Income From Mutual Funds Is Taxable Or Not

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Income from mutual funds is taxable or not. The dividend distributed by a listed company or a mutual fund house is non taxable from the taxpayer s point of view. Higher rates of 20 and above are applicable to those with higher taxable income. On the other hand a short term capital gains tax of 15 per cent is payable in the case of an equity scheme. The long term capital gains tax on a equity mutual fund scheme is tax exempt.

Tax on annual distributions most mutual funds whether conventional or exchanged traded funds etfs are structured as inter vivos trusts and thus are required to distribute net taxable income earned within the fund. However mutual funds are broadly categorized as equity funds debt funds and hybrid funds. Not only investing in mutual funds brings your earnings but your investments in mutual funds also need to be declared in your itr filed. Since an elss falls under section 80c you can claim up to 1 50 000 per annum from your investment as a deduction from your gross total income.

International mutual funds are schemes that. These funds invest in government and municipal bonds also called munis that pay tax free interest. The returns from an elss fund are tax free and the long term capital gains from it are also tax free. Since it is considered as income it needs to be declared to the income tax department.

This is because the income that you earn from mutual funds is considered as one of the sources of income. Ltcg on debt mutual funds feature a tax rate of 20 on your gains if you have received indexation benefit while the applicable rate is 10 in case indexation benefit is not availed. Addition to interest and dividends this also includes capital gains realized within the fund. Mutual funds invested in government or municipal bonds are often referred to as tax exempt funds because the interest generated by these bonds is not subject to income tax.

The other way to minimize your income tax bill is to invest in so called tax free mutual funds. Tax on mutual funds types of mutual funds in india. Securities transaction tax stt a securities transaction tax stt is applicable at the rate of 0 001 on equity oriented mutual funds at the time of redemption of units. An investor is not required to pay stt separately as it is deducted from the mutual fund returns.

In this article we want to discuss mutual fund taxation and help you understand how your mutual fund returns are taxed. Best elss top 10 tax saving mutual funds for fy 2019 2020. Talking about the income tax on mutual funds redemption elss is the best investment tool.