Financial Products Taxation Overview (India – FY 2024–25)
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Financial Products Taxation Overview (India – FY 2024–25)
| Financial Product | Type of Income | Tax Treatment | Holding Period | TDS Applicable | Section |
|---|---|---|---|---|---|
| Equity Shares / Mutual Funds / ETFs | Capital Gains | STCG @ 20% (from July 23, 2024); LTCG @ 12.5% over ₹1.25L | <12m / >12m | No | Sec 112A |
| Debt Mutual Funds | Capital Gains | Pre-Apr 2023: STCG @ slab rate Post-Apr 2023: STCG @ slab rate |
Any / >36m (pre-Apr 2023) | No | Sec 50AA, 87A |
| Unlisted Shares | Capital Gains | STCG (<24m): slab rate LTCG (>24m): 20% with indexation |
<24m / >24m | No | Sec 112 |
| Arbitrage Funds | Capital Gains | STCG: 15%; LTCG: 12.5% (₹1.25L) | <12m / >12m | No | Sec 112A |
| FDs / RDs | Interest Income | Taxed at slab rate | – | Yes, if >₹40,000 | – |
| PPF | Interest & Maturity | Fully Tax-Free (EEE) | 15 years | No | – |
| EPF | Interest & Maturity | Tax-free up to ₹2.5L/year; excess interest taxable | Until retirement | Yes, if interest > limit | – |
| SSY (Sukanya Samriddhi Yojana) | Interest & Maturity | Fully Tax-Free (EEE) | 15 years | No | – |
| SCSS (Senior Citizen Savings Scheme) | Interest Income | Taxed at slab; TDS @10% if interest >₹50,000/year | 5 years | Yes | – |
| Life Insurance (Non-ULIPs) | Maturity Proceeds | Premium > ₹5L/year (from Apr 1, 2023): Taxable maturity | – | No | Sec 10(10D) |
| ULIPs (Post-Feb 2021) | Capital Gains | Premium > ₹2.5L/year = Capital Gains Tax on maturity | Depends on product | No | – |
| SGBs | Capital Gains | Tax-free on maturity (8 years); Early exit: LTCG @ 20% with indexation | 8 years | No | – |
| Gold / Digital Gold / Gold ETFs | Capital Gains | Post-Apr 2023: STCG @ slab rate, LTCG @ 12.5% after 24m (from Apr 1, 2023) | <24m / >24m | No | Sec 50AA, 87A |
| Real Estate | Capital Gains | STCG (<24m): slab; LTCG (>24m): 20% with indexation | <24m / >24m | Yes on rent if > ₹2.4L | Sec 54 |
| REITs / InvITs | Dividends & Capital Gains | Dividends: Slab Listed units: equity CG |
<12m / >12m | Yes on dividends | Sec 112A |
| Bonds / Debentures | Interest & Capital Gains | Interest: Slab LTG: 10% (listed), 20% (unlisted with indexation) |
<36m / >36m | Yes | Sec 112 |
| PMS | Capital Gains | Treated as equity: STCG @ 20%, LTCG @ 12.5% (>₹1.25L) | <12m / >12m | No | Sec 112A |
| AIF – Category I & II | Pass-through Gains | Taxed at investor level; based on asset class | Depends | No | – |
| AIF – Category III | Business Income | Taxed at fund level; highest slab up to 42.744% | – | Yes | – |
| Structured Products | Capital Gains / Interest | Depends on structure; taxed as slab or on debt maturity | Product-specific | Depends | – |
| NPS (Tier I) | Maturity | 60% withdrawal tax-free; 40% annuitized and taxable as pension | Retirement age | Yes on pension | Sec 10(12A) |
Tax Sections Referenced
-
Sec 112A – Equity LTCG @ 12.5% after ₹1.25L
-
Sec 50AA – All debt-style mutual funds post-April 2023 taxed as STCG
-
Sec 10(10D) – Life insurance maturity exemptions
-
Sec 94B – Bonus stripping (disallows capital loss set-off)
-
87A – ₹60,000 rebate (total income ≤ ₹12L under new regime)
Tax Regime Specific to Mutual Fund Investors in India applicable for Financial Year (FY) 2024-25 (Assessment Year 2025-26)
I. CLASSIFICATION OF MUTUAL FUNDS FOR TAX PURPOSES:
| Category | Description |
|---|---|
| Equity-Oriented Funds (EOFs) | Funds investing ≥65% in domestic equities (excluding equity fund of funds). STT applicable. |
| Specified Mutual Funds | Funds investing ≤35% in domestic equities. Includes debt funds, gold ETFs, fund-of-funds, etc. Section 50AA applies. |
| Other Mutual Funds | Includes hybrid, balanced funds, or those not classified as EOFs or Specified MF. |
II. CAPITAL GAINS TAX RATES:
1. Equity-Oriented Funds (EOFs)
| Investor Type | STCG (≤12 months) | LTCG (>12 months) |
|---|---|---|
| Resident Individuals / HUF / AOP / BOI | 15% (up to 22 July 2024), 20% (from 23 July 2024) | 10% (>₹1.25 lakh) (up to 22 July 2024), 12.5% (from 23 July 2024) |
| NRIs | Same as above | |
| Domestic Companies | 15%/22%/25%/30% depending on turnover/tax regime |
🔸 LTCG computation uses grandfathering provisions: Higher of actual cost or lower of (FMV as on 31 Jan 2018, sale price).
2. Specified Mutual Funds (Section 50AA: Acquired on/after 1 Apr 2023)
| Investor Type | STCG | LTCG |
|---|---|---|
| Resident Individuals / HUF / AOP / BOI | Tax slab rate | Not Applicable (all are STCG) |
| NRIs | Tax slab rate or 30% | Not Applicable |
| Companies | 15%/22%/25%/30% based on tax regime |
🔸 No indexation, all gains deemed STCG regardless of holding period.
3. Other Mutual Funds (Non-EOF & Non-specified)
| Investor Type | STCG | LTCG |
|---|---|---|
| Resident Individuals / HUF / AOP / BOI | Tax slab rate | 20% (with indexation) up to 22 July 2024 12.5% (without indexation) from 23 July 2024 |
| NRIs | 30% STCG | 20% with indexation (listed) / 10% (unlisted) / 12.5% (from 23 July 2024) |
| Companies / Firms | 15%/22%/25%/30% |
III. DIVIDEND INCOME TAXATION
| Investor Type | Tax on Dividend | TDS on Dividend Income |
|---|---|---|
| Resident Individuals / HUF | Tax slab rate | 10% if > ₹5,000/year |
| Domestic Companies | Tax slab rate | 10% |
| NRIs | 20% TDS or lower as per DTAA | 20% or DTAA rate |
IV. TDS ON CAPITAL GAINS
| Investor Type | TDS on Capital Gains |
|---|---|
| Resident Individuals / HUF | No TDS |
| NRIs | 20% or DTAA rate, whichever is lower |
V. SECURITIES TRANSACTION TAX (STT) on EOFs
| Transaction | STT Rate | Applicable To |
|---|---|---|
| Sale (delivery-based) | 0.001% | Seller |
| Sale (non-delivery based) | 0.025% | Seller |
| Redemption to Mutual Fund | 0.001% | Seller |
VI. SURCHARGE ON TAX (including capital gains):
| Income Range | Individual / HUF / AOP | Domestic Co. | Foreign Co. |
|---|---|---|---|
| ≤ ₹50L | NIL | NIL | NIL |
| ₹50L – ₹1Cr | 10% | 7% | 2% |
| ₹1Cr – ₹2Cr | 15% | 12% | 2% |
| ₹2Cr – ₹5Cr | 25% | – | 5% |
| > ₹5Cr | 37% (Capped at 15% for capital gains u/s 112, 112A, 111A) | – | 5% |
+ Health & Education Cess @4% on tax + surcharge.
VII. IMPORTANT CHANGES EFFECTIVE FROM 23 JULY 2024
| Provision | Up to 22 July 2024 | From 23 July 2024 |
|---|---|---|
| STCG on EOFs | 15% | 20% |
| LTCG on EOFs | 10% | 12.5% |
| LTCG on non-EOF/non-Specified MFs | 20% with indexation | 12.5% without indexation |
| LTCG holding period for Other MFs | >36M (unlisted), >12M (listed) | >24M (unlisted), >12M (listed) |
VIII. CLARIFICATION ON SPECIFIED MUTUAL FUNDS:
From FY 2025-26, as per Finance Act (No. 2) 2024, a specified mutual fund means:
-
Fund with ≥65% investment in debt or money market instruments
-
Fund of Funds investing ≥65% in such schemes
Thus, equity fund-of-funds will also be classified as “specified mutual funds” (short-term capital gains only).
Summary for Investors:
| Fund Type | Tax Treatment (Resident Individual) |
|---|---|
| EOF (Direct Equity) | 15% STCG, 10/12.5% LTCG |
| Debt Funds / Gold ETF / FoF | Tax slab (STCG), 20% (LTCG till 22 July), 12.5% (after) |
| Specified MFs (Post Apr 2023) | Entire gain taxed as STCG at slab rate |
| Dividend | Taxable at slab rate; TDS @ 10% if > ₹5,000 |