Invested in debt mutual funds? Here’s how you can save tax after Budget 2025.
Subscribe to enjoy similar stories. Debt mutual fund investors have reason to cheer Budget 2025 after being dealt a huge blow in the previous one. Finance Minister Nirmala Sitharaman announced on Saturday that Indians with incomes up to ₹12 lakh will effectively pay no income tax.
They still need to pay the tax, but will receive a rebate of ₹60,000 under Section 87A of the Income Tax Act. However, certain types of income, including capital gains from selling stocks and property, are not eligible for tax rebates. Let’s say Mr A has annual income of ₹12 lakh.
On the surface, it looks like a happy situation since there’s no tax on income up to ₹12 lakh under the new regime. But if only ₹10 lakh of this is salary income and ₹2 lakh is from selling equities or property, he will still need to pay capital gains tax on the ₹2 lakh gains. “Rebates cannot be applied to capital gains taxed at special rates," confirmed Anurag Jain, co-founder & partner at ByTheBook Consulting LLP.
Also read: All income groups got a little something from the Budget Luckily, debt mutual funds bought after April 2023 fall under Section 50AA and are eligible for such rebates, though units bought before April 2023 don’t qualify. “The thumb rule to follow is that whatever is taxed at slab rates is eligible for a tax rebate under Section 87A and those incomes that are taxed at special rates, like capital gains from stocks, equity MFs, and properties will not be eligible for Section 87A rebate," said Siddharth Deb, director, people advisory services tax, Ernst & Young. To keep things simple, let’s say someone just retired and redeemed a part of her debt mutual fund portfolio that was acquired after April 2023.
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