Debt MFs May Get Tax Relief...

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.

However, due to the changes introduced in the July 2024 Budget, investments made in debt MFs prior to April 1, 2023, also lost the indexation advantage.