Tax implications on Indian mutual funds

Classification of Funds

As far as tax implications on Indian mutual funds are concerned, funds are classified as;

1. Equity oriented Funds
2. Liquid and money market Funds
3. Debt Funds other than Liquid Funds
4. 
   
   

In ‘Equity Oriented Funds’, the categories coming under are Equity Diversified, Equity Sector, Hybrid - Equity Oriented (more than 65% equity) and Arbitrage Funds.

Liquid Funds and Liquid ETF are coming under ‘Liquid Funds’.

Ultra Short Term Funds, Floating Rate Funds, Short Term Income, Dynamic Income, Income Funds, Gilt Funds, Fund of Funds, Hybrid - Debt Oriented (less than 65% equity), MIP, FMPs are coming under ‘Debt Funds other than Liquid Funds’.

Mutual Fund Tax Rate

	Individual / HUF$	Domestic Company@	NRI#
Dividend
Equity Schemes	NIL	NIL	NIL
Debt Schemes	NIL	NIL	NIL
Dividend Distribution Tax
Equity Schemes**	NIL	NIL	NIL
Debt Schemes	25% + 10% Surcharge + 3% Cess	30% + 10% Surcharge + 3% Cess	25% + 10% Surcharge + 3% Cess
	28.33%	33.99%	28.33%
Liquid and money market schemes	25% + 10% Surcharge + 3% Cess	30% + 10% Surcharge + 3% Cess	25% + 10% Surcharge + 3% Cess
	28.33%	33.99%	28.33%
Long Term Capital Gains
Equity Schemes	NIL	NIL	NIL
Debt Schemes	10% without indexation or 20% with indexation, whichever is lower	10% without indexation or 20% with indexation, whichever is lower	10% without indexation or 20% with indexation, whichever is lower
Short Term Capital Gains
Equity Schemes**	15%	15%	15%
Debt Schemes	30%^	30%	30%^

** Securities transaction tax (STT) will be deducted on equity funds at the time of redemption /switch to the other scheme / sale of units. Effective from June 1, 2013

$ 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
@ - surcharge at the rate of 5% is proposed to be levied for domestic corporate unit holders where the income exceeds Rs .1 crore but is less than 10 crores and at the rate of 10% hwere the income exceeds 10 crores

# short /long term capital gains tax will be deducted at source at the time of redemption of units in case of NRI investors only. 
^ assuming investor falls into the highest tax bracket., education cess at 3% will continue to apply on tax plus surcharge

Capital Gain:The gains from the debtmutual scheme are taxed depending on the period the investments in the mutual funds are kept.

If the debt mutual fund units are redeemed after a year, then the gains thereon are liable to Long Term Capital Gain tax while the proceeds from theinvestments which redeemed before one year are taxed asShort Term Capital Gain.

For long term capital gains in debt funds, the investor have to pay the tax @ lesser of 10% without indexation or 20% with indexation; (plus education cess). Short Term Capital Gains taxed as per the normal slab of the investors.

Securities Transaction Tax (STT)

STT is levied on the value of taxable securities transactions as under:

Transaction	Rates	Payable By
Purchase of units of equity oriented mutual fund (delivery based)@@	NIL	Purchaser
Sale of units of equity oriented mutual fund (delivery based)@@	0.001%	Seller
Sale of equity shares, units of equity oriented mutual fund (delivery based)@@	0.025%	Seller
Sale of unit of an equity oriented fund to the mutual fund@@	0.001%	Seller

^@@ effective from June 1, 2013

Src: http://www.miraeassetmf.co.in/

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