Big news came on Friday for those investing in mutual funds. The government has changed the tax law related to debt mutual fund schemes, but despite this you can still take advantage of tax benefits. Know what is the whole matter…
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Do you also invest in mutual funds? Then it is very important for you to know about this rule passed by the Lok Sabha on Friday. The government has changed the tax rules related to debt mutual funds. For this, amendments have been made in the Finance Bill. After all, what is this change, do you still have a chance to avoid it, what are debt mutual funds? You will find answers to all these here…
First of all, know that Finance Minister Nirmala Sitharaman proposed 45 amendments in the Finance Bill-2023 in the Lok Sabha on Friday. Long term capital gain available on one of these debt mutual funds so far (LTCG) There was a proposal to abolish the tax benefit. Now that it has passed, know how your investment is going to be affected.
What has changed in the tax rules?
So according to the new rule, if you invest in mutual funds, then you will have to pay capital gains tax on investments in debt mutual fund schemes. According to the new rule, if up to 35 percent or less of a debt mutual fund has been invested in equity assets. So short term capital gain on such investment (STCG) Will have to pay tax.
This tax will be exactly like the tax on investment in FD. An essential condition for this is that the investment period in debt mutual funds should be less than 3 years. Currently, investments in debt mutual funds offer tax benefits related to long-term capital gains.
This benefit available on debt mutual funds is over
You will not understand this story of changing tax rules related to debt mutual funds until you are actually told which magic wand has been snatched from your hands. So think of it like this…
Currently, if you invest in debt mutual funds, then short term capital gain is calculated on investment holdings held till completion of 36 months or less. At the same time, income tax is paid on this according to your income tax slab. While the long term capital gain is calculated on the holding of more than 36 months.
Long term capital gain is taxed at the rate of 20 per cent at the time of computation and it also gets the benefit of indexation. Now the government has abolished the benefit of indexation on long term capital gains.
Is there still a chance to take advantage?
The amendment made by the government in the rules will come into effect from 1 April 2023. That is, if you still want to take advantage of the old system, then you have time till March 31, 2023. If you invest in debt mutual funds before March 31, you will continue to get the benefit of indexation.
What is Debt Mutual Fund?
Debt mutual fund schemes are those which mainly invest in bonds of companies or other bond market. At present, debt mutual fund schemes have to invest at least 65 per cent of their total funds in bonds as per market regulator SEBI’s rules.
