Mutual fund tax rates after budget 2013-14

Mutual fund tax rates applicable for Indian residents

With introduction of budget 2013-14 Mutual fund tax rates have some changes in their structure of rates. All the Mutual fund tax rates in this article are related to Indian resident investors and HUF (Tax rates are different in case of Domestic companies and NRI Investors).

All the dividends received by investors either in Equity oriented schemes or debt oriented schemes are Tax Free in the hands of investors. 

Mutual fund tax rates - budget 2013-14 by chidambarm
finance minster chidambaram budget 2013-14

Tax on distributed income is payable by the mutual fund scheme and Mutual fund tax rates in this case are:

–   Equity oriented Schemes  – NIL Tax ( STT  (Securities transaction tax)will be deducted on equity funds at the time of redemption and / or switch to the other schemes/ sale of units

–  Money market and Liquid Schemes – 25% + 10% surcharge + 3% cess (Total 28.325%). 28.325% includes 25% tax + 2.5% surcharge on 25% tax + 3% cess on 27.5% (Tax+ surcharge)

–  Debt Schemes excluding infrastructure debt funds – 28.325%

 Infrastructure debt Mutual fund tax rates – 28.325%

Note: In above three scenarios 10% surcharge is effective from 01 Jun 2013.

Capital gains tax on mutual fund investments are calculated depending on the investment period in the units of mutual funds.  If the units are held for more than 12 months, such investments qualify for Long Term Capital Gains Tax (LTCG Tax) which is usually beneficial from tax perspective.  Mutual fund tax rates for units of investments held in mutual funds is calculated as per Short Term Capital Gains Tax rates (STCG Tax)

Mutual fund tax rates (For Capital Gains)

Type of Mutual Fund Scheme

Mutual fund tax rates (Surcharge at the rate of 10% is proposed to be levied in case of individual/ HUF unit holders where their income exceeds Rs 1 crore)

Long Term Capital Gains Tax (For units held more than 12 months)

Equity Oriented SchemesNIL
Other than equity oriented schemes10% without indexation or 20% with indexation whichever is lower
–       Without Indexation10%
–       With indexation benefit20%

Short Term Capital Gains Tax (For units held less than 12 months)

Equity Oriented Schemes15%
Other than equity oriented schemes30%

Bonus Stripping: The loss due to sale of original units in the schemes, where bonus units are issued, will not be available for set off; if original units are: (A) bought within three
months prior to the record date fixed for allotment of bonus units; and (B) sold within nine months after the record date fixed for allotment of bonus units. However, the amount of loss
so ignored shall be deemed to be the cost of purchase or acquisition of such unsold bonus units.

Dividend Stripping: The loss due to sale of units in the schemes (where dividend is tax free) will not be available for setoff to the extent of the tax free dividend declared; if units are:(A)
bought within three months prior to the record date fixed for dividend declaration; and (B) sold within nine months after the record date fixed for dividend declaration.

Complete 2013-14 budget details can be find at india budget 2013-14