How to report tax on gains from Equity Mutual Funds in Income Tax Return for AY 2023-24
Tax on gains from Mutual Funds: The due date to file the Income Tax Return (ITR) for AY 2023-24 is July 31, 2023. Taxpayers are required to report all their sources of income in the ITR, including income from equity mutual fund investments.
While mutual funds are taxable just like most other assets where you invest, the tax on the sale of units of mutual funds depends on various factors, such as the type of mutual fund, holding period, capital gains, dividends, and income distribution, says Abhishek Soni CEO and Co-founder of Tax2win, a Fisdom company.
Experts say that tax is levied on both debt-oriented and equity-oriented mutual funds. However, the tax rates and tax provisions vary depending on the type of mutual fund. There are two taxable categories of mutual funds – equity and non-equity funds.
Before moving on to ways of reporting tax on gains from equity mutual fund investments in ITR, let’s first look at how equity and debt funds are taxed.
Mutual funds having 65% or more investment in Equity instruments are known as equity funds. If the holding period of your equity fund is up to or less than 1 year, then it is taxed as short-term capital gains. “Irrespective of your applicable slab rate, short-term capital gains are taxed at 15% flat,” says Soni.
If the holding period of your equity fund is more than 1 year, the gain on the sale of your investment will result in long-term capital gains (LTCG).
However, LTCG up to Rs 1 lakh are exempt from tax. Any gains over Rs 1 lakh per annum are taxable at the rate of 10%, with no indexation benefit.
Also Read: Mutual Fund Investment: 7 things you must know before investing in an SIP
Mutual funds having more than 65% debt component are known as debt-oriented funds or hybrid
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