DIVIDEND / LTCG / STCG

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DIVIDEND
Any amount of dividend received from any mutual fund is totally TAX FREE in the hands of the INVESTOR.

LTCG / STCG
The profit (if any) that you make on your mutual fund investments when you redeem or sell the MF units is referred to as Capital Gains. It can be a Short Term Capital Gain (STCG) or a Long Term Capital Gain (LTCG) depending upon the "Period of Holding". The tax that is applicable on these profits is known as "Capital Gains Tax".

Factors determining the tax status of mutual funds

The capital gains tax on mutual fund withdrawals is based on the factors as below;
  • Residential Status & Tax Status
  • Fund Type (whether the fund is an Equity-oriented fund (or) a Non-Equity Oriented Fund)
  • Holding Period (Duration of your investment)
 
  1. Residential Status & Tax Status & Mutual Funds Taxation
    The capital gains tax rates are determined based on the residential status of an individual / investor. Residential status can be either 'Resident Indian' or 'Non-Resident India" (NRI).

  2. Type of Funds & Mutual Funds Taxation
    What are Equity - oriented Mutual Funds? - MF schemes that invest at least 65% of its fund corpus into equity and equity related instruments and where Securities Transactin Tax (STT) is deducted at the time of redemptions are known as equity mutual funds.
    Examples are : Large cap, Mid-cap, Balanced funds (equity oriented), Sector funds etc.,

    What are Non - Equity Mutual Funds? - MF schemes that hold less than 65% of their portfolio in equities and equity related instruments are known as Non-Equity Funds / Debt funds.
    Examples are : Liquid Mutual funds, Money Market funds, Gold funds, Infrastructure debt funds, Balanced funds (Debt oriented) etc.,

  3. Period of Holding & Capital Gains on Mutual Funds
    Capital gains on Mutual funds could be either long term capital gains or short term capital gains, depending on your investment horizon.

    Long Term Capital Gains

    • If you make a gain / profit on your investment in a Equity Mutual Fund scheme that you have held for over 1 year, it will be classified as Long Term Capital Gain.
    • If you make a gain / profit on your investment in a Non-Equity Mutual Fund scheme (or in a Debt Fund) that you have held for over 3 years, it will be classified as Long Term Capital Gain.


    Short Term Capital Gains

    • If your holding in a Equity mutual fund scheme is less than 1 year i.e. if you withdraw your mutual fund units before 1 year, after making a profit, then the profit will be considered as Short Term Capital Gain.
    • If you make a gain / profit on your Debt fund (or other than equity oriented schemes) that you have held for less than 36 months (3 years), it will be treated as Short Term Capital Gain.
 
Capital Gains Tax Rates on Mutual Funds for the Financial Year 2015-2016 (Assessment Year 2016-2017)

Capital Gains Tax Rates on Mutual Fund Investments of a Resident Indian are as below;
 
 
  • The STCG (Short Term Capital Gains) tax rate on equity funds is 15%.
  • The STCG tax rate on Non-Equity funds (or) Debt funds is as per the investor's income tax slab rate.
  • The LTCG (Long Term Capital Gains) tax rate on equity funds is NIL.
  • The LTCG tax rate on non-equity funds is 20% (with Indexation benefit)
 
Capital Gains Tax Rates on NRI Mutual Fund Investments for the Financial Year 2015-2016 (Assessment Year 2016-2017) are as below;
 
 
  • The STCG tax rate on equity funds is 15%.
  • The STCG tax rate on Non-Equity funds (or) Debt funds is as per the investor's income tax slab rate. (Tax Deducted at Source - TDS @ 30% is applicable)
  • The LTCG tax rate on equity funds is NIL.
  • The LTCG tax rate on non-equity funds is 20% (with Indexation) on listed mutual fund units and 10% on unlisted funds.