The Lok Sabha passed the Finance Bill 2023 without discussion while the opposition continued with its stir demanding a Joint Parliamentary Committee (JPC) on the Adani-Hindenburg issue<\/a>.<\/p>\n\n\n\n

With this, the government has had its way in doing away with the tax benefit on the Long Term Capital Gains (LTCG) tax on debt-oriented mutual funds<\/strong> if they invest less than 35% of their assets in equities.<\/p>\n\n\n\n

Thus now with effect from April 1, 2023, debt mutual funds<\/a> will stand at par with bank fixed deposits with respect to the tax treatment. In other words, the tax efficiency enjoyed by debt mutual funds on the LTCGs until now will be lost.<\/p>\n\n\n\n

Currently, if your holding period is less than 36 months in the case of a debt-oriented mutual fund, you pay Short Term Capital Gain (STCG) tax as per your tax slab (i.e., the marginal rate of taxation). So, if you are in the highest tax bracket you end up paying as high as 30.9% tax.<\/p>\n\n\n\n

However, when if the holding period in the case of a debt-oriented mutual fund is 36 months or more, on the realised gains –classified as Long Term Capital Gains–you, the investor, pay 20% LTCG tax with the indexation benefit + 4% health & education cess and the applicable surcharge.<\/p>\n\n\n\n

For NRIs, the capital gains on debt-oriented mutual funds are subject to Tax Deduction at Source (TDS) at the rate of 10% for LTCG and 30% for STCG.<\/p>\n\n\n\n