Mutual Fund Taxation in India: Latest LTCG, STCG and Indexation Rules
How equity, debt, and hybrid mutual funds are taxed after Budget 2024-25 — with worked examples.
Budget 2024 rewrote mutual fund tax. LTCG on equity is now 12.5% (up from 10%); the ₹1 lakh exemption was raised to ₹1.25 lakh. Debt fund indexation is gone for purchases after 1 April 2023. Here is what applies today.
Equity Mutual Funds (>65% equity)
| Holding period | Type | Rate |
|---|---|---|
| ≤ 12 months | STCG | 20% |
| > 12 months | LTCG | 12.5% above ₹1.25 lakh/yr |
Debt Mutual Funds
For units bought on or after 1 April 2023: gains are added to your income and taxed at slab rate — no indexation, no LTCG benefit, regardless of holding period. For older units, the earlier 20% LTCG with indexation still applies.
Compute your LTCG: Capital Gains Tax Calculator → https://calculatordesk.in/capital-gains-tax-calculator
Hybrid Funds
- Equity-oriented hybrid (≥65% equity): taxed like equity
- Debt-oriented hybrid (>65% debt): taxed like debt
- Conservative/balanced hybrid: check the actual portfolio split each year
ELSS
ELSS = equity mutual fund with 3-year lock-in. Taxed exactly like normal equity: 12.5% LTCG above ₹1.25 lakh. Only the investment qualifies for 80C; redemption is fully taxable as capital gain.
Frequently Asked Questions
Is SIP each instalment treated separately for LTCG?
Yes. Every SIP installment is a separate purchase with its own date. When you redeem, FIFO applies — oldest units first. Only those held > 12 months qualify for LTCG.
Do I need to file ITR-2 for mutual fund gains?
Yes. Any capital gain from mutual funds requires ITR-2 (or ITR-3 if you have business income). ITR-1 does not allow capital gains reporting.
Can I offset mutual fund losses?
Equity STCG/LTCG losses can be set off only against capital gains (not salary). Long-term losses set off only against long-term gains; unused losses carry forward for 8 years.