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Does long term capital gain tax apply to people with non taxable income?

Long term gain arising from the redemption of debt mutual funds shall be taxable at the flat rate of 20% after indexation

I am a senior citizen without any taxable income. I had invested in debt mutual funds a few years ago. Now when I retire, I have to draw from that for monthly expenses. Is it necessary that I have to pay compulsorily 20 per cent tax (Indexed) on the profit which I will be withdrawing?
-Dr Ganapathy V L

Taxation of capital gains on debt mutual funds is mandatory. That is the way this product is designed. Even if your income is below the taxable limits, long term capital gains taxation will be applicable. The profit from your debt mutual fund redemption within 3 years will be considered as short term capital gain and will be added to your annual income. The tax will be charged at the rate according to the applicable slab. Redemption/sale of debt mutual fund units after a holding period of 3 years falls in the category of long term capital gain. Any long term gain arising from the redemption of debt mutual funds shall be taxable at the flat rate of 20% (plus cess) after the benefit of cost inflation indexation.

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