Let’s say I generate 12 lakhs yearly from a debt fund with no other income or gains. How much in taxes will I have to pay under the new tax slabs?
I searched online, but the articles are outdated. Do the gains from the debt fund are taxed as long-term gains tax rates or normal tax rates? Will I get the rebate or not?
@quicko can thro some light on it.
However you may like to explain what is meant by generate 12 lakh. Is 12 lakh total withdrawal or 12 lakh profit.
its because normal rate tax is applicable on profit , not on generated (withdrawal) in financial year.
12 lakh profit yearly - debt funds only
Yes, some confusion. Hoping more clarity will emerge in coming days.
As per this article from mint
Invested in debt mutual funds? Here’s how you can save tax after Budget 2025. | Mint
If you had bought your debt funds post 1 April 2023, gains from that will qualify for rebate.
If they were bought before the date, gains will be treated spearately and taxed at 12.5%
I think profits will still be taxed at individuals tax slab rate.
There is no concept of STCG or LTCG if investment made after 1 April 2023.
Not much info was available for this query & hence I had asked this same question to @Quicko 6 days ago in its “Ask me anything about Budget 2025” post. @Quicko is still to respond but @tallerballer did & I think that is the correct answer.
(Considering the New Tax Regime for AY-2026-27)
Firstly, there is no LTCG on Debt Funds going forward. All gains in Debt Funds would be considered STCG irrespective of the duration. Debt Funds do not fall under the Special Rate Tax sections, namely Sec. 111A (STCG for Equity Stock & Equity based mutual funds) & 112A (LTCG for Equity, Real Estate etc). So Debt funds will be taxed at Individuals Tax slabs which includes him or her getting the Rebate benefit under Sec. 87A.
As for your example, since the Rs. 12 Lakhs gain is entirely from STCG on Debt Funds & you have no other income, your tax liability for AY-2026-27 will be 0.
Had that same STCG been from Equity (stock or mf) then u/s 111A you would have been taxed as follows,
4 Lakhs - Exempted under Basic Exemption Limit
8 Lakhs - @20% u/s 111A
Tax = Rs. 1,60,000 + 4% Cess = Rs. 1,66,400
Hope this helps. Other commenters may add other helpful points.
Edit Reason: In previous calculation, I mistakenly calculated the remainder of 8L from Equity STCG gain at normal income tax slab rate when in fact it should have been at special tax rate of 20%. Its corrected now.
Hi @Soulofamonk,
Debt funds purchased after 1st April 2023 will be taxed at slab rates irrespective of whether the gains are long-term or short-term.
As the profits are taxable at slab rate and not special rates, rebate u/s 87A will be available. Hence, as per our understanding, if this is your only source of income, there’ll be no tax liability if the income is below ₹12L.