal, it will fall under Long Term Capital Gain. The tax would be 20% on the profit after indexation (indexation consider inflation and hence the effective tax will be less than 20%). If the investment is done less than 3 years before withdrawal, it will fall under Short Term Capital Gain. The tax would be deducted according to your tax slab. Note: If the mutual fund has more than 65% allocation in equities, it will fall under equity mutual fund. Let’s first understand the tax on equity mutual fund- Case 1