How are your equity mutual funds taxed now?

What are the tax implications for my equity mutual fund investment of Rs 5 lakh after the tax changes announced in the recent budget? — Anonymous

After the 2024 Budget reforms, long-term and short-term capital gains on equity-oriented investments are taxed at 12.5 and 20 per cent, respectively.

Additionally, long-term capital gains of up to Rs 1.25 lakh per annum are tax-exempt.

So, your original equity mutual fund investment of Rs 5 lakh will be taxed in the following ways:

Case 1: Long-term capital gains tax

If you sell your equity mutual fund holdings for Rs 7 lakh after holding them for over a year, you gain Rs 2 lakh. Of this, Rs 1.25 lakh will be tax-free. So, you will pay a 12.5 per cent tax on the remaining gain of Rs 75,000.

Case 2: Short-term capital gains tax

If you sell your equity mutual fund investment in less than a year, you will pay a flat tax rate of 20 per cent on the entire Rs 2 lakh gain.

Note that any gains earned on or before January 31, 2018, will not be taxed now.

Also read: New tax regime looks even better

This article was originally published on October 07, 2024.