Debt Funds Tax Details
Mutual funds that invest less than 65% of their corpuses in equity instruments at all times are treated as debt funds for the purpose of taxation. Following rules are applicable:
- Short Term Capital Gains Tax (STCG): In case the debt mutual funds are sold before completion of three years of holding, returns are added to the total income and regular income tax as per the applicable tax slab gets applied.
- Long Term Capital Gains Tax (LTCG): If the debt mutual fund is sold after three years, then returns are treated as long-term capital gains and are taxed at a rate of 20% after indexation plus cess @3%.
