Income Tax on Mutual Funds in India

author portrait

Sakshi Shah

Capital Gains
ITR-2
Mutual Funds
Trading Income

If you have invested in Mutual Funds, you need to file your ITR and pay tax on this income. Trading in various types of mutual funds has become very easy due to the availability of online trading platforms. Under Income Tax, trading in mutual funds is classified as a Capital Gains Income.

ITR for Capital Gains from Investment in Stocks
CA Assisted Income Tax Return filing for Individuals and HUFs having income from sale of securities.
[Rated 4.8 stars by customers like you]
ITR for Capital Gains from Investment in Stocks
CA Assisted Income Tax Return filing for Individuals and HUFs having income from sale of securities.
[Rated 4.8 stars by customers like you]

Income Heads for Income from Mutual Funds

Capital Gains on Mutual Funds

  1. Equity Mutual Funds – Since these mutual funds invest in equity-oriented instruments, the treatment is the same as equity shares.
    • Long Term Capital Gain (LTCG): Any gain arising on the sale of equity mutual fund held for more than 12 months is considered as Long Term Capital Gain i.e. LTCG on mutual funds.
    • Short Term Capital Gain (STCG): Any gain arising on the sale of equity mutual fund held for less than 12 months is considered as Short Term Capital Gain i.e. STCG on mutual funds.
  2. Debt Mutual Funds – Since these mutual funds invest in debt instruments, the treatment is similar to other capital assets.
    • Long Term Capital Gain (LTCG): Any gain arising on the sale of debt mutual fund held for more than 36 months is considered as Long Term Capital Gain.
    • Short Term Capital Gain (STCG): Any gain arising on the sale of debt mutual fund held for less than 36 months is considered as Short Term Capital Gain.
Income Tax on Trading
Read about income tax for investors and traders. Learn more about trading turnove, tax audit, tax rates, ITR forms, due dates, advance tax, etc.
Read More
Income Tax on Trading
Read about income tax for investors and traders. Learn more about trading turnove, tax audit, tax rates, ITR forms, due dates, advance tax, etc.
Read More

Mutual Fund Taxation

Taxability of Mutual Funds would depend upon the nature of income. Capital Gains on mutual funds is taxable as per the table below.

Type of Mutual Fund Period of Holding Long Term Capital Gain Short Term Capital Gain
Equity Mutual Fund 12 months 10% in excess of INR 1,00,000 under Section 112A 15% under Sec 111A
Debt Mutual Fund 36 months 20% with Indexation Slab Rates

Other Income on sale of mutual funds is taxable in the following manner:

  • Interest Income – Taxable at slab rates.
  • Dividend Income – Exempt up to FY 2019-20. Taxable at slab rates FY 2020-21 onwards.
Have any questions ?
Have any queries for trading income, ask us on TaxQnA and we will answer it in the simplest way!
Have any questions ?
Have any queries for trading income, ask us on TaxQnA and we will answer it in the simplest way!

ITR Form, Due Date and Tax Audit Applicability for Investors

FY 2019-20: Due Date to file Income Tax Return for both audit and non-audit cases has been extended to 30th November 2020
Tip
FY 2019-20: Due Date to file Income Tax Return for both audit and non-audit cases has been extended to 30th November 2020
Income Tax Calendar
Don't miss another Income Tax due date. Check out this amazing tax calendar for 2020 by Quicko.
Explore
Income Tax Calendar
Don't miss another Income Tax due date. Check out this amazing tax calendar for 2020 by Quicko.
Explore

Carry Forward Loss for Mutual Funds Trading

Set Off and Carry Forward Losses under Income Tax Act
Refer to this article to learn more about set off and carry forward losses
Read More
Set Off and Carry Forward Losses under Income Tax Act
Refer to this article to learn more about set off and carry forward losses
Read More

Example

Mr. Vijay is a salaried individual and has done mutual fund trading in FY 2019-20. His total salary income for a year is INR 8,70,000. And has Short Term Capital Loss of INR 30,000 from Debt Mutual Funds and Long Term Capital Gain of INR 2,50,000 from Equity Mutual Funds.

Now in the above example, Vijay needs to file ITR-2 for FY 2019-20. And his total income and tax liability will be as follows:

Particulars Amount (INR) Amount (INR)
Salary Income   870000
Capital Gains    
Short Term Capital Loss 30000  
Long Term Capital Gain 250000  
Less: Exemption u/s 112A (100000)  
Taxable Long Term Capital Gain 150000  
Total Capital Gains after set-off of losses (taxed @10%)   120000
Total Taxable Income   990000
Tax at slab rate 86500  
Tax at special rate 12000  
Total Income Tax   98500
Health & Education Cess @4%   3940
Total Tax Liability   102440
Import Your Trades
File ITR Online

India’s fastest growing Tax Filing Platform

[Rated 4.8 stars by customers like you]

Import Your Trades

File ITR Online

India’s fastest growing Tax Filing Platform

[Rated 4.8 stars by customers like you]

FAQs

How do I report income from trading in Mutual Funds in the Income Tax Return i.e. ITR?

A trader should file ITR-2 and report income from trading in Mutual Funds as Capital Gains.
– Equity Mutual Funds – Tax on LTCG is 10% in excess of INR 1 lac and tax on STCG is 15%.
– Debt Mutual Funds – Tax on LTCG is 20% with indexation and tax on STCG is as per slab rates.
The trader can set off LTCL with LTCG and STCL with both STCG and LTCG. The remaining loss can be carried forward for 8 years.

Is Dividend earned on Mutual Funds taxable?

Yes. The dividend income earned on Equity Mutual Funds which was earlier exempt is now a taxable income.
– Dividend up to FY 2019-20 – exempt
– Dividend FY 2020-21 onwards – taxable at slab rates. The amount in excess of INR 5,000 is liable for deduction of TDS under Sec 194K at 10%.

Is Mutual Fund taxable?

Yes. Income from Mutual Fund is taxable under the Income Tax Act.
(a) Capital Gain on Sale of Equity Mutual Funds – Tax on LTCG is 10% in excess of INR 1 lac and tax on STCG is 15%.
(b) Capital Gain on Sale of Debt Mutual Funds – Tax on LTCG is 20% with indexation and tax on STCG is as per slab rates
(c) Dividend Income on Mutual Funds – Taxable at slab rates from FY 2020-21
(d) Interest Income on Mutual Funds – Taxable at slab rates

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    Close Bitnami banner
    Bitnami