Debt MFs May Get Tax Relief...

Tax Tales

SEPARATELY, THE INDUSTRY has sought alignment in holding periods while calculating LTCG for gold-based investments such as gold exchange traded funds (ETFs), gold mutual funds, sovereign gold bonds, and physical gold. Currently, gold MFs and physical gold classify under LTCG on a holding period of over 24 months, and the rest on a holding period of more than 12 months.

Since April 1, 2023, capital gains on debt MFs are taxed at the investor's income tax (I-T) slab rate, irrespective of the holding period, which has resulted in increased tax liabilities for debt MF investors. Previously, LTCG on debt MFs were taxed at 20% with indexation benefit or 10% sans indexation, and short-term capital gains (STCG) (holding period up to three years) were taxed at I-T slab rates. Debt funds are defined as those with 35% or less of their assets under management in domestic equities.