VR Logo

Change in Debt Fund Taxation

After this year's budget, gains on debt fund investments held for less than 3 years will be taxed as short-term capital gains

I had invested ₹10 lakh in a 366 Days FMP on 10th Oct 2013. What is the effect of budget 2014 on this investment and how can I avail tax benefits on this?
- S. Kumar

This year's budget has changed the tax treatment of debt funds. From July 11, 2014 onwards, a debt investment held for 36 months or less will be treated as 'short term' and accordingly, the capital gains from it will be taxed as short term capital gains. These gains would be added to your income and taxed according to the applicable slab rate. As these rules are applicable even on investments made before the budget, AMCs are providing an option to investors to extend their FMPs beyond 3 years so that investors can save on taxes.

Therefore, you may talk to SBI Mutual Fund to check if they are providing investors with an option to extend the FMP tenure. Most of the AMCs have done so. If the AMC allows this and you do not need this money at present you may extend your plan for another two years to save your tax outflow. Otherwise short term capital gains on your FMP will be added to your income and you will have to incur higher taxes on your returns.



Post Your Query