Mutual Fund Tax in India 2025-26 — LTCG, STCG, Debt Fund & ELSS

Q: How are mutual fund gains taxed in India?

Mutual fund tax depends on fund type and holding period: Equity funds (>65% equity): STCG (held <12 months): 20% under Section 111A. LTCG (held ≥12 months): 12.5% above ₹1.25 lakh exemption (Section 112A). Debt funds: All gains taxed at slab rate (no STCG/LTCG distinction after April 2023 amendment). Hybrid funds: Tax applies based on equity component — if ≥65% equity, treated as equity fund.

Q: What is the LTCG exemption limit for equity mutual funds?

LTCG exemption on equity mutual funds (Budget 2024): ₹1.25 lakh per financial year. If LTCG from equity MF + listed shares combined ≤ ₹1.25L → zero tax. Above ₹1.25L → 12.5% tax on the excess (without indexation). Example: LTCG of ₹3L → tax on ₹1.75L (₹3L − ₹1.25L) = ₹21,875. Note: The ₹1.25L limit was raised from ₹1L in Budget 2024.

Q: How is TDS deducted on mutual fund redemption?

TDS on mutual fund redemption: Equity fund redemption: No TDS for resident investors. NRI investors: 20% TDS on LTCG, 30% on STCG. Debt fund (resident): No TDS below ₹5,000 LTCG; 10% TDS above ₹5,000 LTCG for non-corporates. Dividend income: 10% TDS if dividend exceeds ₹10,000 per AMC per year (Budget 2025 raised from ₹5,000). Tax shown in Form 26AS and mutual fund statement.

Q: Should I show mutual fund gains in ITR?

Yes, mandatory. All mutual fund gains (even if LTCG ≤ ₹1.25L) must be reported in ITR. Use ITR-2 or ITR-3, Schedule 112A for equity fund LTCG. STCG goes to Schedule CG. Debt fund gains go to Schedule OS or Schedule CG as appropriate. Your broker / AMC provides Capital Gains Statement — download from CAMS (camsonline.com), KFintech (kfintech.com), or your fund house portal.

Q: What is ELSS and how is it taxed?

ELSS (Equity Linked Savings Scheme) is a tax-saving equity mutual fund qualifying for Section 80C deduction (up to ₹1.5L). Lock-in: 3 years (shortest among 80C investments). Tax on gains: Same as equity funds — LTCG at 12.5% above ₹1.25L, STCG not applicable due to 3-year lock-in. Since lock-in is 3 years and equity holding period for LTCG is 12 months, all ELSS gains are LTCG automatically.

Updated: 3 June 2026 | Budget 2024 Rates | Income-tax Act, 2025 | LTCG ₹1.25L Exemption

Mutual fund tax (FY 2025-26): Equity MF STCG (held <12 months): 20% flat. Equity MF LTCG (held ≥12 months): 12.5% above ₹1.25 lakh exemption (Budget 2024). Debt MF (post April 2023): taxed at slab rate (no indexation benefit). ELSS qualifies for Section 80C up to ₹1.5L. Report all MF gains in Schedule 112A / Schedule CG of ITR-2/ITR-3.

₹1.25 Lakh

LTCG exemption on equity MF + listed shares combined (Budget 2024).
LTCG above ₹1.25L taxed at 12.5% without indexation. Exemption raised from ₹1L. No 87A rebate on this income.

Mutual Fund Tax Rates — FY 2025-26 Summary

Fund Type	Holding Period	Tax Type	Tax Rate
Equity fund (≥65% equity)	< 12 months	STCG (Section 111A)	20%
Equity fund	≥ 12 months	LTCG (Section 112A)	12.5% above ₹1.25L
ELSS fund	≥ 36 months (lock-in)	LTCG (Section 112A)	12.5% above ₹1.25L
Debt fund (post Apr 2023)	Any	Slab rate	As per income slab
International fund (foreign equity)	Any	Slab rate	As per income slab
Hybrid: Aggressive (≥65% equity)	</≥12 months	STCG/LTCG (equity rules)	20% / 12.5%
Hybrid: Conservative (<65% equity)	Any	Slab rate	As per income slab
Gold fund / ETF	Any	Slab rate	As per income slab
Dividend income (any fund)	—	Slab rate	Slab + TDS 10% above ₹10K

Frequently Asked Questions

How are mutual fund gains taxed in India?

Mutual fund tax depends on fund type and holding period: Equity funds (>65% equity): STCG (held <12 months): 20% under Section 111A. LTCG (held ≥12 months): 12.5% above ₹1.25 lakh exemption (Section 112A). Debt funds: All gains taxed at slab rate (no STCG/LTCG distinction after April 2023 amendment). Hybrid funds: Tax applies based on equity component — if ≥65% equity, treated as equity fund.

What is the LTCG exemption limit for equity mutual funds?

LTCG exemption on equity mutual funds (Budget 2024): ₹1.25 lakh per financial year. If LTCG from equity MF + listed shares combined ≤ ₹1.25L → zero tax. Above ₹1.25L → 12.5% tax on the excess (without indexation). Example: LTCG of ₹3L → tax on ₹1.75L (₹3L − ₹1.25L) = ₹21,875. Note: The ₹1.25L limit was raised from ₹1L in Budget 2024.

How is TDS deducted on mutual fund redemption?

TDS on mutual fund redemption: Equity fund redemption: No TDS for resident investors. NRI investors: 20% TDS on LTCG, 30% on STCG. Debt fund (resident): No TDS below ₹5,000 LTCG; 10% TDS above ₹5,000 LTCG for non-corporates. Dividend income: 10% TDS if dividend exceeds ₹10,000 per AMC per year (Budget 2025 raised from ₹5,000). Tax shown in Form 26AS and mutual fund statement.

Should I show mutual fund gains in ITR?

Yes, mandatory. All mutual fund gains (even if LTCG ≤ ₹1.25L) must be reported in ITR. Use ITR-2 or ITR-3, Schedule 112A for equity fund LTCG. STCG goes to Schedule CG. Debt fund gains go to Schedule OS or Schedule CG as appropriate. Your broker / AMC provides Capital Gains Statement — download from CAMS (camsonline.com), KFintech (kfintech.com), or your fund house portal.

What is ELSS and how is it taxed?

ELSS (Equity Linked Savings Scheme) is a tax-saving equity mutual fund qualifying for Section 80C deduction (up to ₹1.5L). Lock-in: 3 years (shortest among 80C investments). Tax on gains: Same as equity funds — LTCG at 12.5% above ₹1.25L, STCG not applicable due to 3-year lock-in. Since lock-in is 3 years and equity holding period for LTCG is 12 months, all ELSS gains are LTCG automatically.

Capital Gains Calculator 80C ELSS Deduction ITR-2 for Capital Gains File ITR Income Tax Slabs Budget 2025 Changes

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Mutual Fund Tax in India 2025-26 — LTCG, STCG, Debt Fund & ELSS

Mutual Fund Tax Rates — FY 2025-26 Summary

Frequently Asked Questions

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