Income Tax On Mutual Funds Returns

Any dividend received from mutual funds are tax free.

Income tax on mutual funds returns. Such returns are taxed at 15 per cent. In the equity mutual funds if an investor withdraws before one year of investment then a 15 per cent short term capital gain is imposed in mutual fund returns on investment. Returns from an equity mutual fund are treated as long term capital gains if investments are held for more than a year. In addition to above there is 0 001 securities transaction tax stt changed from 0 25 from june 2013 is levied on redemption of equity mutual funds irrespective of the holding period.

From the table it can be seen that the taxability of returns from mutual funds is much lower than the highest tax slab of 31 2 in most cases which reinforces the fact that mutual funds offer great benefits even to large investors. Mutual fund taxes typically include taxes on dividends and earnings while the investor owns the mutual fund shares as well as capital gains taxes when the investor sells the mutual fund shares. If your mutual fund buys and sells dividend stocks often more than likely any dividends you receive are taxed as ordinary income. Means if you are investing in mutual funds with dividend option the returns from such dividend income is not taxable.

Such returns are completely exempt from income tax according to the current laws. Capital gains tax on mutual funds in india for fy 2019 20 stt on mutual funds. In general dividend income is taxed as ordinary income. There is no stt for non equity mutual funds.

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. However equity mutual funds are subject to dividend distribution tax ddt. An investor is not required to pay stt separately as it is deducted from the mutual fund returns. However if investments are held for one year or less the returns are taxed under short term capital gains.

Details excess and above of rupees 10 lakhs might be taxed. We would categorize the mutual fund returns gains taxation into 3 parts. If you have invested in retail mutual funds then the income earned from the redemption of these units will be tax free up to a number of rupees 10 lakhs in one year. And now the u turn.