Taxation on debt mutual funds will be according to income slab, but what will be the tax treatment of debt etf after budget 2024… will they be treated as equities i.e. ltcg of 12.5% after 1 year or will be added to income and taxed according to income slab
debt etf and mf slab rate
Hi @Quicko, can you please confirm the taxation on global equity FoF and global equity ETFs?
Take the example of Motilal Oswal Nasdaq 100 fund and MON100 etf for instance.
My understanding is that the long term holding period is 24 months, and ltcg is 12.5% on both. Stcg will be taxed at marginal tax rate. Please let me know if the understanding is correct.
And just curious, what happens to investments done in these between the feb 2023 budget and this week’s. How will they be taxed?
Thanks for sharing. Saw similar tables, just wasn’t sure if the said etf falls under any of those row items.
Hey @asen,
Yes, your understanding is correct.
Whenever the investments are made, the taxation will be as per the new rules if these are sold on or after 23rd July 2024.
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Wouldn’t debt ETF / MF bough before 31st March 2023 will fall under 12.5% LTCG slab?
They had indexation benefit earlier, which is now removed, so my understanding is that those bought before 31st March, will be charged 12.5% LTCG if held for more than 24 months.
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This table wrongly clubs Debt and non-equity MFs into single line with similar tax.
In fact there is a third category of neither debt nor equity MF (eg. PPFAS DAAF) which will be taxed at LTCG @12.5% and STCG at slab rate for 24 month holding threshold.
Hey @Akash_Shah,
Yes, LTCG from Debt funds bought before April 2023 will be taxed at 12.5% without indexation. Any funds purchased after that will be taxed as per the slab rate irrespective of holding.
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So basically any listed asset which is not debt is @12.5% ltcg - is this a fair assumption?
e.g. ICICI Prudential Nasdaq 100 is an index fund (and not FoF) in the others category, holding foreign equity.
And what about funds holding overseas debt instruments?
What will be taxation on tbills??
Hi @asen,
For assets listed in India, the holding period will be 12 months.
Moreover, for any capital asset, financial or non-financial, will be taxed at 12.5% in case of LTCG.
LTCG will be taxed at 12.5% and STCG at slab rate. The holding period will be 24 months.
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Dynamic Asset Allocation was always equivalent to an Equity fund before also as told by various CAs, and now also they are considered as an Equity fund.
The 3rd category is of Conservative Hybrid Fund/Foreign FoF & ETF’s/Gold Funds & ETFs
That blanket statement is incorrect. You need to get a better CA 
Dynamic Asset Allocation funds can hold equity from 0-100% and depending on how much equity they are holding, their taxation will be determined.
If they are holding more than 65% sure they will be treated as Equity fund for taxation, but if holding is less than 65%, they will not be treated as equity.
Eg. For PPFAS DAAF, they strive to maintian equity between 35% to 65%. Check here, which make them unique from both equity funds and debt funds.
Asset Allocation (ppfas.com)
This type of funds earlier (pre-budget) had better taxation of 20% post indexation. (that was the whole reason PPFAS launched this fund). Now this will get 12.5% LTCG, post 24 months holding and slab rate for STCG (again not same as equity).
So clubbing all Debt and non-equity MFs is incorrect.
Hope this helps.
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