How are capital gains from the sale of debt and non-equity mutual funds taxed?

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As of April 1, 2023 (i.e., from FY 2023-24), the beneficial tax treatment for long-term capital gains on debt mutual funds will no longer be available.

The government passed the Finance Bill 2023 which introduces charges to the taxation of debt mutual funds from FY 2023-24. Under the new rules, gains from debt mutual finds with less than 35% exposure to equity will be considered as short-term capital gains and hence will be taxed as per the individual's income tax slab.

Prior to FY 2023-24, capital gains earned from the sale of debt and non-equity mutual funds were taxed based on the holding period.

 

Holding Period	Type of Capital Gain	Tax Rate
Less than 3 years	Short-Term Capital Gains (STCG)	As per your income tax slab
More than 3 years	Long-Term Capital Gains (LTCG)	* 20% of gain, with indexation benefits * 10% of gain, without indexation benefits