Tax Regime Specific to MF Investor applicable for FY 2024-25
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Tax Regime Specific to Mutual Fund Investors in India applicable for the FY 2024-25
Equity-Oriented Mutual Funds (EOFs)
(Excluding Equity Oriented Fund of Funds)
Condition: STT must be paid on purchase and sale.
| Investor Type | STCG (≤ 12 months) | LTCG (>12 months) | Dividend Taxation | TDS on Cap Gains | TDS on Dividend |
| Resident Individual / HUF / AOP / BOI | 15% (before 23 Jul) 20% (after 23 Jul) |
10% (before 23 Jul) 12.5% (after 23 Jul; > ₹1.25 lakh) |
Taxed at applicable slab rate (if opted) | NIL | 10% |
| Domestic Companies | Same as above | Same as above | Taxed at applicable corporate rate | NIL | 10% |
| NRIs | Same as above | Same as above | Taxed at 20% | 15%/20% | 20% |
Note:
- No indexation or foreign exchange fluctuation benefit under Section 112A.
- FMV as on 31-Jan-2018 still applicable for grandfathering LTCG.
Specified Mutual Funds (as per Section 50AA)
Definition (FY 2024-25): Funds where ≤35% of proceeds are invested in domestic equity shares.
| Investor Type | STCG | LTCG | Dividend Taxation | TDS on Cap Gains | TDS on Dividend |
| Resident Individual / HUF / AOP / BOI | Taxed at applicable slab rate | Not applicable (All gains = STCG) | Taxed at applicable slab rate | NIL | 10% |
| Domestic Companies | 15%/22%/25%/30% depending on turnover/provisions | Not applicable | Taxed at applicable corporate rate | NIL | 10% |
| NRIs | 30% (as STCG only) | Not applicable | Taxed at 20% | 30% | 20% |
Examples of Specified Funds (FY 2024-25):
- Fund of Funds (including overseas)
- Debt Funds (Liquid, Gilt, Bond ETFs)
- Gold ETFs
- Infrastructure Debt Funds
Effective FY 2025-26, new definition applies (MFs with >65% in debt/money market instruments).
Other Mutual Funds (e.g., Hybrid / Non-EOFs)
| Investor Type | STCG | LTCG | Dividend Taxation | TDS on Cap Gains | TDS on Dividend |
| Resident Individual / HUF / AOP / BOI | At applicable slab rate | 20% (with indexation) or 12.5%11 | Taxed at applicable slab rate | NIL | 10% |
| Domestic Companies | 15%/22%/25%/30% | 20% or 12.5% | Taxed at corporate rate | NIL | 10% |
| NRIs | 30% (STCG) | 20% (Listed units) 10% (Unlisted units) 12.5% (Optional) |
Taxed at 20% | 30% (STCG) / 20% (LTCG) | 20% |
LTCG Indexation: Available on listed units. Optional 12.5% rate available without indexation or currency benefit. Key Notes and Amendments
- Section 50AA (effective FY 2023–24):
All gains on specified mutual funds (≤35% equity) acquired on or after 1 April 2023 are treated as STCG, regardless of holding period. - Post-23 July 2024 Tax Rates (as per Finance Act 2024):
- STCG on EOFs: Increased from 15% → 20%
- LTCG on EOFs: Increased from 10% → 12.5%, applicable on gains > ₹1.25 lakh
- TDS Threshold for Dividends:
- No TDS if dividend paid to resident < ₹5,000/year.
- For NRIs, TDS always applies @20%.
- Surcharge & Cess:
- All tax rates are subject to surcharge and 4% Health & Education Cess.
Holding Period for Capital Gains Classification
| Mutual Fund Type | Transfer Date | Listed Units | Unlisted Units |
| Non-EOF & Non-specified Mutual Fund | Before 23 July 2024 | LTCG if held > 36 months | LTCG if held > 36 months |
| On or after 23 July 2024 | LTCG if held > 12 months | LTCG if held > 24 months |
Capital Gains Tax Rates (Section 112 / 112A)
Residents
| Type of Fund | STCG | LTCG |
| Equity-Oriented Funds | 15% (before 23 Jul) 20% (after 23 Jul) |
10% (before 23 Jul) 12.5% (after 23 Jul, above ₹1.25L) |
| Non-EOF / Debt Funds | As per slab | 20% with indexation (before 23 Jul) 12.5% without indexation (after 23 Jul) |
| Specified Mutual Funds | As per slab | Deemed STCG – taxed as per slab |
NRIs
| Fund Type | STCG | LTCG |
| Equity-Oriented Funds | 15% / 20% | 10% / 12.5% on gains > ₹1.25L |
| Listed Debt Funds | 30% | 20% with indexation (before 23 Jul) 12.5% without indexation (after 23 Jul) |
| Unlisted Debt Funds | 30% | 10% without indexation or currency benefit 12.5% (after 23 Jul, no indexation) |
| Specified Mutual Funds | 30% | All gains treated as STCG – taxed at 30% |
TDS Rates
| Nature of Income | Resident Investors | Non-Resident Investors |
| Capital Gains – STCG / LTCG | No TDS | 15% / 20% / 30% (as applicable) |
| Dividends (Total > ₹5,000/year) | 10% | 20% or DTAA rate (with TRC and disclosures) |
| No PAN (NRI) – Section 206AA | Not applicable | Higher of: 20% or rates in force (unless Rule 37BC conditions are met) |
| Non-filers – Section 206AB | 2× applicable rate or 5% | Not applicable to non-residents w/o PE |
Corporate Taxation
| Type of Domestic Company | Applicable Tax Rate | Conditions |
| Regular companies (turnover ≤ ₹400 crore in FY 22-23) | 25% | Default corporate tax |
| Companies under Section 115BAA | 22% | Opt-in; no MAT; no exemptions/deductions |
| New manufacturing cos. under Section 115BAB | 15% | Only on income from manufacturing; incidental income taxed at 22% |
Surcharge & Cess
For Individuals / HUFs / AOPs
| Income Range | Surcharge |
| ₹50 lakh to ₹1 crore | 10% |
| ₹1 crore to ₹2 crore | 15% |
| ₹2 crore to ₹5 crore | 25% |
| > ₹5 crore | 37% |
Cap on surcharge:
- 15% for capital gains under Sections 111A, 112, and 112A
- 25% cap if New Tax Regime (Section 115BAC(1A)) opted
Securities Transaction Tax (STT)
| Transaction | STT Rate | Payable by |
| Purchase of EOF units | Nil | – |
| Sale of EOF units (delivery-based on exchange) | 0.001% | Seller |
| Sale of EOF units (non-delivery) | 0.025% | Seller |
| Redemption of EOF units to the AMC | 0.001% | Seller |
Special Provisions
- Bonus Stripping (Section 94(8)):
- Loss from sale of original units disallowed if:
- Acquired ≤ 3 months before record date; and
- Sold ≤ 9 months after record date.
- Disallowed loss added to cost of bonus units.
- Applies also to REITs, InvITs, and AIFs.
Exemptions from Capital Gains:
| Transaction | Exemption Applicable |
| Consolidation of 2+ schemes within same category (EOF/non-EOF) | Exempt |
| Consolidation of plans (e.g., dividend to growth) | Exempt |
| Switching between plans (growth ↔ dividend) within a scheme | Taxable transfer |
Segregated Portfolio Taxation:
- Cost apportioned between main and segregated portfolio.
- Based on NAV ratio at time of segregation.
Definition of EOF (Section 112A):
A Fund of Fund (FoF) qualifies as an Equity-Oriented Fund if:
- ≥90% in units of another fund traded on a recognised exchange
- That fund invests ≥90% in equity shares of Indian listed companies
If not met, treated as non-EOF and taxed accordingly.
NRI-Specific Provisions
- DTAA Override: Section 90(2) allows treaty benefits if TRC and supporting docs are submitted.
- No PAN Relief (Rule 37BC): NRI can avoid 206AA (higher TDS) if Provides TRC, name, address, tax ID, country of residence, etc.
- Section 206AB (Higher TDS for non-filers): Not applicable to NRIs without a PE in India.