Taxation of Equity Mutual Funds

Period of holding

Period of holding refers to the time span for which an asset is held by a person, immediately prior to its transfer. It shall be computed from the date on which the asset was acquired until the date of its transfer.

(In case the asset is acquired other than by means of acquisition, the period of holding shall be reckoned as per various provisions of the Income Tax Act, 1961).

An equity MF is considered a long-term capital asset if it is held for more than 12 months immediately prior to the date of transfer.

If held for 12 months or less, it will be considered a short- term capital asset.

Balanced MF which are Equity oriented (more than 65% equity holdings of fund) are treated as normal Equity MF.

For Balanced MF with less than 65% equity, they are treated as Debt MF. Please refer debt MF section for their taxation.

Tax on long term capital gains

The tax payable on long-term gains (LTCG) arising from sale of Equity MF shall be

• In case of an individual or HUF being a resident- 10% of LTCG after giving benefit of 100,000/- deduction on overall long term gains made.
• In case of domestic company - 10% of LTCG.

Tax on short-term capital gains

Short-term gains (STCG) arising from sale of unlisted shares shall be taxable at the rate of 15% on short term gains applicable to the assessee.

References:

The Income Tax Act, 1961