Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
Equity funds
Treated like listed shares: 20% STCG, 12.5% LTCG over the ₹1.25 lakh annual exemption.
Debt funds
For units bought on/after 1 April 2023, gains are taxed at your slab rate whatever the holding period. Confirm current rules.
The categories beyond equity and debt
The equity-versus-debt split is the headline, but the category decides everything, and there are now three broad buckets. An equity-oriented fund (65% or more in Indian equities) is taxed like shares: 20% short-term up to 12 months, 12.5% long-term beyond, over the ₹1.25 lakh annual exemption. A specified debt fund — broadly one with up to 35% in equity — bought on or after 1 April 2023 is taxed at your slab rate whatever the holding period, with no long-term benefit and no indexation; units bought before that date keep the older long-term treatment for gains up to the changeover. Hybrid and other funds fall by their equity percentage into one bucket or the other, and gold and international funds have their own treatment, so the fund’s category, not its name, is what matters. Systematic withdrawals and switches between schemes are each treated as redemptions, so every switch can trigger a gain. For SIPs, each instalment has its own purchase date and holding period, so a single redemption can mix short- and long-term units. Keeping the fund house’s capital-gains statement, which classifies each lot, is what makes the return accurate. Confirm the current rules, which changed materially in 2023 and 2024.