Short-Term Capital Gains to Apply on Mutual Funds from 1 April 2023, Know the Details
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As a setback to investors, the amendment in the Financial Bill will bring some changes in the Mutual Funds. According to the government, investments in debt mutual funds will now encounter taxation. And these instruments will be taxable as per the short-term capital gains. At present, those who have invested in debt funds as per the income tax slab they fall in, pay income tax on capital gains. This is true if the debt funds in question are held for three years at the least.
Once three years pass away for the funds, then the person has to pay 10% without indexation or 20% with indexation. The change in regulation will come into effect after 1 April 2023. One of the reasons why people choose to invest in debt funds over fixed deposits is because of the tax advantage. But as per the new amendment, if you hold debt funds for more than 3 years will not get the benefit of tax indexation and associated advantages.
On Friday, it is possible for tabulating the financial bill amendments and the proposed changes in the same at the parliament. The Managing Director and Chief Executive Officer of Edelweiss Asset Management Limited, Radhika Gupta said in a tweet that she hopes the proposed changes as per the Finance Bill for the removal of LTCG with indexation status are reviewed for debt funds. A vibrant corporate bond market is happening in India along with financialization. And that needs a strong ecosystem of debt Mutual Funds.
More people could now invest in bank fixed deposits as these investments are safer. In Budget 2023, there was another major announcement regarding MLD (market-linked debentures). And this was about making the MLDs taxed according to short-term capital gain. The taxation will also depend on the tax slab the person belongs to. An individual can choose between the old tax regime or the new tax regime.
